A new study on local search advertising from research firm Borrell Associates finds that roughly 50% of businesses that buy search ads directly from Google and other Internet search companies don’t come back the following year. And the churn rate for businesses like Yodle, ReachLocal and LookSmart that purchase search ads on behalf of local advertisers is around 60%, according to the study, scheduled to be released Monday.
Google has been making some improvements to their local search data that is provided to businesses which is an indication that they are certainly interested in this surprisingly under represented section of the business environment. In these times though it’s the smallest players that are feeling a lot of the effects of a soured economy that is giving little indication of getting on track soon. Couple that with the fact that there are studies that show that just over 40% of the small businesses don’t even have a website and it looks like there is a long way to go for local search to truly have its coming out party.
There are many arguments that are thrown about as to why this phenomenon is occurring including affiliates marking up ads and the actual value of the clicks in general. Borrell CEO Gordon Borrell uses some pretty direct language when he states that “Search advertising has been over-hyped and over-sold to local businesses”. Ouch.
While not mentioned in the article one area that contributes to this turnover in advertisers is education. Most small business folks don’t understand the ability and need to track results religiously. They are under the impression that if you place the ad they will come. Start to talk about quality scores and the like and most SMB’s (small and medium business) glaze over. The search industry tends to talk over their head and act as if everyone knows the ins and outs or paid search. That is simply not the case most of the time. As a result, there is disappointment that could be avoided if there was appropriate knowledge of the medium and its potential.
Maybe Google and the other providers of paid search platforms are counting on the fact that there are so many smaller businesses that have yet to even stick their toe in the waters of pay per click that there will be enough new folks in line to back fill as the turnover occurs? Maybe local search just isn’t up to the hype it gets? Maybe we’re making a mountain out of a mole hill? Your thoughts?