Local advertising networks will continue to lose relevance as search engines become the first stop for consumers. To date they have prospered as the “middlemen of paid search”. Will savvy advertisers cut them out of the loop?
Before Google, sites like Superpages and Citysearch established themselves as the leaders of local search. Superpages migrated its cumbersome yellow book to the online arena in 1996. When Citysearch was founded in 1995 there was still a monopoly on local business data. A user could quickly find local businesses by category, location or name – a vast improvement over 411 or the yellow pages.
Compared to the print publishers of old, these local guides offered outstanding value to advertisers. Using a performance-based model, a business paid for results in the form of a click or a call. Advertisers had the ability to better gauge spending and ad performance.
And then came Google. When looking for local business information, search engines - not local guides - became the first stop for most consumers. Search engines provided a breadth of high quality results not possible in a site-wide search.
With AdWords, Google forever changed the nature of advertising on the internet. They applied the same performance based model to the entire web. The search behemoth now controls close to 50% of online ad dollars. Google’s ad distribution far exceeds that of its closest competitors.
The value proposition of Citysearch and Superpages, a featured listing in a site-wide search, became irrelevant. Yet these sites have not only survived, they have prospered – even as their user base has languished.
In the fourth quarter of 2006, Superpages’ revenue increased 26% to $63 million. They even managed to increase their advertiser base 20% year-over-year. Citysearch generates huge profits with their network of 50,000 advertisers charged, on average, $500 per month. These companies have managed to succeed in the face of stagnating consumer interest in their brands.
search volume is one indicator of a site’s relative importance
some perspective
Alexa data, though tenuous, shows a decline in reach
The Middlemen of Paid Search
Citysearch and Superpages rely on human relationships to drive sales, something Google and other big Internet companies have yet to execute on a large scale. “The small-business market relies on sales representatives to call them or visit…these businesses would not go on their own to Google or Yahoo,” says Greg Sterling, former managing editor at The Kelsey Group, an internet firm that provides strategic research and analysis of the Yellow Pages.
Citysearch has begun bolstering its sales force in what it sees as a very competitive local arena. IAC, Citysearch’s parent company, opened up a new sales office in Atlanta this past January and intends to nearly double its sales force there. Travis Fore, VP of local sales at Citysearch, suggests the biggest driver will be Citysearch’s approach to advertisers, who “don’t react well to Internet ad jargon like SEM and SEO.”
In spite of the fact that they are no longer the first stop for the majority of Internet users, Citysearch and Superpages continue to dominate local business spending. To compensate for their inability to compete with search engines, they have created advertising networks and transformed themselves from pure content providers to middlemen of paid search.
According to Superpages, “You create ads that appear at the top of listings at Superpages.com and our network sites.” Citysearch also mentions a network, “Describe your business and how you want to be listed on the Citysearch network, including Ask.com, Google, Yahoo!, and MSN.”
It’s hard to estimate what percentage of users are coming from this ‘network’. Citysearch reports twenty million unique visits per month. If, as some figures claim, they’re spending $100 million annually on AdWords (one-third of their purported revenues), the amount of traffic driven by AdWords would make the company’s internal database driven search inconsequential. Superpages partnered with Google AdWords in March 2006. If recent revenue increases are any indication, the practice is already paying off.
Citysearch and Superpages have been extremely successful in monetizing this ‘network’ traffic. It’s ironic that their greatest competitors, search engines, have become their best earners. When a consumer clicks on an affiliate ad it drives traffic directly to a local advertiser’s profile. Citysearch and Superpages not only underwrite the cost of a click, they potentially earn a profit. This ‘arbitrage’ takes advantage of the price differential of a paid-for-click and the money tendered by the local advertiser.
In many cases the practice goes counter to an advertiser’s best interests. AdWords clicks tend to be less targeted than site wide search. Citysearch has created AdWord specific landing pages that increase the likelihood that a visitor will navigate away from a landing page to other sponsored listings. I explore the topic in a rantish indictment of search arbitrage.
Will advertisers better manage online spending?
As business owners become more web savvy, large local advertising networks may see drastic cutbacks in their advertiser base. Local advertisers have all the tools at their disposal to advertise online – the registration process at Google’s AdWords and Yahoo’s Overture are essentially identical to those of Citysearch and Superpages. By cutting out the middleman, local businesses could garner many more impressions with the same advertising budget.
Google may help speed the shift along. The search behemoth has announced a plan to pay a commission to people who are willing to photograph local businesses and gather information about the company to post on Google Maps. These self-appointed local “contractors” would not only gather local information and photos, but also promote the AdWords program to local advertisers.
It also seems likely that marketing firms may begin better targeting businesses. In exchange for a fee, these firms might create online campaigns on behalf of local businesses. While local networks like Citysearch may remain a tool in their arsenal it is unlikely, given their limited reach and high expense, that they’ll be utilized extensively.
9 comments ↓
This article is fraught with error. “Superpages migrated its cumbersome yellow book to the online arena in 1996.” Incorrect. Superpages.com has nothing to do whatsoever with the printed Verizon Phone directory, there was no migration of any data. Some online directories do simply duplicate yellow page ads on their online companions, but Superpages simply advertises links to a business’ website.
