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The Kelsey Report® White Paper

Mobile Local Search and Directory: Understanding the Opportunity
Carlotta Mast , 11/11/2005

EXECUTIVE SUMMARY:

The explosive growth in the number of wireless devices worldwide has created a sense that it is only a matter of time before most local commercial searches are conducted from a mobile device, using a voice interface, miniature Web browser or some other interface.

It is true that in most developed markets there are now more wireless phones than landlines. The un-tethered lifestyle, in which a consumer or a business has a wireless communications device (or several) but does not have a landline phone, is becoming more common. In fact, this is the norm in many developing markets.

These facts are not in dispute, but it is unwise to assume that mobile services will soon be a dominant source of revenues for search engines and directory publishers.

As detailed in this report, there are many barriers to this conclusion. One is the quality of the experience in using mobile search and directory services. Text-based interfaces, like Short Message Service (SMS), are suitable for simple, direct queries but not for complex searches. And Wireless Application Protocol (WAP) and other browser-based services continue to offer a frustrating and limited user experience. The growth in smartphones offers promise for greater adoption of mobile directory services, but their cost will relegate them to elite status for some time to come.

Beyond the ergonomic and bandwidth challenges are some substantial roadblocks to a viable revenue model. Currently, many mobile directory services are offered free, particularly WAP services that are seen as extensions of search engines or online directories. While users are conditioned to pay for directory assistance (DA) calls and for SMS queries, the overwhelmingly relevant experience is the Internet, which is almost entirely advertiser supported. Therefore, the future revenue model becomes inextricably tied to the quality of the user experience. As capable devices become more prevalent and as search and directory services provide ease and value to users, advertisers will begin to see the value in mobile directory services.

Until that point, many U.S.-based directory publishers are likely to, and probably should, remain skeptical of the mobile local opportunity. However, search engines, led by America Online, Google and Yahoo!, are moving aggressively to develop mobile search products; and publishers in Europe and elsewhere are beginning to get some traction with their mobile products, particularly SMS.

Voice-enabled services remain largely off to the side for the time being, with the notable exception of Canada, which is experimenting with a fully voice-enabled directory service provided by Call Genie.

We would anticipate that the next few years will remain largely about experimentation with different form factors, service offerings and revenue models. It will take several years to learn what works and for devices, bandwidth and user behavior to reach the necessary levels to transform mobile local search and directories into meaningful drivers of usage and revenue growth.

While exactly how soon this market will take shape is open to discussion, what is not worth debating is the notion that highly relevant and extremely accurate content will be key in determining the ultimate shape and structure of the mobile local search and directory space. Directory publishers and online players that want to win in mobile must continue to innovate in ways that place a high value on pushing content acquisition, enhancement and distribution to new standards. Without this, the mobile local opportunity will remain just that another potentially large prospective market that never materializes.

Copyright � 2005 The Kelsey Group. All Rights Reserved.
This published material is for internal client use only. It may not be duplicated or distributed in any manner not permitted by contract. Any unauthorized distribution could result in termination of the client relationship, fines and other civil or criminal penalties under Federal law. The Kelsey Group disclaims all warranties regarding the accuracy of the information herein and similarly disclaims any liability for direct, indirect or consequential damages that may result from the use or interpretation of this information.

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Copyright© 2006 The Kelsey Group. All Rights Reserved.