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interactive local media

Interactive Local Media White Paper

A Closer Look at Local Search
Greg Sterling , 12/22/2003

"In 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)

Last 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.

In 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.

Internet 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.

To 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.

There 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.

Search 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."

SMEs 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.

How 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?

As 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.

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.