What’s ‘The Problem with Local Search’?

Business 2.0’s Eric Schonfeld posts his thoughts and observations in reaction to a recent speech given by YellowBook’s CEO Joe Walsh. Schonfeld basically says, according to Walsh:

• There isn’t sufficient local search volume to deliver enough traffic/leads to SMBs
• Print directory usage isn’t declining (though it’s not growing)
• Small businesses won’t self-provision ads and G, Y & M don’t have a sales force to push ads directly to them so their outlook is somewhat mixed in local

And away we go . . .

SMBs and self-service:

I wrote extensively about the self-service question previously here. Yes, the majority of SMBs are never going to self provision. (Separately, I’ve predicted that in about five years “simplification” will bring the self-service number up to 10% of the addressable SMB advertiser base.) But most SMBs won’t have to self-provision. There’s now an elaborate ecosystem of existing sales channels and new aggregators bringing SMBs online and into search results. (I’ve written about that at length here.) And we’re really in a fairly early stage of development for this network of sales channels – the “local search ecosystem.”

And all these players and channels are, literally or effectively, sales agents of Google, Yahoo! and Microsoft, which is where much of the traffic volume is today.

Print yellow pages usage not declining:

The print newspapers are under huge pressure from declining print subscriptions and general readership as well as a loss of advertisers in their traditional product. Over on the other side of town, Walsh says none of this is happening to the yellow pages. In fairness I’m reading a paraphrase of Walsh’s comments. But every time I hear this kind of statement it just rings false to me. But let’s assume that Walsh hasn’t seen usage erosion in the print directory.

There’s lots of empirical evidence that consumers are now using more sources of information to make purchase decisions. One reason is simply that there are more sources of information. In recent studies, the Internet is now present (I can show you the data) in one of the top influence positions in almost every purchase category. In other words, the influence of any single medium is now diminished and the Internet is an almost ubiquitous influence on consumer purchase behavior. One also has to remember that the Internet isn’t a monolith, but hundreds of sites when it comes to local.

Now on to the issue of demographics…I’m not going to make the facile, often heard remark that “nobody under 30 uses the print yellow pages.” But it is true that the “user base” of print yellow pages is generally older (and less affluent) than the broadband Internet population. And it is true that people under 30 are more inclined to use the Internet (and wireless) than those over 50. (The Pew Internet & American Life Project has very detailed audience segmentation data, which shows the complexity of the marketplace.)

Indeed, the media landscape is more complex and fragmented than it ever has been. But the bottom line here is that the printed yellow pages (if not losing usage in significant numbers) is, at a minimum, seeing diminished influence over consumer purchase decisions and having even less influence on certain populations of users, who represent the desirable segments of the market. Over time these trends will become even more pronounced.

So the idea that the Internet has has little or no adverse impact on print yellow pages usage is incredible — literally. (I believe it’s better to own up to those changes and talk about a multi-platform strategy, which apparently Walsh did to a degree.)

Local search volumes:

This is already a long post and I could make it much longer with this part of the discussion. (Here’s my equally long post from several months ago about the value of local search and corresponding search volumes – scroll for the volume discussion.) I’ve moved from the narrower definition of “local search,” which looks at “local search engine and Internet yellow pages usage and query volumes,” to a much broader one that redefines local search as “the influence of the Internet on offline purchase behavior.” I realize that my new definition in some ways “swallows the Internet” but it’s consistent with what’s actually going on in the marketplace.

People use the Internet for shopping and research and do most of their transactions in the “real world.” That’s almost 100% true for those involving service businesses, the yellow pages’ dominant advertiser base.

The narrow, historical understanding of local search, market fragmentation and the lack of visibility regarding the full cycle of consumer purchase behavior has obscured the true scope and influence of “local search.” For example, no single company has visibility on all the sources of even online information (let alone online and offline) a consumer may use in making a given purchase decision. And there’s no visibility (unless there’s phone tracking, a coupon or some other mechanism) regarding the online influence on offline buying. (Surveys and studies have been done on this, but still the data are limited.)

In terms of the user experience, there are data challenges (completeness, accuracy, recency) and many improvements that still can be made in the UI and presentation of information.

Having said all that, if we look back at the local search market, even a couple of years ago, we’ll see how rapidly it has developed. Even comScore, using the conservative definition of local search, puts local search users at almost 70% of the Internet population. And once better “passive” location awareness becomes more widespread we’ll see searches that are in fact local in their intention but not in their construction more clearly revealed.

I don’t want to simplify any of this; local is a much more complicated market than general search. But it’s also a lot healthier and further developed than the post “The Problem with Local Search” suggests.

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