Posted June 9, 2009 5:25 pm by with 10 comments

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smallbizadvLocal search, much like mobile marketing, always seemed poised to ‘break out’ and experience the growth that so many predict. Whether it’s a real trend or just a result of our un-stimulated economic climate, local businesses that have tried paid search to attract new customers through the search engines like Google and Yahoo are not sticking with it. A report from Borrell Associates as covered in the Wall Street Journal suggests that churn and burn is as much a part of local search as is anything else.

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?

  • Wow that’s too bad- we’ve compared a lot of marketing channels for our local clients, and PPC always comes out near the top, especially for new customer acquisition.

  • @Brian Carter – Take a look at the comment string for the article. There are many folks that question this data and its sources. Not unusual for research reports because I believe they ALL need to be looked at with a healthy skepticism. Tell us if you see some verticals performing better than others for local search in your experience. Where are the successes? It’s gotta work for the other 50% that don’t leave, right? Thanks for checking in.

    Frank Reed’s last blog post..Internet Marketing and Merilee Elliott – A Match Made in Dallas

  • @ Brian, I think the businesses with such high attrition are the ones who are doing PPC themselves. While it doesn’t take a lot of experience to know you need tracking (Google Conversion Code or a custom 800 number for PPC/Internet leads) and how to test ad copy & keywords, I would guess these people are doing this on their own without the aid of an agency. Then I think the problem is further compounded by the scarcity of time businesses have to spend on search.

    Robert Brady’s last blog post..Small Business PPC – Keyword Research

  • PPC is so time consuming for local businesses. PPC management must be much easier than it is today. Unfortunately search vendors don’t look worried, releasing even more complex and tricky interfaces, aimed to digital agencies only. DIY PPC is the way to go to widespread PPC adoption.

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  • a strategic multichannel natural language open social location engine will change the game. whom ever creates the best one will dominate the market. this ball is still up in the air.

  • Since January our directory websites that we own and operate have actually seen an increase in local online advertising. As well as our website templates and even custom editing projects have increased. I don’t see it slowing down 🙂

  • Yeah that’s right its too bad to be gone and unnoticeable by people. Businesses should stand out! Let me tell you about the Shimano brand who remained popular and how they maintained it. Try ready my post here:

    Ecommerce Help – Tyrone Shum’s last blog post..Tips On Creating Excellent Ecommerce Site Navigation

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  • Oscar

    The research should definitely be carefully scrutinized. I think search ads are fairly effective. But maybe a cheaper, more cost-effective way to get your name out is using a service like AdWido.