Local Search Critical to SMEs

  |  August 16, 2004   |  Comments

High Web site adoption by small local businesses raises the stakesin local search refinements.

The latest findings from an ongoing study conducted jointly by The Kelsey Group (TKG) and ConStat, Inc. underscored the value of local search for small and medium-sized enterprises (SMEs).

More than half of the recently surveyed "Hometowner" businesses – SMEs whose customers and suppliers are primarily within 50 miles of their physical location – believe the Internet will enable them to be more successful in their local market, compared to 35 percent in 2002.

"'Hometowners' are a segment that do most of their buying and selling locally, which is why Web site adoption is significant for this segment," said Greg Sterling, senior vice president, The Kelsey Group.

With 48 percent of Hometowner businesses now having their own Web presence, and a portion associating sales with the site, reliance on local search is heavy.

"On average Hometowners attribute 15 percent of sales to their Web sites according to our data. This could be e-commerce, but also could be leads/sales that are driven by the site but ultimately closed offline (on the phone or in person in a physical location)," said Sterling.

Local search may not yet live up to these businesses' expectations. Jupiter Research's (a Jupitermedia Corp. division) Nate Elliott has outlined some of the failings of local search, citing incomplete databases, lack of advertisers, and the major search engines' reluctance to redesign their home pages as major barriers to local search success. But Sterling says these problems are typical of technology that lacks maturity.

"I agree that the local business/information databases are flawed or incomplete and that there isn't yet a critical mass of local advertisers on search engines. However, local search is still in its relative infancy and there will be more and more local advertisers that gain distribution (directly or indirectly) through search over time," Sterling noted.

"As consumer trends become clearer to local advertisers, those advertisers will go online (as with the real estate market). It's not going to happen equally across all local categories and segments and it's not going to happen with equal speed," Sterling continued.

According to anecdotal and empirical evidence, consumers are utilizing local search functionality – despite the growing pains. A joint TKG/BizRate.com study conducted in February 2004 found that roughly 25 percent of online buyers seek merchants that are near their home or work locations, and 44 percent of survey respondents revealed that were performing more local searches than they were one year ago.

"What this and other evidence from the search engines themselves suggests is that the consumer trend toward using the Internet to look for local information is clear," said Sterling.

While local search may not be currently meeting every expectation, analysts agree that the technology has tremendous potential – as a revenue stream and a research tool. Jupiter expects local search marketing to generate $502 million in 2004 and reach $879 million in 2009.

"There's enormous complexity here and many 'moving parts'," said Sterling. "But consumers are increasingly adopting the Internet to search for local information and that will ultimately drive more advertisers online to get in front of them. 'Local search' won't replace Yellow Pages or newspaper advertising, but it will be an important adjunct or element of their marketing mix. The only questions really are 'how big?' and 'how fast?'"

The Kelsey Group/ConStat, Inc. findings are the seventh wave in their Local Commerce Monitor that analyzes the advertising and marketing challenges faced by SMEs. The ongoing study represents findings across 14 major and secondary U.S. markets – Atlanta, Boston, Chicago, Columbus, Hartford, Houston, Los Angeles, Nashville, New York, Norfolk, Oklahoma City, Omaha, Sacramento and Seattle.

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