Search Local, Buy Local

The global aspect of the Internet is what makes it so valuable to many people. No matter where a shopper is located, she can find desired information or products from throughout the world by using an Internet search engine.

But while a global search is great for some, it`s not all that desirable for others. They`re not looking for that rare lamp from Istanbul or even a software package from California. They just want to find a shoe store or a pet shop near their home or workplace. Even consumers who want to make their purchases online often want to buy from an Internet site that has an outlet nearby in case they have to make a return, need repairs later on or have questions on how to get the product to work.

Google, Yahoo go local

For many of these consumers, local searches--where they can identify a wanted product or service and then type in a ZIP code or hometown to find a local provider--are more desirable. And to meet the growing needs of consumers who want local service providers, many of the global search companies, including Google and Yahoo, have gotten into the local search act.

Local searches have been called "the yellow pages on steroids." What that basically means is that the old-fashioned way of having consumers` fingers do the walking has been replaced by having their fingers type in product names and ZIP codes. But unlike the old-fashioned yellow pages which simply list companies and ads under broad product categories, Internet-based local searches can be customized so consumers can look for specific products and services, and even have the listings of proposed retailers sorted by price or other features of their products.

"We can make the search results so much more meaningful to both the consumers and the advertiser," says Justin McCarthy, head of local sales for Google. "We can give consumers the names of retailers that have outlets near their homes. And for advertisers, the leads we give them are customers who are much more likely to buy from them because they are customers who have stated a preference for a store located nearby."

Staples Inc., the chain of office supplies and equipment, for example, is currently using a relationship with ShopLocal.com to customize its online circular offerings so that the circulars reflect the products offered by stores within a specific region. The chain has 1,200 stores nationally and sells products online.

Customized by region

"We don`t always carry the same inventory in all our stores and we like the ability to customize our circulars so that customers see the exact products we offer in their region," says Cathy Cusack, vice president of consumer marketing. "In Manhattan, for example, the high cost of real estate means we have to keep our stores small and as a result, we have a very limited line of office furniture compared to what we can offer in other regions."

Staples plans to test Yahoo`s offering as well and Cusack was interested in what Google could offer. She likes the ability to customize the product offerings by region so that, for example, a New York City resident would not be referred to Staples for office furniture that was not available in the local stores.

"We`re a national merchant, but we consider ourselves part of the communities in which we have stores. The localized online offerings let us reflect that," Cusack says.

Local searches also expand the available market of retailers that pay to have their names show up on searches. Small locally-owned businesses that might have shied away from paying for leads from shopping search engines before because they feared they would get too many leads from customers located hundreds of miles away now find they can pay only for leads that fit their geographic criteria. Also, retailers and service providers who did not previously have online sales capabilities are looking at online searches because the referred customer will be able to come into their stores or call them to make a purchase.

"Local companies who had not been able to take advantage of online advertising before or were unsuccessful in their online advertising attempts have a whole new opportunity before them," McCarthy explains. "Before, if you were a retailer that only had stores in Los Angeles, you might have gotten your name before a lot of customers who just weren`t going to shop with you. Now you can target your advertising strategy so that you only show up before customers who are located in the Los Angeles region. This is a much more efficient and cost-effective way to advertise online."

Targeted ads

In addition to targeting their search criteria, retailers can also target their ads themselves. A customer who clicks on the retailer`s ad might then see an advertisement that emphasizes convenience of location and features that are specific to a region.

The desire to capture the local market has attracted even the largest global search companies. Yahoo Inc., for example, launched Yahoo Local in early October to pursue that market. Yahoo Local is accessible on the Yahoo Front Page and Yahoo Search sites and was launched after obtaining consumer feedback from a beta test in August.

"We`re very excited to integrate our local search product into the Yahoo search experience," says Jeff Weiner, senior vice president of Yahoo Search and Marketplace. "Local is one of the most popular and valuable search categories for our users."

Among features that were incorporated into the local search offering as the result of the beta testing are an improved relevance algorithm to deliver more precise local results; additional data sources; streamlined rating and review systems; improved integration of driving directions from Yahoo Maps; and improved interfaces for narrowing and sorting results by price, rating and distance.

"Local searchers can now feel like an insider in the neighborhood they are exploring," says Paul Levine, general manager of Yahoo Local.

Merchants ensure placement on Yahoo Local in the U.S. by signing up with Overture Local Match, a subsidiary of Yahoo.

Another major national search company attracted to local searches is Google which began a beta test at local.google.com last March. Although Google is calling its service a beta test because it is attempting to gain consumer and advertiser feedback, the test is open to any consumers or advertisers who want to use it, McCarthy says.

Google is using the same AdWords system for its local searches that it uses for its global product shopping searches. AdWords uses a combination of search word relevance, how much an advertiser pays, and how popular a particular advertiser is with other consumers to prioritize the retailers who show up on its search results. The only difference in the local search is that the consumer`s and the retailer`s locations are also factored into the equation.

Pinpointing a location

Google learns the customer`s location in one of two ways. In same cases, customers will simply state where they are located, typing in, for example, "San Francisco cameras" as the search words.

Google can also get the consumer`s location from the IP address, that is, by looking at the server by which the consumer is accessing the Internet and determining the metropolitan area where the server is located. That would mean if a customer is traveling and wants to find local suppliers, Google will know that and tailor the results to the location where the customer is traveling, not her home town.

Guide to E-Commerce Technology

Google also allows advertisers to define what they consider "local" before they bid on potential customer referrals. "We give the retailers some flexibility in deciding how they want to define their market," McCarthy says. "A camera shop, for example, might want to bid on customers located within a 50-mile radius thinking consumers will drive a little bit to get a good deal. But a pizza shop might only want to bid on customers located a few miles away."

