Recession Hits AT&T Online: Kelsey Local Search Advertising Predictions Too?
AT&T’s 2007 farewell to analysts promised a blazing hot New Year thanks to a “three screen strategy” with “internet search and display revenue growth beginning in 2008,” according to Ray Wilkins, President, Diversified Businesses. AT&T CEO Randall Stephenson rang in the analyst New Year by underscoring weakness, however, ciiting a slowdown in consumer broadband and service disconnections due to nonpayment.
AT&T’s bullish, unsubstantiated December 2007 powerpoint on the power of AT&T “Advertising & Search” claimed revenue growth “to more than $1.5 billion by 2010.” How will the AT&T happy talk come to fruition though, when it is already being disclaimed by AT&T’s chief cheerleader: Traditional wire lines and home broadband are the first things consumers disconnect when they are unable to pay their telecommunications bills, Stephenson said. He still has high hopes for wireless, though:
Wireless is proving to be fairly resilient, even in an economic downtrun.
The Kelsey Group seems to be counting on wireless as well for the realization of their bullish online local search predictions. Kelsey, the self-declared “leading provider of research, data and strategic analysis” in the “directories, small business advertising, online local media and mobile advertising sectors” began its New Year by circulating a Press Release of its analysts’ educated guesses about what 2008 will look like, while promising hard data to back up its predictions, available apparently only for Kelsey clients, though.
Among the many unsubstantiated, far reaching predictions Kelsey released to the local world at large last week: 2008 will see “big increases in local search inventory.” BUT, I have been asking Kelsey: Why “big increases”? How “big increases”? Where “big increases”? Who benefits from the “big increases”? Does any data back up the specific prediction, or is it a gut call?
CEO Neal Polachek told me yesterday: There will be more mobile phones, more searches, more online content. In other Kelsey words, there can’t help but be a virtuous Internet circle spurring an inevitable local search inventory and sales increase, right?
WRONG! The entire Internet advertising ecosystem has long been waiting for the materialization of a supposed “inevitable” correlation of increased consumer online media consumption with a matching increase in advertiser spend online.
Polachek suggested Kelsey has hard data showing an increasing use of local Web search by local merchants AND an extrapolation of merchants’ own local search use of the Internet into a perceived consumer demand for more local merchant information online. The inevitable Kelsey conculsion? Local merchants will spend more money on local search advertising!
Too bad the king of all online search isn’t in on the local search advertising play book proscribed by Kelsey, though. Google continues to make it economically inefficient for independent single store owner/operators to partake of the “democratization” of advertising that the $200 billion market cap online marketing juggernaut claims to offer.
SEE: Reach Local Advertising? How Google Squeezes SEMs and AdWords Buyers and Google AdWords Plus Box: Local CPC Bidding War Unleashed! and
Google Apps & Maps: Enterprise and Local Business STILL Missing
The latest Kesley Interactive Local Media conference surfaced the persistent roadblocks that thwart en masse online adoption from local businesses, as I underscored as a panelist on the closing session in Los Angeles in November. SEE Local Advertising Online: SMEs Hold the Billion Dollar Keys, ILM ANALYSIS.
The industry looks at the local opportunity glass as half full rather than as half empty. There are two fundamental flaws with the conventional wisdom that online local ad spend growth will inevitably catch up to online local media consumption, however:
1) The majority of local merchants do no advertising whatsoever in any medium, online or off, and will continue to remain happily advertising-free.2) Getting SMEs online–one way or another–does not mean that they will stay online.
Matt Van Wagner of FindMeFaster shared case studies at Kelsey of his local search campaigns for small businesses which he described as “miserable failures.“
MerchantCircle claims it has more SMEs online than anyone else, about 300,000. It also says it has contacted every single SME in the U.S., about 15 million. MerchantCircle then has a 2% conversion rate, and many accounts are not active.
Jonathan Weber, New West, shared during his Kelsey keynote, “It is hard to get local businesses to participate, even if it is free.”
During the opening “Local Search: Why Your Business Needs To Be There and How” panel, ReachLocal CEO Zorik Gordon underscored “digital agencies” help local merchants not capable of, or not interested in, self-provisioning SEM campaigns to “simplify, manage and aggregate the Internet into a single buy.” SMEs want to “cut a check and have someone do it for them,” Gordon said. The ReachLocal platform hails its “patent-pending campaign optimization, management and tracking technologies” help small businesses “attract local customers via search.”
During the Q & A I asked Gordon:
Small businesses find a certain comfort in the fixed price formula of offline media. ReachLocal’s one check buy mimics that but does not negate the ROI impact of search advertisng’s variable pricing. The CEO Of Reed Publishing said at paidContent’s conference in NYC that SEM’s “dirty little secret” is PPC inflation.
How do you manage clients’ fixed spends so ROI does not decrease; Do you move from higher-priced engines to lower-priced vehicles?
Gordon acknowledged rising click prices in local keyword categories are a challenge, but indicated ReachLocal has been able to optimize conversions to keep ROI stable.
In response to a later question, Google Local Sales Director, Eric Stein, suggested Gordon implied that ReachLocal is able to “drive CPC down” via technology. Gordon nevertheless countered that local search power continues to require agressive bidding (up) to ensure prime placement in SERPs, the desirable Google kind.
High priced CPC AdWords are desirable for GOOG, BUT A BANE TO LOCAL MERCHANTS. Local advertisers are some of the toughest negotiators around, protective of their small but dear investments. Local merchants pride themselves on driving rate cards down.
Google’s black box, bid up your own rate card GOOG fuel system HURTS growth of the local search ecosystem.
UPDATE: Yellow Pages Get Reprieve? The Myth of King Google Local Advertising ROI
ALSO: Scrabulous At Risk? Zynga $10 million VC Game: Facebook Roulette and Henry Blodget Braces For ‘Harder Times’: Silicon Alley Insider ‘Screwed’? and Kelsey: You’ll Still Have Yellow Pages To Kick Around Some More