Our family has always been keen on board games… especially Risk and Monopoly. The early stage of these games was always calm and friendly, as we picked our playing pieces, set up the board and shuffled the cards. However, once the land or property was secured and the game advanced, tempers could flare, voices got louder and the players could become very aggressive. Notwithstanding the Irish blood and all that red hair – there is a parallel between our experiences with board games, and the growing intensity around local search.
Who would have predicted ten years ago, that Microsoft’s biggest acquisition in history would be an advertising firm? With the aQuantive deal at $6 B (45 times cashflow!!), Google’s prior acquisition of DoubleClick for $3.1 B, and Yahoo’s $680 M purchase of RightMedia, the online advertising game is clearly heating up. Exciting!
So what is wrong with this picture? According to The Kelsey Group, the global market for paid local search is less than $5 B – a tiny fraction of the $600 B global advertising market size cited by Shar Van Boskirk of Forrester Research, to justify the aQuantive valuation. Traditionally, most media types realize a 50/50 revenue split between local and national advertising.
There are two important things to consider. One – Advertising is obviously big business… but do Microsoft, Google and Yahoo have the DNA to run global advertising agencies? Two – why has paid local search not taken off like AdWords?
While I don’t feel qualified to answer the first question, I have a strong opinion on the second… there is currently no critical mass of local search users or traffic. Advertisers will always find the audience – as evidenced by first Overture’s and then Google’s relatively instant success in monetizing keyword search traffic. By comparison, local content and local advertising are highly fragmented, and may never be consolidated or aggregated into a single, global portal and search brand, like Google.
Think about it… how many web sites do you have to visit to find the best information about local dining, reviews, shopping, news, events, sports, movies, tourism, history, culture, photos, businesses, classifieds, parking, traffic, or weather, for just a single community or city? Estimates are that no single web property garners more than 15% of the local online advertising revenue in any single market.
Why is combining maps and search so difficult? (It is.) I have been involved in the Geographic Information System (GIS), mapping and location technology industry for over 20 years. In fact, our team coined a term in 2001 for an emerging technology category called Location Intelligence platfoms. Since then, technology analysts like IDC, a major media and conference company called Directions Media, and competitors like MapInfo have adopted our terminology. Location, more than any other enabling technology, continues to hold out the promise of universal application – but never quite arrives.
I believe that the current state of local search and location technology is like the beginning of a Risk or Monopoly game – pretty maps, without the playing pieces (content). While MapQuest sparked a small storm, and Tim O’Reilly’s Where 2.0 crew has fueled a tornado – only a tiny fraction of the world’s information has been indexed, and is currently accessible for location-centric search or map-based visualization.
Most people still use Google.com to research a vacation in Barcelona, Spain… they don’t start at Google Maps or Google Earth!