Besides Yahoo, one of the newest local searches is ShopLocal.com, developed by CrossMedia Services Inc., which is partly owned by three large daily newspaper chains: Gannet Co. Inc., Tribune Co. and Knight Ridder.

ShopLocal relies partly on the ability of the 145 newspaper web sites owned by the media conglomerates to bring consumers to the ShopLocal site. Once there, consumers can search for local retailers by typing in store name, brand name or special product names. They can then type in their city or ZIP code to find local providers.

Initially, CrossMedia began signing up mostly national retail chains that had local outlets. But more recently, CrossMedia has begun to integrate many of the local advertisers from the daily newspapers. That is expected to bring in a lot more of the smaller, locally-owned businesses that ShopLocal had hoped to attract, says David Hamel, chief marketing officer.

While some consumers who use ShopLocal are expected to shop online through retail connections, more commonly they will use the web site to identify businesses that they will call or visit. Many such businesses are expected to be service companies--such as plumbers or electricians--with whom it is impossible to do business via the Internet, Hamel says.

Hugely local

"We take people who are looking for products online and find them a store that has what they want and is near them," he says. "We are not an e-commerce site per se."

One company testing ShopLocal.com this fall is The Bombay Co. "This is the yellow pages taken to a whole new level with products and product attributes being searchable instead of just our company name and business type," says Matt Corey, vice president of marketing and e-commerce for Bombay Co. "So we`ll test this concept to see if it generates the ROI we require to move forward on a longer-term relationship. Right now we`re cautiously optimistic that the model will provide beneficial."

This isn`t the first time CrossMedia has brought information and services to consumers online; it also owns CareerBuilders.com, Cars.com and Apartments.com.

Another marketing company that was attracted to local search is FindWhat.com. It was motivated to increase its local search offerings by statistics that showed that 35% of general searches ended up being local in nature. And as the online marketing firm conducted additional consumer studies, it found more and more consumers say they want to identify local service providers, says Rick Szatkowski, senior vice president and general manager of FindWhat.com`s private-label network. New technology, particularly wireless systems, is also driving the trend toward local searches, Szatkowski says. He has noticed that as more consumers use small wireless devices in their daily lives, there is increased demand for these people to look up a local business while in their cars or out and about.

FindWhat is combining its local search functions with its new pay-per-call offering. Now instead of just paying the search provider for each sales lead received when a consumer clicks on a hyperlink, FindWhat.com allows companies to pay for leads they receive when customers call them on special 800 numbers. This feature allows businesses to be included in Internet searches, even when they don`t have web sites or don`t allow online purchases. As a result, it has allowed FindWhat to include more small businesses and those located in small towns in its retail lists.

Another driving feature, Szatkowski says, is the growing capacity for online sales companies to allow customers to return merchandise to their stores. This has caused a lot of consumers to give preference to online retailers, particularly those affiliated with large national chains, that have outlets nearby where they can return merchandise if necessary.

FindWhat allows consumers to type in their city or ZIP code along with a keyword indicating what they are looking for. The keyword can either be of a general product category--i.e. electronics or apparel--or a specific product sought--digital camera or shoes. Typically, the more specific the description typed in, the higher the conversion rate to sales, Szatkowski says.

FindWhat has 100,000 online businesses in its listing, but expects to greatly expand that with the new pay-per-call program. Additionally, the company has a deal with Verizon Information Services to incorporate many of the 1.5 million advertisers in Verizon`s online SuperPages.com into FindWhat`s data base.

Higher price

In most cases, advertisers bid on customer leads on a pay-per-click basis. In the case of FindWhat.com`s program where customers call a special 800-number, advertisers pay on a per-call basis. Because the value of having an interested buyer on the phone is perceived to be greater than someone who has simply clicked on an ad, the cost of the pay-per-call model will be higher than pay per click, starting at $2 per lead. Pay-per-click has a 5-cent minimum.

ShopLocal charges retailers on a per-visitor basis, but has several ways to calculate the fees. If a consumer goes directly to a retailer site from ShopLocal and the consumer moves around the site, the retailer pays 40 cents for the visit. If a consumer is searching for a specific product and clicks just to view that product, the retailer pays 5 cents. If that consumer then looks at other products at the same retailer`s site, the retailer pays an additional 5 cents per product with a 40-cent daily maximum.

In a similar manner, retailers without web sites pay 40 cents to have a customer view their company description, which includes address, phone number and directions to the nearest store.

ShopLocal has several ways to obtain product information. Retailers can send a direct electronic feed listing their products and brand names or they can send ShopLocal a copy of their advertisements and ShopLocal will input the information from the ad into its system. Shoplocal does not take product information directly off of web sites. "We`re trying to promote the idea of visiting the retailer`s shops and many retailers offer products on their web sites that they don`t have in their stores," Hamel says. "We don`t want to list products that consumers can`t get in the stores."

At Google, advertisers can pay on a per-click basis to have their ads appear above local search results. Google gets retailer content information from more than 4 million web pages and combines that with information from Yellow Pages data.

Interactive bus shelters

To get consumers to use the local searches, some companies are taking extreme measures. While Google and FindWhat are directing their national customers to their local sites when such searches are desired, ShopLocal is relying on the online newspaper readers to see its ads and click through.

But Yahoo is taking its marketing message a little further. With the launch of its local search service, Yahoo began an extensive marketing campaign. Part of that campaign involves select interactive bus shelters in New York, Los Angeles and San Francisco. Persons waiting at these shelters can conduct a search for a nearby service, view the results and print the information out from the bus stop to take with them.

But while that might seem a little extreme, it appears that the future definitely will include more pushes by the online marketing and search companies to move from global searches to those that are more local in nature.