• by Mark Walsh  @markfwal, October 11, 2006

Internet portals such as Google, Yahoo and MSN will become major players in mobile voice search after entering the directory assistance market by mid-2007. That's a major conclusion of a new report by market research firm The Kelsey Group.

The Internet giants will use mobile directory service as a means of launching new "opt-in" marketing businesses that will pose a serious challenge to traditional and free 411 services as well as the Yellow Pages, predicts Kelsey. The study estimates that more than half of Yellow Pages look-ups could be at risk with the entrance of big Internet companies into mobile voice search over the next several years.

Pushing the Internet portals into directory assistance will be a variety of factors, including the proliferation of mobile devices and the falling cost of handling voice information requests. Google generates about 10 cents of revenue for every online search it gets, according to Matt Booth, the study's author and program director for interactive local media at The Kelsey Group.

"If you can service that call for less than 10 cents, then it makes sense for a whole lot of people to look at this market and start getting into it," he said.

The model, pioneered by mobile services in Britain, involves an automated voice response to a directory assistance call. The requested information is then sent to the mobile customer via a text message that also includes relevant advertising. "If you can just call up and say 'I'm looking for specific business' and have it sent in a text message, that's a pretty good service," said Booth.

He noted that Google is already testing a voice-based search service that returns text-based results to mobile users.

On Monday, Cingular Wireless and Tellme Networks announced plans for an enhanced 411 service that will enable Cingular customers to receive information in response to spoken requests as text messages sent to their cell phones.

The Kelsey Group estimates that directory assistance will generate 6.3 billion requests this year through landline, wireless, and VoIP communication. Traditional directory assistance providers that charge $1.50 on average per call will generate $9.4 billion in 2006.

Competing with them are a growing number of companies such as 1-800-FREE411, which provide free directory assistance by requiring consumers to listen to a relevant ad before receiving the information requested.

The Kelsey report warns, however, that as Internet heavyweights enter directory assistance, traditional 411 services will face shrinking margins as they add enhanced information services to better compete. Free services that lack local sales forces, meanwhile, will be hard-pressed to match the resources of the Internet portals. The study predicts that the portals will handle 1.6 billion voice queries by 2010.