Editor's note: If you've been following my series on local search, you've seen that so far I've covered developments being taken by major web search engines to improve local searching.
I've also said that the series will examine the excellent material offered by online yellow pages such as Switchboard, SuperPages and SMARTpages. And so it shall, especially focusing on how some search engines already incorporate yellow pages information and how that integration will continue to evolve, perhaps quite radically.
That story, along with my long promised one on CitySearch, will be coming later this month. But I'm taking a pause in the coverage because we have a great report from session about local search from The Kelsey Group's recent Digital Directories & Interactive Local Media Summit.
At the summit, a panel called, "The Local Search Forum: Separating Hype From Reality," involved executives from major search companies and German media company Muller Medien. The panelists examined the opportunity local search offers to web search engines and the real challenges in turning it into a money maker.
I'm sure you'll find the comments enlightening. And now I hand over to our guest author, Dick Larkin, who attended the session. -- Danny Sullivan
Yellow Pages & Search Engines
You know local search is going mainstream when the major print Yellow Pages publishers gather with the major online search providers to discuss this formative new industry, as happened at this conference.
Yellow Pages publishers are concerned that web search is going to make inroads into the $25 billion Yellow Pages market. The improvements in local search threaten publishers' IYP offerings and they foretell a credible threat to the printed directory business.
The Yellow Pages Integrated Media Association commissioned a study finding that the printed Yellow Pages have seen 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 that IYPs had .33 average weekly lookups and local web search had .33 average weekly lookups.
Logically, you might think that the big Yellow Pages publishers might work with the web search firms to sell the paid search to local businesses. Unfortunately, there are some inherent problems for search companies and Yellow Pages publishers 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 representative to sell.
- Online directories & search companies are not prepared to build outside sales forces necessary to reach the 10 million small to medium enterprises in the US. In comparison, there are approximately 39,000 outside sales people selling print Yellow Pages.
- The economics of publishing printed Yellow Pages remain incredibly strong, so even with decreasing usage; the books continue to deliver leads at an acceptable rate to advertisers. Renewal rates of print advertisers has held steady at 75-80%.
- Using a traditional print Yellow Pages 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 their strategies for monetizing local search. The audience of 300 attendees from 130 companies included every major Yellow Pages (YP) publisher and dozens of Internet Yellow Pages (IYP) publishers. I understand that Google declined to participate on the panel.
The panel agreed that the local search market is enormous and getting larger. Somewhere between 20-35% of all web search is seeking geographically relevant results, and every panelist said they expect that percentage of local queries to increase with user sophistication, better search technology and deeper local content.
Paul Levine, General Manager, Yahoo Get Local said that 5% of all searches through the main Yahoo search box included explicitly local terms such as a city, area or neighborhood. Additionally, they've identified that 15-30% of all searches wanted a local result, but didn't include a local search term. Paul gave the example that a user searching for "auto repair" probably wanted local auto repair shops instead of the sites on the history of auto repair.
Gerry Campbell, Executive Director, Search and Navigation, America Online agreed saying that AOL's experience completely mirrored Yahoo's in terms of the percentages of implicit and explicit local search.
Tony Mamone, VP Listing Services, LookSmart added that they've see local search almost double in the last 18 months and they expect it to continue increasing.
The panel then focused on the challenge of building quality local content to better satisfy local search queries.
Yahoo's Levine said a major obstacle was that 80-90% of local businesses don't have a web presence. To compensate, Yahoo has experienced a leap in consumer satisfaction by integrating Yahoo Yellow Pages results into their main web search results. He said that this hybrid approach has boosted click-through rates on local search significantly. He expects this trend to continue.
He also said that Yahoo doesn't consider the main search box to be the best place to start a local search. He indicated that Yahoo would probably release an extension of the main search box that would be better suited to resolve local queries.
LookSmart's Mamone made a good point stating that an arbitrage situation currently exists in locally relevant pay-per-click. The average price per lead via paid search is in the range of 20-40 cents. However, local leads are significantly more valuable, and are currently undervalued by the marketplace. The volume of local leads is relatively low, but each lead delivers far more value that the cost to the advertiser.
The panel then focused on strategies to reach the 10 million small to medium enterprises (SMEs) in the US. Less than 250,000 currently purchase paid search placement.
AOL's Campbell said that they believe a much simpler range of search products is necessary to reach unsophisticated local advertisers. He expects to see ad products that mirror traditional Yellow Pages advertising. An advertiser would pay a fixed price for a number of months instead of trying to micro-manage keyword auctions.
Levine discussed Yahoo's successful relationships with SBC and Bell South's Yellow Pages sales forces. The YP publishers bundle Yahoo IYP inventory with the IYP products of RealPages.com or SmartPages.com. He made the comment that there was plenty of margin to go around for resellers to afford to partner with Yahoo
Expect to see partnerships between Yellow Pages publishers and web search companies, products targeted toward SMEs and improvements in local search.
Dick Larkin is Vice President - Internet of TransWestern Publishing, a major independent Yellow Pages publisher with 330 directories in 25 states. He produces "The Yellow Pages Commando News," an edgy weekly newsletter covering local marketing and sales strategies.
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