Google to Add Local Inventory to Products

Buried in the announcements coming out of the Google Search “Evolution” event that happened yesterday was one about local product inventory coming to Google Product Search (online and in mobile). Because there were bigger and sexier announcements most of the coverage has neglected this little detail, which Engineering VP Vic Gundotra said would happen next year. 

Google Product Search (formerly Froogle) has been a kind of “sleeping giant” in online shopping for quite some time. But the company has largely failed to take advantage of its opportunity and provided a very lackluster product. Indeed it created a big opening for Bing, which sees shopping as one of the “four strategic verticals” (Local, Shopping, Travel, Health).

More recently, however, Google has been upgrading the product search experience and added a range of improvements and new features. Some might argue this is all a response to Bing. But they have been a longer time in coming, though perhaps accelerated by Microsoft’s competitive moves. 

Among the recent Google Product Search upgrades is “nearby stores,” which shows physical store locations rather than product inventory. But that’s about to change according to the largely unnoticed zinger from Gundotra. 

I don’t know who Google is working with or whether they’re doing it on their own; but the addition of product inventory information (both online and in mobile) is potentially a major development. We’ll have to see what shows up. 

Google doesn’t make any money off paid inclusion or clicks within results; it monetizes the traffic by placing relevant ads around results. It also obviously shows product ads on Google.com SERPs. 

Most of the big shopping engines (save one or two) are doing search arbitrage or trying to use SEO to get traffic — essentially because they have no brands and limited consumer awareness — that they then resell as highly qualified. As you know most people do pricing and reviews lookups (research) online and then buy in local stores. The online buying is dominated by familiar brands, multi-channel retailers (e.g., Target) and most notably Amazon. The no-name etailers and shopping engines see traffic and clicks but fewer actual “conversions” for the aforementioned reasons. Even eBay is under increasing pressure and is struggling to boost traffic and growth. 

Source: Hitwise, November 2009

So what happens if Google does a good job with local inventory information? (which has literally been on the company’s radar for 5 years or more). As an aside, the reason local inventory data wasn’t added at Google before is because of a lack of scale. This soft announcement yesterday suggests that Google now has a way to do it at scale or at least has revised its expectations in the near term. 

If what shows up at Google Product Search in the form of local inventory data is prominent and effective it may put Google Product Search in the top tier of online shopping experiences and spell bad news for the Shopping.com’s of the world (owned by eBay). Companies like Krillion would be in a strong position — they’re already talking to everyone — because local inventory information would start to become a “defensive” necessity. Milo, as well, would/will see many BD calls and/or suitors come knocking. NearbyNow has this data but has changed its model to focus on mobile app development for magazine publishers. ShopLocal also has a version of local inventory information in its circular data. 

Another reason that Google would be in a strong position is because of its mobile assets. Among the major e-commerce players and shopping engines, Amazon offers the most complete mobile experience. It has terrific iPhone and Android apps (Amazon Remembers/SnapTell). Shopping.com also has a nice site. But the larger point is that the PC-mobile shopping crossover will get stronger and stronger. And increasingly “online shopping” will feature the following scenario: I’m standing in front of a product in a store with my smartphone. Here’s what I’ll want to see:

• Pricing information
• Reviews
• Discounts/sales information
• Other, comparable products
• Where else might I buy it in my area

The addition of local inventory data combined with Google’s ability to refer traffic to itself (think Maps) could become highly “disruptive” for many online shopping players — provided that Google continues to improve its online shopping experience and leverages its PC–>mobile advantages.

Report: IYP to be 11% of US YP Revs

According to YP consultancy Simba:

Internet yellow pages spending is projected to increase 17.4% to $1.83 billion in 2009, accounting for 11.1% of total yellow pages market revenue . . .

By comparison, in the UK, Internet represents 20% of overall revenue for Yell (it was 12% of revenues for subsidiary Yellowbook in 2008 at YE).

Overall Simba said that IYP revenues in the aggregate (for the US market) are $1.83 billion for 2009.

