Trends in the Local Search Marketplace

A Conversation with Greg Sterling, Principal, Sterling Market Intelligence

Few people are as respected as Greg Sterling in the world of local media. A former analyst at The Kelsey Group, he now runs his own consulting and research firm, Sterling Market Intelligence, focused on online consumer and advertiser behavior and the relationship between the Internet and traditional media, with an emphasis on the local search marketplace. He is back to blogging this week at Screenwerk after a brief medical hiatus (hope you’re recovering, Greg). We caught up with Greg recently to get his thoughts on the local media landscape, including the world of call tracking.

eStara: It seems like one of your pet peeves lately is analysts failing to recognize the influence of online search/browsing on offline conversions. Why do you think people are failing to make this connection, and how do you see marketers tracking these types of conversions?

GS: I think one of the reasons that people don't make this connection readily is precisely because there's so little tracking and Internet-influenced transactions are so difficult to follow. There's something of a "cliff" between the online research consumers do and their ultimate transactions in local markets. There are currently only a couple of ways to capture online-to-offline behavior, one of which is call tracking. While call tracking doesn't reveal an actual conversion or transaction in real time, it's a pretty good proxy. Coupons and their equivalents are another way to do this. And there are also some interesting opportunities presented as mobile Internet use gains more adoption.

eStara: Your previous work at the Kelsey Group really helped introduce the concept of pay-per-call to the local search market. We all know about the major players that have introduced this model or formed alliances to provide it to advertisers, but what are your thoughts on its adoption amongst local advertisers? Who's using it, and who benefits most? Also, what are publishers doing to help sell advertisers on the concept?

GS: I think that pay-per-call has gained steady adoption but it hasn't taken off as quickly as might have been expected given its logical appeal to the local market. I think the reason for this is that the "push" channels -- where a sales force introduces the concept and sells it to SMBs -- haven't run with it. SuperPages introduced a pay per call product early on, but the other yellow pages publishers are just now experimenting with it. And while Google and Microsoft introduced "click to call" (call completion) and Google and Yahoo have experimented with pay-per-call, they haven't rolled it out yet. Until the sales channels that can educate SMBs and the big distribution channels that can generate call volumes bring it to the market in earnest we won't see it live up to its potential. However mobile is a natural fit with pay-per-call and it is gaining adoption there.

eStara: Many traditional media outlets are beginning to adopt ad models that resemble their online counterparts (ie. Auction-based placement, CPA, pay-per-call, etc.). Do you think this will help keep traditional (or offline) media relevant to local advertisers?

GS: The Internet has created a general demand for greater "accountability" in advertising across the board. And while the introduction of performance based models into traditional media will generate enthusiasm in some quarters, the thing that will keep them relevant to advertisers is their ability to attract and retain audiences. If consumer audiences erode then performance based models may become a way for traditional advertisers to hold on to marketers -- for a time. But if the audiences aren't there then the performance based models won't really work either.

eStara: As more and more traditional publishers get into the SEM game, we're hearing more about "co-opetion" between IYPs and search providers. Presumably, in this equation, the IYPs bring the brand awareness and "feet on the street" sales teams, while the search players bring eyeballs. However, with search providers introducing their own local and SMB products, should the IYPs be worried about cannibalization? What are some differentiators that local advertisers should consider?

GS: For the immediate future, traditional directory publishers with a sales channel have the ability to acquire and retain advertisers more effectively than the predominantly self-service models offered by the search engines. There are some scenarios that may alter that equation in the next couple of years but a "push" channel will always be more effective than a "pull" one for gaining SMB advertisers.

On the consumer side the search engines are at something of an advantage because of their higher traffic volumes and greater consumer awareness. The way that online directory publishers can and must compete is by offering the best user experience they can, the most accurate and freshest data available and by experimenting with features and content types that offer real utility to consumers. That may sound very "generic" but there's no magic formula in local. It's a complex area that continues to rapidly evolve. The more useful their sites -- the more they actually help people find local businesses and solve consumer problems -- the more they'll be rewarded with repeat visits.