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Search Engines Are Setting Their Sites on Local Businesses to Boost Ad Dollars

March 30, 2004|Chris Gaither | Times Staff Writer

The early promise of the Internet was to bring things from the far reaches of the world to your desktop computer. Now Google Inc., Yahoo Inc. and other big search providers are rolling out services that generate hits closer to home.

The next generation of search-engine technology is designed to make it easier for people to find restaurants, carwashes and dentists in their own neighborhoods.

It's the battleground of the moment in the fiercely competitive race to win -- and keep -- the loyalty of Internet information-seekers and the advertising dollars that are expected to follow them.

"It's an enormous revenue opportunity for paid search advertising," said Greg Sterling, an analyst with Kelsey Group, a market research firm in Princeton, N.J. Such ads, which bring in about $100 million today, could be worth $2.5 billion by 2008, the firm predicts.

Internet ads are on a sustained rise for the first time since the dot-com crash three years ago chased major advertisers offline. Spending swelled 20% last year, to $7.2 billion, according to the Interactive Advertising Bureau, a trade group.

Nearly one-third of those dollars paid for search-related ads. They are triggered when users type in specific search keywords and appear above or next to regular search results.

To keep the growth going, companies such as Google are trying to lure more mom-and-pop businesses away from traditional outlets like phone books, newspapers and coupons and onto the Net.

Many customers have already made that transition, analysts say. So have online merchants that sell their wares via the Web. But small firms that depend on foot traffic, like dry cleaners and beauty salons, have been more cautious.

One exception is John Burch, a dentist who works in Mountain View, Calif. He has placed ads on Google, FindWhat and Kanoodle that appear when people type phrases like "Mountain View dentist" and "Silicon Valley dentist." Each time someone clicks on one of those ads, he pays a fee that ranges from 37 to 80 cents.

The pennies add up to about $600 a month, and Burch says it's a bargain. The online ads bring in about 20 new customers a month -- twice as many as he gets from the 1-800-DENTIST referral service, which charges him $1,700 a month.

None of Burch's dentist friends have caught on yet.

"I'm ahead of the curve, that's for sure," he said.

In some ways, the push toward localized searching is bringing the Internet industry back to the future.

Local portal sites like Citysearch and online phone directories have been targeting people in specific places for almost a decade. Search engines, though, are the preferred launching pads to the Internet.

The challenge for search engines is figuring out where an Internet user is. Only about 7% of searches conducted in the U.S. include a local modifier such as a ZIP Code, city or area code, according to ComScore Networks Inc., a market research firm.

With their new services, the companies intend to identify the physical location of their customers. Yahoo, for example, might use the ZIP Codes its users provide when they register for an account. The Sunnyvale, Calif., company recently unveiled a service called SmartView that displays ATMs, restaurants and other kinds of businesses when users enter an address into Yahoo Maps.

Google's strategy is to ask searchers where they are or to analyze the numerical Internet address of the computer a searcher is using, said Salar Kamangar, a director of product management at the Mountain View, Calif., company. Those numerical addresses are loosely linked to geographical areas.

Online phone directories are trying to counter those efforts. Verizon Communications Inc.'s SuperPages.com, the most popular online directory, began selling ads tied to search keywords this month.

Although SuperPages.com lacks the traffic of Yahoo or Google, Lester Chu, a marketing vice president with Verizon Information Services, says it has something more important: 2,100 salespeople who know small businesses because they have been selling them traditional Yellow Pages ads for years.

"We feel that's our big advantage," Chu said.

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