Craisglist v. eBay: What’s at Stake?

The Craigslist vs. eBay trial going on over the alleged dilution of eBay’s ownership interest in the site is happening this week. There’s a provocative BusinessWeek article that spins out various scenarios and potential outcomes:

• Craigslist wins, nothing changes
• eBay wins and 1) forces Craigslist to charge money for listings across categories making eBay’s Kijiji, eBay itself and other classifieds purveyors more competitive with CL and/or 2) paving the way for an eventual acquisition by eBay

Here’s the most provocative nugget of the piece:

From the time eBay purchased a 28.4% stake in 2004, the larger company has considered fuller ownership, court documents indicate. The idea was “to take out the free player,” says Jeffrey Lindsay, an analyst at Sanford C. Bernstein.

Here’s what I wrote in July, 2007 when eBay’s Kijiji entered the US market:

Having a board seat on a company you’re directly competing with would seem to be a direct violation of eBay’s fiduciary obligations to Craigslist. In one sense the ultimate expression of Kijiji’s success would be to take Craigslist’s business — which by the way I don’t think it will be able to do. Google Base didn’t kill Craigslist or eBay, Kijiji won’t kill Craigslist.

My belief is that eBay bought a stake in Craigslist so it could “go to school” on the site. From the beginning I think eBay’s motives were to secure an acquisition or to glean enough “learnings” so that it could more effectively compete with CL. eBay, a “Web 1.0 company,” is under pressure to find new sources of growth, which are not coming from its core business; PayPal is one of those potential areas as an aside.

I was never a securities lawyer and so I don’t know the nuances of the law here. It may be that CL acted improperly and in violation of eBay’s rights as a director and part owner of CL in diluting the auction site’s interest. However there are some major “unclean hands” on eBay’s part. I suspect we’ll see some sort of settlement before the trial concludes. But maybe not . . . in which case there could be appeals, etc.

But unlike the BusinessWeek piece suggests I don’t think we’re going to see some major change in the competitive landscape or pricing of online classifieds regardless of the outcome.

Favorite Places: SMBs, Local & Mobile

Google is using a range of strategies to engage local, small businesses and get them to claim and update their information through the Local Business Center (LBC). In a provocative new effort, Google has identified 100,000 “Favorite Places” based on “how many times Google users looked for more information about those businesses.” Right now this is US only but Google intends to expand the program to other geographies over time.

As a key part of the overall effort and promotion, Google has sent out physical window decals to these 100,000 businesses for them to display in their windows (bet that they will). Similar to many of the familiar “best of” or “winner of” stickers that one sees in local restaurant windows, these decals contain something extra: a QR barcode that links the physical sticker to the mobile version of the Place Page on Google associated with that business.

The rest of this post is at Search Engine Land.  And here’s more from the Google Blog. 

Citysearch Becomes a ‘Twitter Client’

First out of the gate among local publishers, Citysearch has integrated Twitter to such a degree that the site is now a “Twitter client” — literally.

The new functionality allows businesses to sign up for Twitter (or integrate their existing accounts) and tweet directly from Citysearch. In addition users can interact with business owners or reps using Twitter directly on the profile page on Citysearch. Third party mentions of the business are also integrated on the profile page. Here’s an example to illustrate (identified in the release):

Beyond the three most recent Tweets on business profile pages, there’s a link that take users to a page to see more comments:

The idea being promoted is that you can “manage your online reputation across the web from one location.” There’s Facebook integration as well:

Integration of social media and “online reputation management” is a new “front” in the war to win the hearts, minds and loyalty of local advertisers. Many if not most local publishers operate a “network” of some sort, including Citysearch, which involves managing an online ad spend for SMBs with SEO services and/or distribution to third party sites (including Google/search).

Online reputation monitoring and/or distribution of SMB promotions and communications to sites like Twitter and Facebook is a kind of parallel suite of services that will very soon become a must to complement more conventional advertising.

