A Look at Local.com
I was over at AdTech last week, trying to scope out the latest and greatest happening in location. Unlike a few weeks earlier at the search engine marketing conference SMX East, where local search was quite a hot topic, permeating many booths and break out sessions. The local emphasis among the larger internet marketing community seemed much more subdued. Folks like Quova, who have provided geo IP targeting oriented solutions for websites for years had updated their offering to include mobile location aware targeting through a third party partnership with Navizon, which was a nice extension but nothing too exciting.
A company called HelloMetro was busy trying to build up city oriented sites to compete with Citysearch… although it sounds like they’re still a long way off for the moment in terms of size.
The biggest booths seemed reserved for folks trying to create local business directories for consumers like Local.com and Localpages.com and also ReachLocal.com which is trying to create a platform for buying and selling local ads across the existing and search, directory and display ecosystem.
In the current age of search and with all the innovations that the existing search engines are doing to infer local intent (Google 10-pack), the idea of going back and creating a local directory seems so old school, but there they are.
Here is a drill down on what I picked up about Local.com
There are a couple of different components to their business:
Part 1 Local.com the consumer portal.
So not surprisingly people aren’t consulting the Yellow Pages as much anymore to find a businesses in their town… and in the ideal world of the folks at local.com, you’d now simply go to local.com to find your neighborhood plumber or window washer. And if that were to happen en masse local.com would be getting a nice chunk of the current $12-13 billion or so spent in yellow pages advertising every year.
It makes sense, except that folks are generally turning to traditional search engines like Google and Bing as the first place they go looking for local business information… and those search giants have most notable stepped up their local search game in the past year instead.
Local.com triple dips with every search query (see presentation at end of post) first presenting Yahoo result followed by Superpages and finally their own internally sold business listings. And it’s important to note that over half of those search queries aren’t happening organically… Local.com spent $19 million in ads on other search engines in order to bring in $39 million in gross revenue (before rev shares/commissions). So lets say for example that they can buy the term “San Diego Florists” for $1 per click on Google but can then turn around and earn 75 cents from the Yahoo listing on Local.com and another 50 cents from the Superpages listing and an additional 25 cents from a Local.com direct deal with San Diego area florists… that’s not a bad scheme… $1 going out and $1.50 coming in.
Part 2. The Local.com Syndication Network.
The local syndication network is essentially the same offering as on local.com but instead provided as a white labeled solution to local media companies like newspapers and radio stations. So the local newspaper in Little Rock can offer the local search capability on their site and also presumably leverage their ad sales connection in the local community and profit from bringing in new clients.
Local has some patents in this area and has struck a few licensing deals related to helping improve local search… but the revenue from this is quite small so far.
While I would agree with the company that this is not purely a search arbitrage company, there is a fair amount of organic traffic coming directly to the site and its network… but you can’t help but wonder what will happen as folks like Google continue to improve on their ability to deliver local oriented search result… will a stand alone local business finder still be necessary? Is this company just providing a stop gap solution to solve a temporary problem caused by the shortcomings of the major search engines to effectively handle local oriented searches?
One very telling stat in my mind is that the company currently makes just 27 cents per unique visitor, this is compared to $4-5 in ad revenue for a good quality vertical content site, and the double digits figures that someone like Google makes. In theory the highly targeted local searcher with a strong pre disposition for actually going on to make a purchase should command a huge premium… and the fact that its not is a little worrisome.
There is a huge future in connecting the local customer to local businesses using various types of technology, it will be interesting to see where local.com can take it from where they are today.