The very title of the article paints Superpages and Citysearch as the “middlemen”. The reality is Google is the middleman here. On Superpages, you have to define the geography you are searching. So once a search is completed, the result is every listing shown is either physically located in that region, or serves that region. The same search on Google produces enormous amounts of links that have little or nothing to do with the requested data. So Google partnered with local search providers to offer consumers a better result. Now, when you search Google for local content, you will be sent to Superpages or other local search providers. That makes Google the middleman, not the content providers.
“These companies have managed to succeed in the face of stagnating consumer interest in their brands.” Wrong again. Average number of monthly searches for Superpages in 2005 was 118,662,542. 2006 was 246,300,890. So far 2007 is 377,747,950. Those numbers do not reflect any traffic funneled from the network. Those are people who went to Superpages and completed a search. Pretty stagnant huh? Only grew by more than a hundred million searches a month.
The author of this article should be embarrased, its a complete joke.
Hi Shawn,
Thanks for the feedback.
RE: Migration, I wasn’t inferring that they migrated advertiser listings.
RE: Middlemen, I realize search engines are middlemen in the sense that they help us find information on the web.
My attempt was merely to show that Superpages/Citysearch are the middleman of “paid search” - insofar as they buy traffic using their “network” (e.g. Google AdWords) and resell it at a premium to their advertisers - in the form of paid-for profile views.
If you wanted to attempt to show that the article is a ‘complete joke’ you should provide a breakdown of your traffic sources - and a breakdown of where paid-for profile views are originating.
RE: Traffic, while Superpages has grown the number of monthly searches - I’ll bet there’s been a linear increase in ad spending, to fuel this growth.
Its a great model - get your advertisers to pay for paid clicks, and then reap further benefit as a user navigates away from their page and searches for something else.
The fundamental difference between your perspective and mine is that you feel Google renders Superpages and local search tools obsolete. I believe both have a place in ones search tool chest. If you are looking for information, or to buy a widget that you dont need to try on, test drive, or have serviced and assembled at your home, then certainly Google or your search engine of choice is a great solution. But if you have an over flowing toilet and need a local plumber to repair it, Superpages is a much better choice. It will take you fewer clicks and you will have more choices. You’ll also have almost no irrelevant listings. With a search engine, that is simply not the case. Google knows that, thats why they partnered with Superpages and other providers of local search. Remember, almost all small local business’ have ads in their local phone book. The guy who sells them that ad also sells them a website and exposure on their online directory. That is a capability Google lacks and it certainly wouldnt make sense for them to try to do that themselves. So they need to have access to that data content so when guys like you use them for local search, they at least have a destination for you to get the information you need.
As far as Superpages being the middlemen for paid search, that is a logical part of the partnership. If your a small business who has zero web experience, and your yellow page salesman helps you begin your web initiative with a template web site and exposure on a an online directory, you might find a whole new revenue stream and get excited. The next logical step is to find ways of increasing the traffic to your site. Wouldnt it be convenient if your yellow page rep who is providing almost all of your traffic now could assist you in taking the next step and show you how to optimize yourself on the major search engines? You imply that yellow page rep is unnecessary middleman, I propose he is an invaluable asset to that small business that lacks the resources and manpower to go out and do that himself. That guy is not the guy who is contacting Google and requesting info to purchase advertising. So Google and Superpages enjoy a symbiotic relationship.
Incidentally, Superpages does not buy Adwords from Google and resell to their advertisers for a premium. There is no markup on that transaction. The customer pays a set service fee for managing their entire online campaign, which they would pay whether they opt for Google or not. Remember, most of these small business dont have a marketing person on staff that has the capability or experience to handle the management end.
As far as the sources of my traffic, it is from Superpages themselves and I will gladly supply documentation if you want to see it. I simply dont have the capability to post it in this space.
Shawn,
Nowhere did I say that Google renders Superpages or Citysearch obsolete. In fact, I think feel there is value in local search. BlogSoop.com is a local search resource.
I even feel you (Idearc) can create value for advertisers, but only if your clients advertise within your site. And perhaps, if they know nothing about the internet and are intimidated by the prospect of advertising online.
I continue to feel the growth of your client base has been unwarranted, as its been driven (primarily) by your ‘advertising network’.
In light of your comments, my thesis “savvy advertisers will eventually cut you out of the loop” is sound.
The internet is still in its relative infancy. As local business become more web savvy they should realize they can get more out of their advertising budget by cutting out the middleman.
Signing up with AdWords is incredibly simple - Google merely lacks the sales force (at this point) to execute on the same scale.
“In light of your comments, my thesis “savvy advertisers will eventually cut you out of the loop” is sound.”????
LMAO, now there’s the most bizarre, unqualified statement you’ve made……and you’ve made a few! Not to mention you totally contradict yourself. On one hand you say there is value in local search, and then you say savvy advertisers wont want to advertise on the largest source of local search!?!