MerchantCircle was first (in early 2007) with a basic version of something like this: collecting reviews about local businesses from selected sites. GetListed is also in this broader space, although focused on the existence and consistency of listings. And most recently Marchex developed a very rich SMB reputation management and monitoring tool. 

The degree to which SMBs “get” social media and sites like Twitter and Facebook is variable but growing. Steve Espinosa of eLocal Listing (and elsewhere) told me informally that he’s seen about 5% of local SMBs in the database with pages on Facebook. That’s very quickly closing in on a million SMBs if not already at that number. Without citation to a source TechCrunch says, ”There are now over a million local businesses which have claimed their Google local listing.” 

We’ll probably see something like 10% to 20% of SMBs doing self-service (broadly defined) in the next couple of years. While that means 80% are not, we’re talking about an audience of SMBs the size of the existing US yellow pages advertiser base in the aggregate. 

This coming year, 2010, will be the year that “social media” goes mainstream for SMBs and a majority of the major publishers operating in the space integrate the content (Tweets) into their own sites and establish tools, such as what Citysearch has done, to enable SMBs to tap into Twitter and Facebook. 

Urbanspoon, now owned by IAC, has also started integrating Tweets into its pages. “In just a few weeks Urbanspoon has collected over 4,000 restaurant Twitter usernames nationwide, with more to come,” says the press release.

We’re going to see more and more interesting things developed around Twitter data feeds by third parties (like this) in the local and mobile segments this next year as well.

Will Chrome OS Solve the ‘Netbook Problem’?

CNET is reporting that Dell has put the Chrome OS on its Mini 10v Netbook. I believe the Google OS, targeted initially for netbooks, will succeed in that arena. Recall that Google said Chrome OS was a netbook OS and these devices were positioned as a “second computer.” 

Back in June NPD Group released results of a consumer survey of netbook owners in which it was reported that many were not happy with their machines:

• Only 58 percent of consumers who bought a netbook instead of a notebook said they were very satisfied with their purchase, compared to 70 percent of consumers who planned on buying a netbook from the start. 
• Satisfaction was even harder to ascertain among 18- to 24-year-olds, one of the main demographics manufacturers were hoping to win over with the new products.  Among that age group, 65 percent said they bought their netbooks expecting better performance, and only 27 percent said their netbooks performed better than expected. 
• One marketing aspect that has interested buyers is the portability factor.  It’s been the key marketing tool for netbook manufacturers, and consumers agree that it is a great feature.  Sixty percent of them said that was a main reason they bought their netbooks.  However, once they got home, 60 percent of buyers said they never even took their netbooks out of the house.

The positioning of the Google/Chrome OS netbook as an “InterNetbook” and/or second machine will set expectations accordingly and avoid some of what was reported in the NPD survey above. Pricing will be key however.

As I argued previously, the devices need to be priced at less than $400 and probably below $300 to gain adoption — $200 would make them fly off the shelves (but would there be any quality there?). That will be the challenge unless they’re subsidized by mobile carriers. One interesting parallel scenario is Clearwire: I pay one price for my Internet at home but it extends to anywhere the 4G coverage exists in my city and beyond. 

Earlier this year we asked consumers over at Internet2Go (4/09, n=611) whether they would prefer a smartphone or a netbook as their mobile Internet device (if costs were the same). Here were the results:

• Smartphone: 34%
• Netbook: 27%
• Neither: 13%
• Unsure: 26%

I read these results to indicate that many people still are looking for a mobile Internet device that’s more full-featured than current smartphones. Internet-connected tablets may fit the bill there but they still need to solve the connection problem too.

Bing’s ‘Pepsi Challenge’

I spoke with Microsoft during the Bing launch period about the iconic “Pepsi Challenge” ads of the late 1970s:

Now it would seem Bing may be about to embark on a version of the same thing (we’ll see). Without much context, we learn about a study that involved a kind of week long “Bing challenge.” Reportedly 10 out of 15 users who participated would switch from the “leading search engine” to Bing:

Reuters: Friendster Gets an Exit

The site that (sort of) started the social networking craze — which came out of online dating — is Friendster. Reportedly the company turned down $30 million to sell to Google in 2003. The rest is history: technical problems and other issues plagued the site, which gave way to MySpace, which itself is now struggling to reinvent itself in the wake of Facebook’s ascent.

