Local Search Heats Up

Google, Bing, Yahoo, and a slew of startups boost their focus on small business

On the Internet, it's been said, nobody knows you're a dog. And if you happen to be a dog groomer? You're lucky if anyone even knows you exist. Fewer than half of all U.S. small businesses have websites or advertise on the Net, Nielsen Online reports, even though most consumers search online for local shops and services before picking up the phone or leaving the house.

Now, dog groomers, car detailers, and other neighborhood businesses have a host of new options for raising their profile online. Hundreds of new services have cropped up, aiming for a piece of the $17.5 billion that consultancy BIA/Kelsey says U.S. small businesses will spend on Net ads this year. By 2014, BIA estimates, that figure will grow to $36.7 billion, a quarter of all local advertising. "There's an increasing sense of urgency around having an effective online marketing strategy," says Court Cunningham, CEO of online ad agency Yodle, which caters to small businesses.

The biggest players on the Internet know there's money to be made serving small business. Microsoft's Bing is shoring up neighborhood-specific information and business listings. "Local is a key area of focus," says Bing marketing chief Mike Nichols. Yahoo! on May 24 renewed a partnership with Nokia to power its maps and navigation services for local listings. On Apr. 20, Google rebranded an older small biz service called Local Business Center as Google Places. Google has created pages with data on millions of small businesses, and some 2 million companies have added their own information to those pages. Owners can also request a free photo shoot of their shop, and in 11 cities they can pay Google $25 a month to make their listing pop up with an icon and other information when consumers check neighborhood maps on smartphones and on the Web. "Our view is we're in early stages of the intersection of local and mobile," says Carter Maslan, Google's local search boss.

Smaller companies are aiming for the same market. Business directory MerchantCircle has online profiles of 1.3 million small companies, four times what it had two years ago. Review site Yelp had 31 million unique visitors in April, up 35 percent year-on-year, and on May 5, Yelp launched a French service. Dozens of sites offer coupons that small business owners can use to attract new customers. Valpak, which has long distributed local circulars by mail, in March launched new mobile apps. Chicago-based Groupon helps promote small businesses via daily e-mails with deals on products and services. Groupon operates in 65 cities across the U.S. and in April raised $135 million in venture capital. On May 16 it acquired Citydeal, a similar service based in Germany, expanding its presence to 18 countries.

The multitude of choices is spurring rapid growth in another category of online business: companies that sort through all the options and help small business owners figure out a Web strategy. Among the biggest is ReachLocal, based in Woodland Hills, Calif. The company raised $54 million in an initial public offering on May 20. Its revenues in 2009 grew by 38 percent, to $203 million, and this year it expects to introduce a tool that lets business owners monitor what's being said about them online. Rival WebVisible says its sales have grown by 100 percent annually for the past three years, and founder Kirsten Mangers plans to nearly double the headcount at the 285-person company by December. "There are 17,000 location-based apps" alone, Mangers says. "It's almost impossible for [business owners] to figure out. We're bringing order to the chaos."

The bottom line: Local businesses face an ever-growing range of options for promoting their products and services online.

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