“As local business become more web savvy they should realize they can get more out of their advertising budget by cutting out the middleman.” Really? How? Please use your infinite wisdom and experience to explain why a local mom and pop business who has gotten tremendous value and returns from Superpages, which now manages campaigns for her on the larger serach engines, would want to go to Google direct? It wont save her a nickle. She has no experience or understanding of how Google works, so she would have to learn all that. And most importantly, she certainly has no desire to add more to her already full plate! And if you think she is going to cut Superpages to go to Google, your dead wrong. The only reason most of these business’ even have a web presence is because of Superpages. So basically your saying savvy business’ will double their effort for the same result. That makes a lot of sense!
“I even feel you (Idearc) can create value for advertisers, but only if your clients advertise within your site.” So your problem is obviously with Superpages adding value to their offering? Your okay with a small business advertising on Superpages, but ONLY if ALL the traffic is directly from someone who types www.superpages.com into their browser? WOW! That is some sound reasoning. You should be a consultant!
“Nowhere did I say that Google renders Superpages or Citysearch obsolete.” No, you didnt. You only said they are the middleman and a saavy advertiser should cut them out. I’m certainly going out on a limb by saying that if everyone followed your sage advice, Superpages and Citysearch would be obsolete.
I’m only focusing on a very narrow part of the issue here, Shawn.
Let me be clear: ITS THE “ADVERTISING NETWORK” WITH WHICH I HAVE FAULT. Not your site.
You say, “She has no experience or understanding of how Google works, so she would have to learn all that. And most importantly, she certainly has no desire to add more to her already full plate!”
Really? How different are these two processes:
1) Superpages - http://advertising.superpages.com/spweb/products/pay-per-click
2) Adwords - https://adwords.google.com
Do I need a salesperson to walk me through both?
Fact is, small business owners won’t stay web retarded forever.
You say, “Your okay with a small business advertising on Superpages, but ONLY if ALL the traffic is directly from someone who types www.superpages.com into their browser?”
Yes - what do you think creates more value for the user:
1) When someone clicks on a Google/Yahoo AD and is directed to a Superpages profile or when 2) they go to Superpages to look for information?
By going to the Superpages.com site they’ve shown intent and TRUST. Anyone who goes to Superpages is a more engaged and valuable user.
Plus, your internal search is MUCH more targeted than an AdWords campaign.
A visitor from your advertising network is simply not worth the same cost-per-click as an internally driven hit.
Why do you think your making money by the fistful? Your charging more for a less valuable visitor.
“Really? How different are these two processes:
1) Superpages - http://advertising.superpages.com/spweb/products/pay-per-click
2) Adwords - https://adwords.google.com”
There’s very little difference between the two links to information. The problem is neither is getting many clicks from small business’. If a sales rep did not sit with the business owner and virtually do all of the work involved in getting them on Superpages, 95% would not advertise there…… or anywhere in the web. Again, your assuming you have a motivated, knowledgeable business owner. Those guy’s are less than 1 in 100.
“Yes - what do you think creates more value for the user:
1) When someone clicks on a Google/Yahoo AD and is directed to a Superpages profile or when 2) they go to Superpages to look for information? ”
Here again, you are misunderstanding the process. The person in the scenario you described above is not a part of Superpages network. Go to MSN, on the homepage is a link that says ‘Yellow Pages’. When you click the link, you are taken to what looks like another MSN page (same color, same advertisments, MSN written all over it), but it is in reality Superpages with an MSN face. You type in the exact same information as you would on Superpages (category/location), and get the exact same result. THAT is considered a network search, not the scenario you describe. And yes, that has the same value to a customer as one who goes to Superpages directly.
” A visitor from your advertising network is simply not worth the same cost-per-click as an internally driven hit.”
That is correct, which is precisely why they are not charged the same! I’ll repeat; When you sign up for a PPC campaign on Superpages, you pay a service fee for managing your campaign. You set a click rate and a monthly limit. You have the choice of allocating some of your budget to Google or other major search engines. If you do so, you pay whatever that engine charges, NOT what you are paying for Superpages. They are two different costs. And again, Superpages does not add to that cost, you pay the same as if you went direct. The service is included as an added value in your service fee. So whether you opt in to it or not, the fee is the same.
“Why do you think your making money by the fistful? ”
Same reason any other company is successful, they offer value. The customer generates much more than is invested. Superpages has made it easy for small business’ who otherwise wouldnt have a web presense to be successful with minimal time investment.
“Your charging more for a less valuable visitor.” Incorrect, see above explanation, or the first one you missed in my second response, third paragraph.
I’m surprised by the hostility of some of the comments above. Could it be that Doug has accurately pointed out that many small business owners are somehow roped into paying too much for online clicks to their websites?
As angry as they seem, none of them has been cheated out of hundreds or thousands of dollars like the folks who comments on my Citysearch Click Fraud article here: http://aldebaranwebdesign.com/blog/my-adventure-with-city-search-pay-per-click-advertising-and-click-fraud/
From my perspective, I see many small businesses getting trapped into long term contracts with these types of pay-per-click middlemen, and then when you analyze the quality of the traffic, it’s awful (if they are indeed really human clicks). I do hope that more small business owners try out organic SEO and Google AdWords, because IMHO, it’s the best return on their advertising dollar.
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