Reuters is reporting that Friendster will now be sold for in excess of $100 million to an undisclosed Asian buyer. The site raised just over $45 million in four funding rounds.

Most of Friendster’s usage and traffic is in Asia so this makes sense. Globally it has roughly 23 million visitors. In the US the numbers are quite low however:

Droid Is for Rad Dudes Only

A new Droid commercial goes after the iPhone as a kind of “digitally clueless princess” — a pretty but superficial device. Clearly the audience here is young men and dudes who want “rad” devices that “shred” the mobile Internet.

These TV ads seem to be trying to create an image of a tough, fast phone vs. the fluffy and impliedly weak iPhone. The commercial is borderline offensive in some respects; its subtext is not that far away from suggesting that the iPhone “is gay.”

Now I didn’t spend a ton of time with the Droid device but I did hold it and use it. It struck me as a better Android OS but I was unimpressed by the device and the design in particular (given all the hype). Overall it’s inferior to the iPhone in most respects (save the Google Navigation and multi-tasking). The Droid industrial design is also inferior to the Pre, which I own but don’t really like.

Verizon’s massive marketing campaign has driven sales of nearly a million units. But I find it fascinating that, like a political campaign (via commercials like this) Verizon is trying to define its opponent with labels and names — however false they may be.

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Update: Perhaps we should call it “the Penis Phone” . . . but these ads do seem resonating with men apparently, according to this YouGov survey:

Are Stores Going Away? No

I was struck by a recent MediaPost article entitled “The Obsolescence Of Brick-and-Mortar.” I had to look at the date a couple of times because it had the flavor of a piece that might have been written in 1999:

Web sites will replace brick-and-mortar stores within five years. I realize that’s a bold prediction, but here’s why.

Brick-and-mortar retail stores selling everything from clothing to high-ticket items like flat-screen TVs will turn into warehouses where consumers can touch and feel the merchandise. Web sites, supported by search engines and site search, will become the cash cow for the retail store. Advertisers will have more of an opportunity to address consumers because many will spend the time online that they would have spent in the store. Tracking sales and pulling in data from social sites to target consumers with specific ads, coupons and discounts will become much easier for marketers.

True, we’re in a multi-platform world but physical stores and corresponding retail sales will not be cannibalized by e-commerce, which is and will continue to be a fly on the posterior of US retail — albeit a big fly. People fundamentally use the internet to research (“shop” for) products and look at reviews. In 96%+ cases they buy offline. The Internet is mostly a marketing platform accordingly. This is a fundamental fact that many (if not most people in the tech industry) have failed to see and accept.

That’s why location matters so much; offline is where all the spending — and Internet influenced spending — happens.

Let’s get over the e-commerce vs. offline discussion that characterized the early days of online. Now it’s really about how all these channels can work together to support sales, notwithstanding some of the lingering internal political-organizational issues among retailers. Clearly “multi-channel” sellers (e.g., Target) are at an advantage vs. “etailers” (other than Amazon and a tiny minority of others, e.g., NewEgg, Etsy, Zappos [Amazon]). The no-name, pure-play etailers are screwed unless they have:

• Razor-thin margins and huge volume
• Extensive inventory
• Unique or niche products
• Several of the above

Indeed, when taxes come to e-commerce (and they will) this will put even more pressure on the pure etailers. People don’t want to pay shipping and they don’t want to pay other costs associated with purchases (e.g., taxes, handling). Convenience and in some cases lower cost are the chief reasons people buy things online. If costs, such as sales taxes, are equalized I’m not going to buy stuff online unless:

• It’s the middle of the night
• I’m sending a gift to my mom in Southern California and I don’t want to physically ship it
• The store is out of the desired item

Yes, e-commerce will continue to grow (ironically it may be boosted by smartphones) but as Jeff Bezos once said:

I think online ultimately will be 10 to 15 percent of retail. The vast majority of retailing will stay in the physical world because people have acute needs, they want things now.

