The Real Problem with Local Search

(or, “Why Google REALLY introduced Universal”)

The closing/aggressive-sale-mode announcement about Judy’s Book yesterday made a number of waves around the SEO community as a bellwether for the state Local search. Like many dot-com startups, I think Judy’s Book may have fallen victim to being a bit ahead of its time. If you’ve never visited, it is (was?) a phenomenal-looking site, with a really intuitive interface, and a strikingly useful data set.

Greg Sterling over at Screenwerk, whose story on Judy’s Book is the first link in this post, runs down a great list of Local Search statistics in a related post at SearchEngineLand:

Internet ad spending will reach $62 billion and surpass all other media by 2011; local online spending will reach $19.2 billion. Local search is projected to be $4.1 billion. Veronis Suhler Stevenson, August 2007

Local search is the second most popular online activity after e-mail.
Piper Jaffray (2007)

60% of all local business searches now happen online (33% happen in print yellow pages) and 82% of the people using local search sites follow up their research with offline action.
TMP Directional Marketing-comScore, August 2007

Out of the 130 million monthly unique users of Yahoo last year, 116 million of them came to Yahoo with local intent.
Hilary Schneider, Executive Vice President, Global Partnership Solutions, Yahoo!

The Internet will influence a trillion dollars in offline/local retail spending by 2010/11.
JupiterResearch, Forrester Research, 2007

Nearly all of the Local Search Marketing experts agree that the problem with Local Search is that “It’s too fragmented and too complex.” (If you’re interested in reading some of these opinions, Greg Sterling is your absolute best source, but tons of other people have written and spoken about how fractured the Local Search market is.)

Local probably is more fractured than some other verticals within the search industry. But no one seems to complain about the fragmentation of e-commerce, for example, with all of the affiliate marketing strategies, let alone selling items directly on Amazon, eBay, Froogle, etc…

It is true, though, that small businesses are too busy running their own business to even know about half of the players in the Local field. Most of my clients to date had heard of Craigslist. But only ONE had heard of Yelp (and she’d never used it!). CitySearch and the Internet Yellow Pages were completely off their radar screens. Judy’s Book? Kudzu? Yeah, right.

Even if they’d heard of them, what small business owner has time (or money) to attend things like SES or SMX Lo/Mo, where they could actually LEARN a bit about how to use these sites to their advantage? The newly-announced Universal Business Listing should help alleviate some of that fragmentation, but how long will it take for the UBL to actually catch on with small business owners?

But guess what: every small business owner in the country has heard of Google, Yahoo, and Microsoft.

And before we get wrapped up in the latest Local entrant to secure a few million dollars in VC funding, let’s not forget that BY FAR the biggest players in Local Search are STILL the search engines. As a small business, if you’re doing well in these three engines (well, really if you’re doing well in the first TWO of them), you probably already have more business than you can handle.

The REAL problem with Local Search isn’t fragmentation.

Beyond the Big Three, there are an incredibly limited number of quality sites to go for local business information: Craigslist, Yelp, CitySearch, Judy’s Book, and a few of the online YellowPages. Whether or not these sites will succeed as profitable business models is an entirely different question. But they are certainly well-organized enough, and certainly get enough traffic to be major players for the foreseeable future. The economics of Local Search will, sooner or later, sort themselves out–the new entrants that don’t have some sort of core differentiator will be left by the wayside in the months and years to come.

THE REAL PROBLEM WITH LOCAL SEARCH IS THAT SEARCH ENGINES AND LOCAL LISTING SITES AREN’T RETURNING RESULTS THAT USERS WANT TO SEE.

And a greater variety of PPC offerings and banner ads simply isn’t going to improve matters, because small businesses can’t afford online advertising on a permanent (or even semi-permanent) basis, anyway, on more than one or two sites.

According to a recent Kelton Research study, 70% of Americans experience “search engine fatigue.” Taken in tandem with Yahoo’s statistic of 116 million out of 130 million users searching with Local intent (cited earlier in this post), it’s safe to say that an incredibly high percentage of searchers that AREN’T SEEING THE LOCAL RESULTS THEY WANT TO SEE.

The search engines know this, and I suspect it’s a major reason they’ve radically altered the look of a typical “product/service + city + ST” search result.

The new “Universal” layout is proof that engines WANT local businesses at the top of their results. With a few solid reviews (or even ONE solid review), and a geographic location close to the center of town (a MAJOR flaw in Google’s current Local algorithm, IMHO), a business that doesn’t even have a website can effectively be Google’s #1 organic listing, just like Plumbing Works below. “Mom & Pops” now DOMINATE the de facto top three results in a Local SERP. I still don’t think Google (or Yahoo, or MSN) is pulling the RIGHT Mom & Pops, but it’s a step in the right direction.

The number of “traditional” organic listings has been chopped by 30%, from 10 to 7 (at least on Google). And if the findings of Gord Hotchkiss’ image thumbnail studies can be extended a bit into Local, I’d imagine that area map at the top left-hand side of the page is bright red on an eye-tracking heat overlay.

Experientially, I’d say that prior to the introduction of Universal, a standard locally-targeted SERP contained maybe 35-40% Mom & Pop listings. The remaining 60-65% were taken up either by national players with local or regional stores (but leveraging PR7 or PR8 domains), nationwide referral services (leveraging PR5 or PR6 domains), or OTHER Local listing services (such as Craigslist, Superpages, etc.).

Which leads to the SECOND reason that the engines’ Local algorithms now get top billing in a standard Local SERP:

The more “mom ‘n pops” are featured, the more the bigger players are forced to buy Adwords to compete.

The engines are not stupid. They KNOW that the big marketing dollars come in from the Fortune 500 chains with regional or local brick-and-mortar stores. Mom & Pop will never be able to compete in the $5.00/click world of PPC, yet users EXPECT to see local stores they recognize in their search results.

They ALSO know users don’t want to sort through Google’s search results only to be directed five OTHER companies’ OWN Local search results (like Yelp, InsiderPages, CitySearch, or sadly, Judy’s Book). It’s simply not in the engines’ own interest to take people away from their OWN PPC ads and into someone else’s set. That’s lost revenue, and a poor user experience to boot.

So take heart, Local Business Owners of the World. Despite the current confusing, fragmented world of online marketing, things WILL get easier. The demise of Judy’s Book is just one indication that even quality Local sites are falling by the wayside–you’ll have fewer options to worry about in the near future.

And most importantly, although they’re only at sea level, you have many friends in the Internet’s highest places–Mountain View, Sunnyvale, and Redmond–who want your business to succeed online, albeit not for entirely altruistic reasons.