One in Ten Local Searches Commercial in Nature

Ten percent of all local searches are geared toward the purchase of products or services, according to a soon-to-be-released white paper from The Kelsey Group (TKG).

If correct, the discovery suggests a huge, largely untapped opportunity for regional and national businesses to increase sales via local search advertising, and it provides a further motive for search engines and listings providers to improve their support for geo-targeted ads. Of the big two players, only Google lets advertisers target their listings geographically, though Overture has said it’s working on a local search product.

“There is clearly a tremendous local opportunity, but there are plenty of challenges in tapping that market, partly because it is so fragmented,” said Greg Sterling, author of the report and director of TKGs interactive local media advisory program.

The Kelsey Groups estimate that one in ten local searches results in a buying decision was not easy to arrive at, since the research firm first had to determine what percentage of all searching can be classified as local.

To do this, it surveyed key search technology players — including Google, Overture, Citysearch, LookSmart, FindWhat and others — on their usage statistics and revenue projections. Results varied widely, placing local searchs share of the overall search pie at anywhere from to five to 30 percent. Based on that data and further discussions with the surveyed companies, TKG arrived at the 10 percent figure.

In the immediate short-term, Sterling said growth in local paid search will consist mainly of national advertisers with local stores, since these companies have the resources to effectively use the existing paid search infrastructure.

Small businesses typically dont have the time and resources to really come to the search engines and do this all themselves on any kind of scale, Sterling said. There will have to be a set of partnerships or intermediaries that bring those businesses into paid search.

The field of search players is now busy trying to provide those intermediary support structures. However, its a gradual, halting process, fraught with obstacles. Online search is still generally acknowledged to be a fairly weak alternative to traditional and online yellow pages for local advertisers.

However, recent months have seen several developments in the local search arena. Citysearch this week launched a new site optimized around local search; Google began testing regional targeting of AdWords in October; and FindWhat.com early this month reached a deal to provide Verizons SuperPages.com with local advertising technology.

TKG predicts the local paid search advertising market will amount to $2.5 billion in the United States by 2008. It has also projected that digital directories, which it defines as Internet Yellow Pages, local search and wireless directories will overtake print directory lookups in 2007.