If it gets to that point those will still be huge revenues, given that total retail in the US is just under $4 trillion annually.

Is Answers.com about to Take a Nosedive?

When I look up definitions or check my spelling I usually search Google for the word in question and then click the “definition” link in the upper right of the SERP (ignoring the myriad organic links on the main part of the page):

But when I did that earlier today (not for “haberdasher”) I noticed that the usual source, Answers.com, had been replaced by Google’s own dictionary:

Answers.com has lots of traffic and offers a range of features/services, but this development is probably going to have a material impact on its traffic:

I don’t know when or why this change occurred but it’s not good (and could be very bad) news for the site, which is public.

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Speculation: This may be tied into the new, improved Google Translate features announced today.

Is Content or Distribution King?

The much-rumored purchase of NBCU by Comcast is now public. The company has paid $30 billion for a controlling interest in the company. According to the NY Times report:

The agreement will create a joint venture, with Comcast owning 51 percent and G.E. owning 49 percent. Comcast will contribute to the joint venture its stable of cable channels, which includes Versus, the Golf Channel and E Entertainment, worth about $7.25 billion, and will pay G.E. about $6.5 billion in cash, for a total of $13.75 billion. For now, the network will remain NBC Universal, but ultimately Comcast could decide to change the name.

The strategy according to the joint statement issued by Comcast and GE is media “anytime, anywhere”:

Comcast Chairman and Chief Executive Officer Brian Roberts said, “This deal is a perfect fit for Comcast and will allow us to become a leader in the development and distribution of multiplatform ‘anytime, anywhere’ media that American consumers are demanding.  In particular, NBCU’s fast-growing, highly profitable cable networks are a great complement to our industry-leading distribution business.  Today’s announced transaction will increase our capabilities in content and cable networks.  At the same time, it will enhance consumer choice and accelerate the development of new digital products and services.

So this would seem to be a great marriage of “carriage” (distribution) and content and the “anytime anywhere” media concept also seems right for a bold, new multi-platform world. It’s worth noting that this combination is potentially much more potent than TimeWarner and AOL were. However an AP analysis suggests that Comcast is weighting content over distribution as the future of its business:

Comcast Corp. is buying control of NBC Universal from GE largely because Comcast wants to own more movies and TV shows. The point is to give it a position of strength if fewer people sign up for its cable TV services and watch more video online.

I would tend to agree that cable TV subscriptions will decline over time as people get the Internet on TV and use the Internet to consume TV and movies, unless bundling and aggressive pricing with other services (phone, Internet) keeps people hooked in.

But think about this: on the Internet distribution has become more important than content; consider the Google vs. News Corp. debate . . . or Google vs. YP publishers. Or perhaps it’s more accurate to say that some categories of “content” have become commoditized (general news, local business listings) and thus distrubtion is more important in those situations. Branded content remains in demand.

So one view of this GE-Comcast deal, as the AP article argues, is to value content above distribution. Clearly both are required for success. But what do you think? Is branded content more important than disribution or vice versa?

Amusing: Yelp on Citysearch

Stumbled across this: Yelp reviewed on Citysearch . . . It gets 3 out of 5 stars.

Touché: Citysearch rated on Yelp (thanks Luther).

Is PagesJaunes Doing Better than Yahoo?

I was in a meeting today with some folks in Montreal and I was told that Pages Jaunes (France) saw approximately 44% of its revenue coming from online. I was then told that the company has more online revenue that Yahoo! in Europe.

If it’s true it’s pretty remarkable. Can anyone verify. I’m in the airport so I can’t check further at this time.

Groupon Raises a Whopping $30M

Local deals and coupon (er, “social commerce”) purveyor Groupon announced that it had raised $30 million:

Groupon, the social commerce service that has saved consumers in cities across America more than $36 million since its launch 12 months ago, has raised a $30 million round of capital led by Accel Partners with participation from Groupon’s initial investor, New Enterprise Associates. The financing will be used to accelerate Groupon’s customer acquisition, expand into new geographies and further develop its technology.

