the world of search there is still a lot of innovation that needs
to be done. It's still not very good at finding local information.
. . . Clearly, integrating local search with network search, with
web search, there is a lot still to be done there to make it richer."
Bill Gates in Australian IT (October 23, 2003)
year at this time, there was no such thing as "local search." Now
it's probably the hottest topic in the industry. A lot has changed
in a very short period.
fact, when The Kelsey Group (TKG) issued "Searching for Profits: Yellow
Pages and the Challenge of Pay-per-Click" six months ago, local search
was still largely a matter of speculation. There were no examples
in operation. Today, while all the players agree that it is still
in its infancy, Google, AOL, Yahoo! and Citysearch are actively in
the market with local search products and functionality. And there
are many more companies right on their heels.
Yellow Pages, for their part, are busy trying to regroup and determine
how to best position themselves and leverage their assets in an online
world that is increasingly dominated by usage of keyword search.
date, most paid search revenue has come from companies selling goods
that could be shipped from anywhere to anywhere else. So geography
didn't matter much beyond shipping charges. But paid search has now
awakened to the market potential of local and small-business advertising.
are approximately 10 million small and medium-sized enterprises (SMEs)
in the U.S. (and at least double that abroad), a majority of which
do most of their business inside a 50-mile radius. The Kelsey Group
has conservatively estimated the value of the local advertising market
at US$22 billion. And a dominant share of small-business ad budgets
are allocated to print Yellow Pages.
engine advertising replicates the value proposition of Yellow Pages,
delivering "qualified leads" to marketers in the form of consumers
who are "ready to buy." So it was probably only a matter of time before
paid search cast its gaze over to the local marketplace, which represents
a tremendous opportunity for paid search if it can be realized.
And that's a big "if."
combine to form a very diverse and fragmented market that is notoriously
difficult to penetrate. Accordingly, there are numerous challenges
ahead for paid search providers as they move into the local market.
many consumers are using search to find local businesses? How large
is the potential advertiser base and what are the short and long-term
potential revenues? What are the major obstacles to success?
the title suggests, this report takes a closer look at these questions
and the many developments that have occurred in the past six months.
It also explores in considerable detail the market forces and practical
issues that have emerged as the drivers of and barriers to SME adoption
of local search.