Local Search and Yellow Pages (1/2) August 23, 2006
Posted by NoWires in Local search, Technology, Web.trackback
As Google and Yahoo push their way into the local search with local listing, the eventual demise of print Yellow Pages have be pronounced repeatedly, for example, here and here. And here is a tell-tale picture I came across on Flickr by Larsz which seems to exemplify the down hill slide of Yellow Pages. The very fact that they are laying around at every corner you turn makes it appear to retain very little value. Which self-respecting Googler is going to admit that he is still using the lowly Yellow Pages?
So who uses Yellow Pages now a days?
Well, a lot of us, apparently. According to a July Wall Street Journal article, Americans referred to Yellow Pages over 25 billion times in 2005. In comparison, users conducted 2.7 Billion searches on Google last month. Keep in mind the Google number include ALL searches. Local searches makes up only a fraction of the total number. Here is another set of numbers: Yahoo and Google had combined revenue of about $12B in 2005, whereas Yellow Pages rung up $16B on the local advertising market alone.
Yellow Pages’ numbers appear to be strong. Why are people writing their last rights already?
No Wires 
I sat in a meeting between HP and Kodak a number of years ago where the arguement was made that “look at all the pictures people are making” and the “film business is so much bigger than the” digitial picture business. This year, 10 to 100X more pictures are taken on camera phones and never printed than ever hit film. Polaroid and Kodak find themselves in an interesting position.
Of course, this will not happen over night.
But the Yellow Pages will shrink and it is not clear that the cost model they have –built on the domination of a sales channel for advertising to small local business or the control of a distribution channel into the home–can survive the destruction of these two advantages.
A few people have estimated that the Yellow Pages get openned 15B times a year. The value of an open being about $1. When you look at searches and consider that 60% of searches might be local (what the companies are reporting) — the math suggests that the number of searches on just Google to in fact matter relative to the Yellow Pages.
Finally on the revenue point, Skype is pretty short on revenue as are a number of VOIP providers as compared to ATT/ Having said that if you at the value they have taken from ATT etc…it is huge. New industries are often created by destroying the economics of the incumbent. Southwest, Dell, Skype, Google, etc.
Attack me on the facts, but in the end…being sure is often more important than being right.
Great comment and reminds me of an entry on our company blog that speaks the same.
Obvious Trends Post
Ben you are stealing my thunder. 🙂
I was about to lay out some of the problems with YP in part 2 of the post. Certainly growth rate favors search engines heavily. The performance based model is another huge advantage. Printed YP could very well be on their way out.
However, my intention is not to simply declare that as a cold fact. Are there issues worth a pause and deeper consideration? That’s the question interests me. Before writing off the YPS, one must keep in mind that the ad market for local neighborhood businesses are notoriously hard to crack. Mom and pop stores are not the easiest customers to sell to. It takes fair amount of time and resources for new comers to build up the sales presences, feet on the ground or otherwise, to compete with the YPs. Incidentally, how is the pick up rate at MerchantCircle? 🙂 Hope you are doing well, looks like you are doing a lot of right things.
Also, speaking of numbers.
I don’t have data for local searches on search engines. I guess it also depend on how you define “local search.” If we put in in the context of YP vs SE, 60% sounds high to me. According to Google Zeitgeist., 2005’s top 10 search phrases are:
1. Myspace
2. Ares
3. Baidu
4. wikipedia
5. orkut
6. iTunes
7. Sky News
8. World of Warcraft
9. Green Day
10. Leonardo da Vinci
The list doesn’t struck me as particularly locally oriented.
As you will find in the web search space, the top searches don’t tell you alot because of the Long Tail. Searches are not a normal distribution, they are distributed on a long tail.
The Kelsey Group, Princeton, NJ, estimates that 60 percent of searches are local in nature, and 10 percent of those searches are for a commercial service or product.
If you take a look at the recent search data from AOL (the mistaken release) you will find the same thing.
Google has reported the same range as has Yahoo in thier public discussions. People search locally, becuase people are basically well..people are local.
The central problem in creating a local internet advertising industry is breaking the sales complexity issue. This is 100% of our focus and we are excited about the results. If you want to get to 1,2, 5M merchants then you have to solve this problem. We are.
Josh who has a small investment in us has a great post here about the “shrink a market” investment thesis.
http://redeye.firstround.com/2006/04/shrink_a_market.html
Ah, there goes my chance of spending a day without hearing about “Long Tail.” I think the jury is still out on that theory. If it is showing effect for you, great.
Long Tail is a mathmatical representation of a distribution of searches. No theory there. The Theory is can anyone leverage it to make something interesting happen based on it….way down the tail is people searching on their own names. In one of my other deals, I am definitely betting on that theory. Watch http://www.spoke.com over the next few months on that one as even the most junior Cisco system adminstrator shows up with his own page indexed on Google.
The reason for all the excitement about long tail is a valid one. After so much focus on “The most popular”, once everyone finally grasped it, the results became clear – most traffic does not show up on the most popular searches.
Pizza may be a popular search term, but “Miniville Pizza delivery” is where “Miniville Pizza” finds its customers.
Not counting Pappa Johns and Pizza Hut. A quick search shows that they have made sure that they own a solid piece of that pie.
Because that was 2005. We’re exponentially way out in the future now with local search and … umm quantum computers being planned for our major search engines (I would imagine!)
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