New Developments in Local Search, Part 4

So far in this series on local search, I’ve covered developments being taken by major Web search engines to improve local searching.

I promised to examine the excellent material offered by online yellow pages (YP) such as Switchboard, SuperPages.com, and SMARTpages.com. And so I shall, especially focusing on how some search engines already incorporate YP information and how that integration will continue to evolve, perhaps quite radically.

That story, along with my long-promised one on Citysearch, will come soon. I’m taking a pause in the coverage because we have a great report from a session about local search from The Kelsey Group’s recent Digital Directories & Interactive Local Media Summit.

At the summit, The Local Search Forum: Separating Hype From Reality panel included executives from major search companies and German media company Muller Medien. Panelists examined the opportunity local search offers Web search engines and the challenges of turning it into a money maker.

I’m certain you’ll find the comments enlightening. Now, I’ll hand the column over to guest columnist, Dick Larkin (his bio is below), who attended the session.

Yellow Pages and Search Engines

You know local search is going mainstream when the major print YP publishers convene with the major online search providers to discuss this formative new industry, as was the case at this conference.

YP publishers are worried Web search will make inroads in the $25 billion YP market. Improvements in local search threaten publishers’ Internet yellow pages (IYP) offerings and foretell a credible threat to the print directory business.

The Yellow Pages Integrated Media Association commissioned a study that found print YP have experienced a usage decline from 2.0 average weekly lookups per person in the mid-1990s to 1.4 average weekly lookups in 2003. The same study found IYPs and local Web search each had 0.33 average weekly lookups.

Logically, you might think the big YP publishers might work with Web search firms to sell paid search to local businesses. Unfortunately, there are inherent problems for search companies and YP publishers alike in monetizing interactive advertising:

• Online local traffic is still far too low to justify prices high enough to compensate a field sales force.
• Online ad products are far too complex for the average advertising sales rep to sell.
• Online directories and search companies aren’t prepared to build the outside sales forces necessary to reach 10 million small-to-medium-sized enterprises (SMEs) in the U.S. Some 39,000 outside sales people sell print YP.
• The economics of publishing print YP remain incredibly strong. Even with decreased use, the books deliver leads to advertisers at an acceptable rate. Renewal rates are steady at 75-80 percent.
• Using a traditional print YP sales force to sell interactive products takes sales resources away from the highly profitable print business.

Search Engines on Local Search

The most eye-opening panel at the conference had Yahoo, AOL, LookSmart, Terra Lycos, and Muller Medien discussing strategies for monetizing local search (I understand Google declined to participate on the panel). The audience included every major YP publisher and dozens of IYP publishers.

The panel agreed the local search market is enormous, and growing. Between 20 and 35 percent of all Web search seeks geographically relevant results. Panelists said they expect local queries to increase with user sophistication, better search technology, and deeper local content.

Paul Levine, Yahoo Get Local general manager, said 5 percent of all searches through the main Yahoo search box include explicitly local terms, such as a city, an area, or a neighborhood. They’ve discovered 15-30 percent of all searches want a local result but don’t include a local term. A user searching for “auto repair” probably wants local repair shops, not sites on the history of auto repair.

AOL’s executive director of search and navigation, Gerry Campbell, agreed, saying AOL’s experience mirrors Yahoo’s in terms of percentage of implicit and explicit local search.

LookSmart’s VP of listing services, Tony Mamone, added his company has seen local search almost double in the last 18 months. They expect the trend to continue.

The panel moved on to the challenge of building quality local content to better satisfy local search queries.

Levine said the fact 80-90 percent of local businesses don’t have a Web presence is a major obstacle. Yahoo experienced a leap in consumer satisfaction by integrating Yahoo Yellow Pages results into its search results. He said this hybrid approach boosted CTRs on local search significantly.

Levine also said Yahoo doesn’t consider the main search box the best place to start a local search. He indicated Yahoo would probably release an extension of the main search box better suited for local queries.

Mamone pointed out an arbitrage situation exists in locally relevant pay per click. The average price per lead via paid search is $0.20 to $0.40. Yet local leads are significantly more valuable and are undervalued in the marketplace. Local lead volume is relatively low, but each lead delivers far more value to the advertiser.

The panel then discussed strategies to reach the 10 million U.S. SMEs. Less than 250,000 currently buy paid search placement.

Campbell said AOL believes a much simpler range of search products is necessary to entice less-sophisticated local advertisers. He expects products to mirror traditional YP advertising. An advertiser would pay a fixed price for a number of months, not micromanage keyword auctions.

Levine discussed Yahoo’s successful relationships with SBC Communications and BellSouth’s YP sales forces. YP publishers bundle Yahoo IYP inventory with the IYP products of RealPages.com or SMARTpages.com. He observed there’s enough margin to go around. Resellers can afford to partner with Yahoo

Expect partnerships between YP publishers and Web search companies, products targeted toward SMEs, and improvements in local search.

Dick Larkin is VP of Internet at TransWestern Publishing, a major independent YP publisher with 330 directories in 25 states. He produces The Yellow Pages Commando News, an edgy weekly newsletter covering local marketing and sales strategies.

This column was adopted from ClickZ’s sister site SearchEngineWatch.com. A transcript from the panel this column summarizes is available to paid Search Engine Watch members.