New local search technology may finally give small businesses the incentive they need to put more ad dollars online
Michael Rivkin and Alexander Libkind have a high-tech solution for one of modern man's most vexing problems: The need to order more food during the Super Bowl. For the unprepared—those fans lacking the foresight to put the local pizzeria on speed dial—this task has often involved someone missing the game or those much-hyped commercials to look up the number of the buffalo-wing and beverage-delivering corner deli. But Rivkin and Libkind, co-founders of Zodiac Interactive, have tapped their inner couch potato to envision a better way: using the remote control to connect with local vendors.
On Jan. 17 the pair released technology that will let subscribers search for local businesses and never miss a minute of what's on the tube. Simply hit a button on the remote, and the live-action picture on the screen shrinks to make room for a local search menu, which users can peruse by category or keyword.
Businesses in the vicinity matching the desired criteria are then displayed onscreen. Clicking on a vendor causes the cable subscriber's phone to ring with the business on the line.
Targeting Small Business
Rivkin, Zodiac's CEO, plans to support the service by selling interactive banner ads from local vendors on the search screen. Zodiac may charge businesses for the call as do other click-to-call Web services.
Rivkin is still experimenting with the revenue model. But first he wanted to develop a service that could make life a little easier for the average television viewer. "If you are watching the Super Bowl and you want pizza, or sushi, or whatever, just go into our service and order from the place that you want," he says.
The person that stands to benefit most from Zodiac's service, however, is not the football fan but the small-business owner. Indeed, this may be the breakout year for small-business ads on the Web.
Tech companies such as Google (GOOG) and eBay (EBAY) have unveiled or announced the development of services to get the small-business owner more involved in online advertising. The hope for technology companies is that such products —which often link online services such as interactive maps with local business directories and even Internet phone providers—will help them sustain double-digit growth by tapping into a large segment of U.S. businesses that have yet to spend much, if any, of their ad budgets online.
For years, businesses that wanted to advertise online have had to invest thousands to develop a Web site or pay companies to develop Web-specific advertisements such as banner ads. As a result, many small-business owners have been reluctant to invest in what they saw as an unproven medium.
But the advent of search advertising, with its ability to target consumers and track results, encouraged more small businesses to get involved with online ads. The text-based search advertisements also got rid of one of the big barriers for small businesses, the inability or unwillingness to pay a design firm to create a graphic ad. An advertiser could supply Google or Yahoo! (YHOO) with the same few words it was already giving to directories such as the Yellow Book.
"The Final Frontier"
Search is still a primary driver for local Web advertising. But as search ads get more expensive, it's new products such as pay-per-call advertising and local mobile advertising that have potential to reel in many of the small businesses that have yet to advertise on the Web (see BusinessWeek.com, 1/22/06, "The Small Fry Sour on Search Ads").
"Local online advertisers are the final frontier in online advertising," says Colby Atwood, president of Borrell Associates, a research firm specializing in local advertising. "Smaller local businesses were slower to catch on, but they are starting to flow onto the Web at a pretty high rate."
Atwood attributes much of the growth to a realization among small business owners that customers are researching potential purchases on the Internet and new Web services, such as click-to-call advertising, which have made it easier for small businesses without much of a budget to advertise online. He predicts local online advertising will jump more than 32%, to $7.7 billion this year. That's up from $5.9 billion last year
One company enjoying the trend is Ingenio, an advertising firm that offers pay-per-call advertising and works with Time Warner's (TWX) AOL and Microsoft's (MSFT) MSN network. The company expects revenues to grow more than 20% this year, surpassing the $100 million mark, thanks, in part, to increased participation from smaller businesses.
Ingenio CEO Marc Barach says the ability to tie advertising expenditures to calls, which turn into sales at higher rates than clicks, appeals to small businesses with tight ad budgets. "The consumer who calls is so much closer to a sale—they are past the information-gathering phase and they are ready to transact," says Barach.
Taking Search Local
The quest to capture more ad spending from smaller businesses is attracting traditional search advertisers such as Google. Last year, Google (GOOG) unveiled two local business advertising products in conjunction with its local search and map offerings.
Users can search through Google Local for businesses related to specific keywords near a location. The results are then displayed and marked on the map. Sponsored links from applicable advertisers appear in a blue box, before directory listings. Google also displays printable coupons, supplied through a partnership with Valpak.com, along with the local search results.
Google also offers free click-to-call services in its local search directory with technology provided by VoIP (VOII), a company that owns a patent on click-to-call technology. VoIP CEO Tony Cataldo says the company has seen steady growth through the involvement of advertisers such as lender Nationwide, which has click-to-call features on its Web site to let customers fill out online forms while speaking with a representative over the phone.
VoIP is talking to companies that can identify where a potential customer is via GPS software on their cell phone and then provide text messages when a nearby advertiser has an offer. The ads would allow users to call the store immediately if they are interested.
Cataldo believes that, as more large businesses get involved with click-to-call services this year, the small businesses that compete with them will follow. "These mom-and-pop shops want to be competitive," says Cataldo. "We are seeing them doing it now."
Google is not the only search engine trying to cash in on local advertisers through local search and click-to-call services. Search engine platform Yahoo has offered a similar service on its local search property since 2004.
Internet commerce giant eBay has offered click-to-call services since acquiring Internet communications company Skype in 2005. And in August, eBay and Google announced they would team up to develop click-to-call text ads. They plan to test the services early this year.
Smaller search engine Ask, owned by Interactive Corp. (IACI), also is getting into the market. In December the search engine unveiled its new AskCity service, which combines maps and local search with reviews and tickets from other online sources such as IAC's online local guide service Citysearch and ticket-service Ticketmaster. AskCity does not yet include advertising but eventually will offer opportunities for local advertisers such as online coupons, says Ask's vice-president for product management, Doug Leeds.
Web Ads Go Legit
Leeds is optimistic about the ability to make money from AskCity because it's a way for businesses that do not have a large Web presence to advertise. For example, a local business could potentially pay to have a button appear on a map when a user searches for services around an address near their store.
Such a button could link to a coupon, instead of a Web site, or simply a directory listing. "One of the nice things about this model is [small businesses] don't have to get a Web site," Leeds says.
A Web site, however, isn't the only thing holding local businesses back from advertising online. There is concern about the reliability of tracking for online ads due to click fraud, says Borrell's Atwood.
There's also the mixed message from traditional media companies with whom local businesses have advertised. Often they will only sell online ads with print ads, making online advertising appear like an extra rather than an effective medium. EMarketer senior analyst David Hallerman says this will become less of a problem as traditional media companies embrace Web advertising themselves and develop partnerships with Google and others.