• by Gord Hotchkiss , Featured Contributor, October 14, 2004

The news piece was buried on page 36 of the business section in a major Canadian daily newspaper. It was just one paragraph, a mere 46 words, announcing that the Yellow Pages Group had signed a deal with Google, making Yellow Page information available on the new Google Local service. I'm not sure the editors realized they were running the obituary for an 80-year-old, $16 billion a year North American industry.

The localization of search has been inevitable. Really, only two things have been holding it back:

First, the accessibility of the Internet. Using a search engine to find local information only makes sense if Web access is just as close as your nearest phone book. We're not there yet, but wireless networks and new mobile devices are definitely closing the gap.

Secondly, more local companies have to have an online presence. In order to have an online presence, there needs to be an existing Web site for search engines to find. It's in this second regard that we still have a long way to go.

Overcoming these hurdles is simply a matter of time. Obviously Google feels the time is close at hand, and they're busy hammering nails in the coffin of the Yellow Page industry. The discrete announcement from the Yellow Pages Group about the Google deal indicates that they're very aware the writing is on the wall. The Yellow Pages have been diagnosed with a terminal case of obsolescence. The world is quickly passing the industry by.

Why Local Search Makes Sense

Using the Web to find local businesses makes a lot of sense. Once you find the business, you can interact with it to the full capacity of the Web. You can access reams of information, browse catalogues, book appointments, ask questions, see interactive demos, get a map of the location or even purchase online. It's tough to do all that with a Yellow Pages ad.

Look at three examples of the top Yellow Page advertisers, lawyers, pizza shops, and appliance repair shops. On the law firm's Web site you can read the bio of the lawyer who handles the practice area, discover more about the firm, and perhaps even submit a question or two. You can also schedule a consultation visit.

With the appliance repair shop, you can read a troubleshooting guide, make sure they repair your brand and model, and even search to see if they have the necessary parts in stock. And with the pizza joint, you can shop, pick your pizza, place your order, and wait to have it delivered; all this with just a few clicks. Sorry Yellow Pages, you just can't hope to compete with the advantages of the Internet.

Finally, the Yellow Pages are restricted to predefined industry categories. If you're not sure what industry to look up, you won't be able to find the advertiser. Search is keyword based. Type in a product or a model number, and search will take you to the right vendors. This offers significant advantages for the user and the advertiser.

Of course, to make local work, local businesses have to fully tap the potential of the Internet and create a rich online experience for users. This has never been a priority before, but it will be in the next few years.

The Local Boom in Search

The second part of the boom comes when companies, who never cared about search, realize it's suddenly very important to capture a top 10 ranking in their local market. At this point, the same rules apply for ranking relevancy on Google Local as on the main Google index. Google still wants the best sites, as determined by PageRank and other factors, to show up at the top of the listings.

This will fuel new demand for search marketing services, as the industry reaches into an entirely new market. Local advertisers will discover what national and international marketers have discovered in the last eight years: Search is the best online channel for providing qualified leads.

Suddenly, the number of companies seriously considering search will mushroom from its current number (probably about 100,000 total, based on information from Overture and Google) to include almost everyone. This will fuel a new boom in search, both on the sponsored and organic side. Budgets will be small, but the opportunity will be rich for do-it-yourself tools. This potential likely goes part way to explaining the seemingly high valuations placed on recent acquisition deals including WebPosition Gold (by WebTrends) and GoToast (by aQuantive).

How Yellow turns to Gold for Search

The question on a lot of industry analysts' minds lately has been: "Is sponsored search revenue - sustainable?" I get asked this question weekly by analysts from major investment firms all across North America. I think the answer becomes apparent, in the long term, when you look at the potential for local search.

The yellow pages industry accounts for about 16 to 17 billion in annual revenue in North America. Right now search is about a $2 to $3 billion a year industry. Overture has about 100,000 active advertisers. While impressive, this number only accounts for 0.5 percent of all the businesses in North America. As search takes over for the Yellow Pages, the revenue growth opportunities are immense.

Don't worry, the day in the sun is still yet to come for the search industry.