Local Search: Working Hard for the Money

Santa Clara, Calif. – While local search presents a rich opportunity, cashing in on that promise is going to be a challenge, according to industry players. They suggested teamwork between online yellow pages providers and search engines may be one solution.

The discussion came at a two-day conference on local search put on by the Kelsey Group in Silicon Valley this week, where more than 400 people turned up to hear about and discuss the issues. Local search is believed to be one of the next growth areas in search engine marketing, with the Kelsey Group expecting local paid search advertising in the U.S. to reach $2.5 billion by 2008.

“It is not going to be an easy path. Local search means changing peoples’ behavior, and that’s tough,” said Safa Rashtchy, a Piper Jaffray analyst, speaking at the “Drilling Down on Local Search” conference.

“The studies presented here show there is still hesitancy out there. Still, I’m convinced it’s a big opportunity,” Rashtchy said.

The research Rashtchy referred to was a Kelsey Group study presented at the conference that focused on 460 local small business advertisers surveyed in February and March 2004. Of the 460, a total of 185 used, or were interested in using, pay-per-click local search. The remaining 275 were undecided or not interested.

Of the “not interested” group, 51 percent said such advertising “would not work for my business.” Thirty-four percent of those in this category said paid search is for larger businesses. Only 6 percent believed pay-per-click is extremely cost effective.

Like Rashtchy, consultant Ken Clark sees great potential in local search. To Clark, sales is the key component that will make the difference in getting advertisers to sign on the dotted line.

“Who is going to go visit those businesses and work with them? The logical answer is the yellow pages guy. Somebody has to make the sales call,” Clark said

And therein lies the dilemma. Major search engines such as Google, Overture, Yahoo and MSN have a pricing model, pay-per-click, as well as search traffic, but no local sales forces in place to sell small to medium-sized businesses.

It would seem that online yellow pages providers , with their existing sales forces, would be in a prime position. But “people don’t think of SuperPages in terms of searching for services or goods,” admitted Verizon’s Dana Benton Russell, referring to the company’s online yellow pages site. Also, though Verizon has teamed with FindWhat.com to offer ads using the popular pay-per-click model, many yellow pages companies do not yet offer that option.

For these reasons, partnerships between the two groups were a lively subject of discussion at the conference. Many of the major search engines already use yellow pages data for listings. Google’s beta version of local search,which launched in mid-March, does so, for example, as does Yahoo’s SmartView.

“As we move forward to penetrate the small business market we’re looking at partnering with yellow pages, resellers, those kinds of groups,” said David Means of Overture. And during a presentation on direct sales, Warren Kay, Overture’s director of sales for local search, said, “A media sales partner is a good idea.”

Regardless of what approach is taken, conference participants agreed that there is “no silver bullet,” as Overture’s Means put it. “No one can definitely say what is going to be.”