By David H. Martin

While water treatment dealers traditionally devote 50 percent or more of their annual advertising budgets into the $13.6 billion yellow pages directory industry,1&2 Google—the world’s greatest search engine—is out to offer a better-targeted, web-based alternative on a pay-per-click basis. The fact that nearly 40 percent of all searches on the Internet are through Google.com3 has made the engine a very attractive advertising medium. At the heart of the new ad-driven Google is AdWords, a self-service ad server that uses relevance-ranking algorithms similar to ones that make this powerful search engine so effective.

How does it work? Advertisers tell Google how much they want to spend per day. Then they “buy” pertinent key words. When users type in a matching word or words, the ad appears near the search results under the heading, “Sponsored Links.” Each time a user clicks on the ad, Google automatically subtracts the cost-per-click from the advertiser’s account. When the account’s daily budget (or cap) is met, Google stops displaying the ad.

To date, Google’s system has proven easy to use and remarkably effective for companies that sell online. About 15 percent of ads displayed adjacent to Google searches result in click-throughs, according to the search engine. That’s more than 10 times the click-through rate of the average banner ad.

Pinpoint targeting has always been the goal for advertising, but it’s a goal that has been largely unattainable until now. Even the “where to buy” yellow pages can’t deliver enough well-defined prospects to justify the substantial up-front dollar commitment. Plus, yellow pages ads are unchangeable through the year so the medium can’t be used for “limited time” promotional offers.

Monitoring spending
Google’s AdWords has already changed all that, and the advertiser pays only for leads and spends only as much as he or she wants. In fact, Google’s statistics-driven approach to marketing has created a new category of prospects, one that shifts the very notion of advertising from a blind “leap of faith” to a quantifiable investment. Four years ago, Google had less than 10 percent market share of search engine traffic and only $125 million in revenue. Today, it dominates the former leader, Yahoo, and all other competitors with 40 percent share of market while raking in $900 million and watching its rivals’ decline.

So far, Google’s pay-per-click advertisers have been mostly companies that engage in online commerce, but that may change soon. The searchmeister is gearing up to attract local business advertisers by letting them target prospects located in their local marketing areas. (Who says the World Wide Web is only for worldwide marketers?)

Others are watching and not just Yahoo (which acquired Overture last year, launched a new search engine independent of Google in mid-February and began unveiling its own online advertising service programs3,4&5), but online yellow pages services including Verizon and SBC, which are focusing on selling ads to plumbers and other trades, some of which do not yet have websites. A Feb. 16 article in The New York Times business section contained some interesting information and speculation on pay-per-click advertising evolving to include local advertisers. The article told of a survey released in February suggesting that small businesses may not be able to ignore online advertising for long because potential customers are looking for them on the Internet.

The Kelsey Group, a research and advisory firm, and BizRate.com, a shopping comparison service, queried more than 5,500 online shoppers and found that 25 percent of their searches were for merchants located near their homes or workplaces. The figure, more than twice what the Kelsey Group had estimated last year, is particularly striking because search engines and yellow pages websites have done little until recently to give Internet users easy ways to find local businesses.

Localizing the search
Still, the dearth of local search advertising is likely to change soon, Inter-net advertising analysts said. According to a report released in late February by eMarketer, a technology research firm, online search advertising revenues in the United States will reach $2.5 billion this year and $3 billion next, and local search advertising will capture at least 15 percent of that market. As money moves into that segment of Internet advertising, web-based companies are quickly improving their services.

Last year, Google introduced a test version of a localized search engine (http://labs.google.com/location). When users type “plumbers and 10036” into the search box on that site, they receive a list of local plumbers and a map of their locations. I recently tested the service for “water filters,” using my Oak Park, Ill., zip code to localize my search. (You might want to try it yourself, using your zip code.) The results of my little experiment were disappointing, but I believe Google has the money and technology to make it work, if we can believe content management industry analysts. Google and yellow pages competitors are moving to “key word” search to better target services. The standard “category” listings have ignored our industry completely, so this is a significant improvement for bottled water and water improvement dealers.

Up against the yellow pages
Salar Kamangar, Google’s director for product development, said the company was continually tweaking its “local search” service and would not place it on Google’s main site until it worked properly. Neal Polachek, an analyst at the Kelsey Group, said that although Google and Overture have sophisticated paid search functions, they don’t hold a firm advantage over their online yellow pages competitors in local search advertising because they all face the same challenges. First, the search sites need a significant number of monthly visitors. Second, they need technological expertise. Third, they need effective ways to gather information on the roughly 15 million small businesses in the United States.

As of March 1, users of Verizon’s SuperPages can perform general searches by typing in any key word or phrase rather than being limited to the precise business categories created by SuperPages. According to Les-ter Chu, a Verizon vice president overseeing Super Pages. com, the company will also offer to let advertisers bid for placement and pay only for the ads that are clicked. For $10 a month, SuperPages will monitor and automatically adjust an advertiser’s bid like a proxy on a listing to ensure that the placement remains high on the search page. The Super Pages changes follow similar upgrades at Switchboard, an Internet Yellow Pages company, that in February abandoned the category search in favor of key word search. SBC’s SmartPages.com site is expected to follow suit.

Conclusion
Google, the dominant information search engine, and two major publishers of print Yellow Pages directories (SBC and Verizon) are gearing up for a three-way fight that may soon determine who will control the potentially powerful “local ad search” market. As new online search site enhancements take hold, it is clear that more and more consumers will abandon printed directories for on-line searches that can link to more information about local services. Dealers who spend half or more of their advertising budgets on traditional Yellow Pages print ads may want to dedicate as much as 25 percent of this to one or more of the online search leaders next year.

References

  1. “Research Shows Yellow Pages Spending Influences 15% of $2.3 Billion GDP,” Yellow Pages Integrated Media Association, see: www.yellowpagesima.org/pdf/newsreleases/NR20020919_GDP_Release-FINAL. pdf
  2. “RBOC Yellow Pages Market Opportunities, Forecasts and Strategies, 2003-2008,” see: http://wintergreenresearch.com/reports/RBOC_Yellow_Pages_Final.htm
  3. “Google Tops Among 39% of Americans that Use Search Engines,” “Yahoo Search Offers Automatic Site Indexing” and “Yahoo Adopting Paid Inclusion for Search,” see: http://www.searchenginejournal.com/
  4. “Yahoo Announces Content Acquisition Program,” see: http://searchenginewatch. com/searchday/article.php/3320071http://www.searchenginejournal.com/
  5. “Yahoo!, Overture Debut New Paid Inclusion Program,” see: http://www.clickz.com/news/article.php/3320161

About the author
David H. Martin is president of Lenzi Martin Marketing, of Oak Park, Ill., a firm specializing in water improvement and environmental marketing that integrates old and new media. He can be reached at (708) 848-8404, email: dmartin@lenzimartin.com or website: www.lenzimartin.com

 

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