People in the US tend to spend 80 percent of their budgets within 50 miles of their homes, and the Kelsey Group thinks that bodes well for local advertising’s $110 billion market to shift more into local search ads.
Google may already be the largest local search advertising company. A Kelsey Group report published in a client letter from the Jordan, Edmiston Group investment bank said analysts believe 10 percent of Google’s multi-billion dollar revenue stream comes from local sources.
Only about four percent of local ad dollars are currently being spent on local search advertising. The Kelsey Group expects that to grow, and fast. They forecast a 50 percent annual growth rate for local search spending.
Google reports its quarterly financial on July 20th. These should be very interesting given the context from the Kelsey Group report. If Google does $6.6 billion in revenue as projected for the fiscal year, growth in local spending alone as forecast might bump Google to $7 billion in revenue next year.
Enjoying that growth and more means facing down the yellow pages companies for the attention of local people seeking information. It’s a challenge for Google, Yahoo, and Microsoft, all highly desirous of more of the local search market.
The yellow pages publishers have an advantage today. The Kelsey Group refers to local ad service selling as a “high-touch” occupation, and salespeople can be expensive.
Keeping with Google as an example, we see how that search advertising company’s strategy appears to be playing out. In March 2006, Google debuted its AdWords Starter Edition. It offers a simplified approach to search advertising, and only allows the advertiser to target a single geographic area, ideally a city.
Google further hinted at “getting feet on the street” by inviting marketers who are currently Google Advertising Professionals to learn how to become AdWords Seminar Leaders. Think of them as evangelists who would preach a day-long sermon extolling AdWords to small businesspeople.
Whoever does the best job of advancing the cause of local search advertising will have to show the ability to measure conversions. The Kelsey Group sees search marketing as something that could become “the ideal channel for uniting individual with merchant.”
Any merchant will need to see proof of this as part of the investment in search advertising. Making offline conversion measurement as close as possible to online measurement may be the piece of the puzzle all the search engines need to find for local search success.
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David Utter is a staff writer for Murdok covering technology and business.
