IYP Versus SEM

While Internet Yellow Pages (IYP) providers work to move their print customers online, search engines are trotting out local or regional targeting. Will the two clash or cooperate?

The stakes are rising as major search players stake their claims in the space. Google launched regional targeting for AdWords in September, and Overture Services is set to roll out the feature after testing it on AltaVista.

The IYP and SEM services go about helping people find local businesses in entirely different ways, yet both are going after the same audience and competing for traffic they can turn into revenue. This rapidly evolving space could see the fiercest co-opetition of any online ad play.

In this battle, Internet Yellow Pages have two edges over search engines: brand awareness and a local sales force that can bundle print and online buys.

A recent analysis based upon the new comScore Media Metrix Local Market Reporting system showed there’s no consistency in the way users in different locales use directory search sites, but they do tend to use the online versions of their local telcos’ directories. For example, Internet users in Austin, Houston and Green Bay are disproportionately likely to visit SmartPages.com, which is owned by SBC, a major provider of local telephone services in those markets, while more people use Verizon’s SuperPages Network in the markets in which it operates.

And, just as Internet searchers use familiar directories to find local businesses, those local businesses themselves are more likely to test the Web through their local Yellow Pages providers. Dean Polnerow, president and CEO of online yellow pages provider Switchboard , said local businesses are reducing the size of their print Yellow Pages ads and putting some of that money toward online. “Where they might have spent $1,000 a month for print Yellow Pages,” he said, “they can get an online ad for $100.” So, instead of buying a half-page that crams in all the information about the company, they might buy a third-page ad giving the URL where customers can find out more.

Citysearch, another pioneer in online business listings, has a field sales organization of over 100 people, according to CEO Briggs Ferguson. “We sell them, in a sense, door-to-door,” he said. That sales message includes the offer of a quick Web presence for $50 to $75.

SBC’s Smartpages.com uses the “whole ball of wax” approach for local sales. Reps offer everything from a print display page to Internet listings to premium online placements to complete Web development services, all of which is handled in-house.

Search engines, for their part, have huge traffic in their arsenals and well-developed self-serve software that works well for a certain segment of local businesses. Unfortunately, with local search in its infancy, many searchers aren’t getting good results when looking for merchants in their own towns. “While search engines are driving a lot of lookups, by and large, the results on a local level in an unstructured Web search are pretty dismal,” said Dick Larkin, vice president of Internet for TransWestern Publishing, an independent print directory publisher. “Even someone as good as Google has pretty horrible results versus a structured IYP.”

SBC Smartpages.com senior manager Mary Jane Thornburg said her company’s research shows that the longer consumers are online, the more they turn from search engines to online yellow pages when looking for businesses. “They realize that if they go to search and type in something, they’ll get quite a few results, some that are relevant and other that are not,” she said. “And those results are only Web-enabled businesses. It won’t be a comprehensive list.”

Moreover, the very structure of IYP listings are more familiar to consumers, and that may give these sites an edge when it comes to providing good results for local advertisers. They can provide all sorts of hot links and context for their ads to help users find what they want. Verizon’s SuperPages.com, for example, offers map-based search, which lets users plot the location of several businesses on a customized online map.

But Internet Yellow Pages also have some challenges. Search isn’t as flexible or reliable as it is on search engines — you can’t search by key word. They’re no use if you don’t know the town or zip code of the business you’re looking for. Additionally, paid search’s pay-per-click pricing model can be more attractive than flat rate pricing, because businesses don’t pay unless they actually get traffic to their Web sites.

But when it comes to the business of getting a share of the revenue from pay-per-click or contextual ads, it’s far from an either/or competition. Switchboard partners with Google to display AdSense contextual ad placements. Polnerow said AdSense results tend to be national or e-commerce advertisers at this point.

Smartpages.com is actually a pay-per-click customer of search engines. Its aggressive search engine marketing campaign includes buying Yellow Pages buttons on portals, bidding on key words and providing listings for Yahoo, other portals and local media sites. It also has a large affiliate network, with those affiliates also presumably bidding feverishly on keywords.

John Ellis, senior director of local for Overture Services’ global product management group, said that a large proportion of the pay-per-click ad network’s advertisers are local or regional advertisers, with roughly 4 percent of the traffic searching exclusively for local results. Overture already serves advertising to the Yellow Pages unit of its parent, Yahoo, which is a partnership between Yahoo and SBC. “The challenge,” he said, “is in getting deep penetration, and the best way to do that is with partnerships in the industry.”

Nor does Citysearch’s Ferguson see his service competing with search engines. In fact, he said, Citysearch pages should be one of the results returned for local searches. Indeed, Barry Diller, CEO for InterActiveCorp, which owns Citysearch, said this week that Citysearch is in talks with the major search players about how to cooperate on local listings.

TransWestern’s Larkin said that the major issue that could bring the search engines and IYPs together is developing an economic model that can support an outside sales force while accommodating the way small businesses buy advertising, which is an annual print Yellow Pages ad plus a set amount each month. The package would have to be easy to explain and deliver a reasonable return on investment.

The biggest barrier, according to Larkin, is that “Internet Yellow Pages and search engine people are very territorial. It’s like trying to get elephants to dance.”