• by Laurie Sullivan , Staff Writer @lauriesullivan, January 10, 2011

The advertising industry may have witnessed the first of several casualties as a result of Bing's deal to power the backend of Yahoo's search engine and paid search ads. It doesn't appear to be a permanent wound, but one that could have a lasting influence on smaller search sites.

Local.com, an Irvine, Calif.-based search site that powers more than 100,000 local Web sites, said last week it would miss fourth-quarter earnings, blaming the Bing-Yahoo integration for earning less revenue per click. The company now expects an adjusted fourth-quarter profit of 19 cents per share in the fourth quarter on revenue of $19.9 million, down from its previous forecast of 20 cents to 21 cents of profit and revenue ranging between $22 million and $23 million.

Company execs admit it could take several more months for Local.com to adapt to the Bing-Yahoo integration. This is not totally unexpected and out of the blue.

In a blog post published Dec. 7, The Search Agents' Frank Lee points to the impact the Microsoft-Yahoo search alliance would have on advertiser performance in December by comparing the performance for several weeks. The agency reviewed performance for the last three weeks separately managed by Yahoo search marketing and Microsoft adCenter, from Sept. 20 and Oct. 10, to first three weeks after the full transition to adCenter, between Nov. 1 and Nov. 21. The agency removed this transition of a phased migration of accounts from the analysis between Oct. 11 and 27.

During this time, the research shows impressions and clicks declined, while CPCs spiked since the integration. The Search Agents also notes conversion rates improved, but click-through rates and cost came in relatively flat. And, due to lower impressions and rise in cost per clicks (CPCs), the cost per acquisition (CPA) increased by 8% and conversions dropped by 10%.

In September, GroupM Search warned advertisers could see a CPC increase up to 78% above Bing CPCs as a surge of competitors move to one platform with the Yahoo and Microsoft Search Alliance transition.

The study, at the time of its release, suggests once the market settles, GroupM expects advertisers to see a 13% increase in CPCs for unbranded keywords and a 23% increase for branded keywords above today's prices on Bing.

As for Local.com, the company will diversify services. Friday it announced the acquisition of iTwango LLC, a technology platform that allows shoppers to group buy daily deals from local businesses, for an undisclosed amount. And in December 2010, Local.com appointed Ken Cragun chief financial officer, who served as the company's interim CFO since October.