Can Yahoo or Google make money in local?

Yahoo’s top sales exec and Google’s top sales exec have something in common: both have set their sights on the lucrative, but fragmented, local ad market. Greg Coleman, Executive Vice President, Global Media Sales, Yahoo, said at Advertising Week recently: Local ad dollars are three times that of national ad dollars.

Yahoo’s top sales exec and Google’s top sales exec have something in common: both have set their sights on the lucrative, but fragmented, local ad market.

Greg Coleman, Executive Vice President, Global Media Sales, Yahoo, said at Advertising Week recently: 

Local ad dollars are three times that of national ad dollars.

Sheryl Sandberg, VP Global Online Sales & Operations, Google, said at an investor Q & A in NYC last month: 
We think the local opportunity is huge. Local has a very interesting property in that it is very highly monetizable. 

In “Google Maps vs. Yahoo Local: multi-billion dollar local search battle” I cite recent data on local search traction:

Approximately 109 million people (63% percent of U.S. Internet users) performed a local search online last July, a 43% increase over July 2005. 
In “Google wants $10 billion local ad spend” I present the appeal of the large local ad market as well as the ramifications of the highly fragmented local landscape. 

Google’s Sanderberg:

As people do more local search on Google, we provide greater opportunity for local advertisers. In that area we think the market is widely under penetrated, it sounds surprising to a lot of us, but even in the United States, arguably the most developed market in the world for ecommerce less than 50% of businesses even have a Web site, or let alone advertisers, so we think there is tremendous opportunity to bring those people online and bring them into our advertising product.”

I noted, however:

The strength of a traditional Yellow Pages publisher is its vast sales force network of “feet on the street” calling upon local small businesses. A “feet on the street” sales strategy does not come cheap, but it is often what is necessary to reach, and acquire, local merchant accounts. While Google’s advertiser self-provisioning system is cost-effective, it has not been overwhelmingly adopted by the millions of small businesses in the U.S.

The difficulty of reaching and acquiring local ad accounts is underscored by the founder of local review site, “Judy’s Book.” Andy Sack posted at his blog, “What’s been hard at Judy’s book”:

Achieving critical mass in local

Momentum in any one location doesn't transfer to others – you have to fight the same fight over and over…

Getting money from local merchants

Local merchants and local marketing spend just hasn't moved online at the rate that we anticipated when we started the business. Moreover, the degree of fragmentation (location + category + size + etc.) and the inability to reach the decision-maker (I came to believe that self service for this market won't work -- I think you need feet on the street to address this market). We began to talk about this problem as the cost of sale problem at Judy's Book.

Sack’s “Judy’s Book” in-the-(local) trenches start-up follows successful buy-outs of his previous ventures: he was “founder and CEO of abuzz, a provider of technology for building online communities purchased by New York Times Digital in 1999 and  co-founder of Firefly Network...developers of personalization technologies, purchased by Microsoft in 1997.”

The two ventures cited were primarily scalable technology plays. The direct sales to local merchants primary component of “Judy’s Book,” however, is similar to the expensive one-off sales efforts required by legacy yellow pages publications and local newspapers.

In local, Yahoo and Google are up against the same fragmented, hard-to-reach small business market as “Judy’s Book.”

Scalable, automated, self-serve systems work for targeting national ad budget dollars from corporate franchise organizations with local storefronts, but not for extracting advertising dollars from the spread out masses of independent, local businesses.

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