Groupon leverages group buying and social media to provide its millions of customers big discounts on the best local businesses in major cities such as Chicago, Boston, New York City, San Francisco, Atlanta and Washington, D.C. To date, customers have purchased over 800,000 Groupons on deals ranging from spa treatments and golf outings to fine dining and skydiving.

Daily deals are delivered via email. I get them and mostly just delete because of lack of relevance (to my interests and lifestyle). Obviously, however, people love deals and email marketing remains quite effective. Daily Candy, a similar city-specific daily email newsletter, was sold last year for $125 million to Comcast.

Separately Coupons.com reported — it offers mostly grocery coupons with some fast food — the top coupon categories of 2009:

2009 Top Coupon Categories

1. Ready-to-Eat Cereal
2. Yogurt
3. Sweet Snacks
4. Refrigerated Dough
5. Salty Snacks
6. QSR/Casual Dining
7. Nutritional Snacks
8. Entertainment
9. Condiments
10. Pizza

My favorite categories on this list: Refrigerated Dough and Salty Snacks.

Google’s Top Local Searches by City

Here’s a list of the top local queries by US city from Google’s year-end list:

What’s striking is how distinct and local they are. I’m sure there are other patterns that exist but with low blood sugar I’m unable to find them now.

Local Display Ads: Where Are They Going?

The Kelsey Group’s latest release projects an increase in geotargeted display advertising:

The geotargeted display (or banner) advertising market will grow from $897 million in 2008 to $1.9 billion in 2013, representing a compound annual growth rate of 16 percent, according to BIA/Kelsey. The geotargeted segment of the display market will grow from 10.2 percent of all display ads sold in 2008 to 15 percent by 2013.

The locally bought portion of the market, which primarily comprises small and medium-sized businesses, will see the highest growth, at a CAGR of 66 percent. The segment will grow from $45 million in 2008 to $565 million by 2013. Further, the SMB market will swell from 5 percent to 30 percent of the total geotargeted market over the same period.

Most small advertisers are not using display advertising today. Three different surveys (with different sample sizes) I’ve conducted in the past year and a half have shown between 13% and 22% of SMBs saying they have done online display advertising of some sort (definitions are an issue). That means, on average, roughly 80%+ have not done any display advertising. There’s a much longer conversation to be had about how SMBs execute display campaigns directly or via surrogates.

My belief is that national entities will still be the primary ones taking advantage of increasingly accurate display geotargeting online and on mobile devices in the foreseeable future.

The 10.2% starting point in the Kelsey forecast likely derives from a comScore study, which was based on a creative but pretty rough methodology for determining which display ads were geotargeted in four markets. It probably under-counted actual geotargeted display inventory.

The stated rationale behind geotargeted display growth in the Kelsey release — that local search resellers are looking for cheaper local impressions/clicks — is sound. But in my view it’s too narrow in terms of what may actually drive geotargeted display over the long term.

There’s also the problem of the ad creative. While that can be automated it has to be done carefully and thoughtfully or those ads simply won’t perform. Creative is the most important part of a display campaign and most of the local search resellers are not thinking about creative; rather they’re just thinking about alternative sources of cheap local inventory.

Compare Borrell’s numbers (definitions are always an issue in forecast comparisons), which have locally targeted “banners” at $5.3 billion in 2010. In addition Borrell sees standard display giving way to myriad other forms of local advertising, including video, email and search over the next few years.

Study: Local Search Used by 81%

SEMPO and Advertise.com have put out findings from a study of online marketers. Survey respondents indicated the following about their campaigns (sample size not provided).

• 81.7% of participants indicated that they implement local search advertising campaigns online.
• Best ROI:

Search – 70.7%

Cost-per-action (CPA) – 14.6%

Email – 6.1%

Social – 3.7%

Other – 2.4%

Used display:

• No – 69.5%
• Yes – 30.5%