So anyone that’s been around the online advertising world will be familiar with the famous Google Page Rank algorithm. While maybe no one other than Larry and Sergey truly knows how it works, there are literally small armies of SEM and SEO experts that wake up in the middle of the night in a sweat wondering if they left out an important keyword, or whether they need to pay for links to get a boost for their clients.  It’s a fascinating micro economy that has developed almost exclusively around servicing customers and their interaction with Internet search providers, particularly Google and its $20B in annual revenue.

I haven’t bought search in well over a decade, before Google existed, and am by no means an expert in search, let alone local search, but if you’re looking for more information I’d suggest starting out by reading SEOmoz or Greg Sterlings Skreenwerk blog or reaching out to a local search SEO specialist like David Mihm or Mike Blumenthal who are frequent speakers on those circuits and regularly share some invaluable experiences on their blogs at Mihmorandum and Blumentahals.

But to greatly over simplify, fundamentally there are two main components in play for Google on the web, and how well they translate into a true mobile location aware search is fuzzy at best.  So for the current Google web search here are two key factors being looked at:

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Per John Hanke, VP of Google Earth, Maps, and Local from a recent TechCrunch article : ”PlaceRank is like PageRank for places, it tries to figure out how prominent a place is based on factors such as references on the Web, reviews, photos, how many people know about it, how long its been around.”

By the way I think it’s notable that the thing being “figured out” here is “prominence”.

Now I understand that you’ve got to start somewhere, but I would argue that the tactics used in web search engines don’t really apply to spatial search much and it should be treated as a completely separate animal.  Web pages are about text and the authors of that text linking to (and as a result voting on) other web pages, in order to determine a pages’ ‘prominence’. 

I think there are a few key differences when looking at location and spatial oriented search:

• The “prominence” of a search result is relative to things like distance and the convenience of alternatives in local/spatial search, versus something more absolute in web search where you’re simply clicking on a link to ‘get there’
• Determining “prominence” is very important when parsing through 1 trillion pages of “always available” information, but in the more dynamic yet much more limited options of local search something as simple as solving for “highest prominence” may not be the right answer
• The true “linking” happening to a physical place is not happening on a website, but through foot traffic and phone calls… and the traffic links between places is not captured on a webpage at all, but on a handset or a carriers’ back end logs
•  The stuff being searched for could and should exist in a variety of mediums, not just html on webservers… find a person from their mobile device, find an item from an inventory system, find a bus from a location sensor.

I suspect  that there will be some incremental improvements over time with matching online information to offline stuff, but I also suspect that we’d be better off by blowing up the existing search model and starting over from the ground up with a model designed purely around location specific spatial search, that merely taps into the vast reservoir of online content only when necessary… rather than serving as the foundation.

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.

It does bring up some interesting issues like why in the world would Google not regulate this more closely and why they feel the need to allow users to have free reign over a core part of a Google product… even when it has the potential to erode the quality of the product.

I think the answer is tied to both the economic and ideals over at Google.