Local Search War Gets Hot: Facebook Joins Game

MIHMORANDUM NO. 653 | August 20th, 2010Reader Comments (29)

Original Image Credit: Usonian on Flickr

I’m sure most of you have heard by now about Facebook Places’ launch and maybe even read some of the excellent initial commentary from Greg Sterling and Mike Blumenthal.

First of all, congratulations to Localeze, which officially announced this morning that it is supplying Facebook’s data.

I was impressed by the number of features Mark Zuckerberg laid out last night, but so far, I’ve been a little underwhelmed with the launch itself.  Seems to me such a big company could have coordinated its roll-out (or at least set expectations) a little more efficiently. Namely:

A) It doesn’t seem like businesses are able to claim a Facebook Place via desktop.

B) The Facebook Places help documentation seems extremely thin so far.

When I go to touch.facebook.com, I click the Places tab and nothing happens.   So apparently my desktop is not a supported device.  But when I perform a search on facebook.com for some pretty popular businesses in my neighborhood, as directed by the help page, I only get Citysearch pages for those businesses populating the initial results, and Bing web search results populating the ones below that.

Who knows, maybe it just hasn’t fully rolled out yet.  But, my initial impression is that prioritizing iPhone-wielding Facebook users ahead of everyday business owners is a strategy that Yelp tried and presumably (based on their recent business-oriented innovations) regrets.

Game On: The Battle for Local Domination

I think Facebook’s entry into the Local game is a watershed moment for our little corner of the world. It’s an incredibly well-known brand, with a wide-ranging demographic, and a pretty darn simple interface.  It’s going to be extremely interesting to see how the other major players respond (evidently Yelp and Foursquare are both partnering up with Facebook right off the bat, according to Greg’s writeup).

The battle for Local domination is officially afoot…here’s how I’m currently handicapping the players, based on a set of six criteria. Oh, and if you’ve never played RISK–or watched the Seinfeld episode called “The Label Maker”–a lot of the references in this post will make no sense whatsoever.

Google Places

User Base Volume: Astronomical. Who doesn’t use Google?
User Base Loyalty: Pretty darn high. I use Bing for about half my searches these days, but for some queries, Google’s just better, and they still get the vast majority of my Local queries.
Business Owner Volume: Compared to its user base, this is “Meh.” Google announced back in April that there are about 2 million claimed Place Pages in the US (out of about 20 million businesses).
Business Owner Loyalty: Mixed. Google Places has rolled out a lot of great features recently (like announcements, the ability to respond to reviews, even a business-owner oriented blog), but Places still strikes me largely as a ‘set it and forget it’ type of product.  But that map in Universal search is still the #1 place business owners want to appear on the ‘Net, and a lot of them will work extremely hard to get there.
Monetization Potential: Huge. Personally I thought that last fall’s Local Listing Ads (guaranteed placement in the 7-pack) could have pretty much cornered the SMB ad market, but perhaps it was a case of too much demand and not enough supply for Google, which is why they went with Tags. I’m still not sure we’ve seen the end of guaranteed placement (like Adwords for the 7-pack), but it’ll presumably come in a little different format.  Adwords is still too complicated for the average SMB, though.
Intangibles: I think Google continues to wrestle with the need to provide some kind of customer service to frustrated business owners coupled with its own desire to keep things algorithmic and impartial.  But this stark algorithmic DNA which made Google such a successful company may be a weakness as the web becomes more social.
Comments: While Google Local/Maps/Places is innovating faster than it ever has (and the spam problems it suffered with a year ago seem to largely be in the past), I get a strange sense that Place Pages are starting to look “less cool” for a certain set of business owners.  There’s not the same ability for customization that Facebook Pages and even Twitter profiles offer, and there is that pesky customer service issue.  Overall, though, I’ve been a big fan of the direction that Google Places has been heading the last 18 months or so and I think they’ll continue to be one of the behemoths in the space–especially as more and more business owners hear about Places.
Analogy: Google is Asia. It’s the biggest continent, worth a lot of points, but it is vulnerable to small attacks on a lot of different fronts.

Bing

User Base Volume: Currently small; could get much larger with Yahoo partnership.
User Base Loyalty: Weak, if my own experience is any indication. I try hard to balance out my search queries, as I said above. But even I have a hard time staying on Bing 100% of the time.
Business Owner Volume: Probably pretty small.
Business Owner Loyalty: Probably pretty weak.
Monetization Potential: Quite substantial.
Intangibles: Commitment, mobile possibilities, partnerships.
Comments: Looking at the above, it doesn’t make sense to give Bing much space in this post.  But Bing’s upside is (I think) larger than any companies on this list except Facebook and Google.  Its Local Listing Center used to be the joke of the local search world.  It’s come a very long way in the last 18 months and is now almost as robust as Google’s.  Ballmer and company appear to be pouring some major resources into Local, and with their existing stake in Facebook and partnership with Yahoo, things could get very interesting in short order…
Analogy: Bing is South America. It has a ton of money, plenty of commitment to the space, some very smart people working on the team; in short, it’s primed to become a major player, but doesn’t yet have as much brand recognition or sex appeal among the general public or small business owners…so it’s kind of marginalized at the moment.

Yahoo

User Base Volume: Fairly large.  There are still a ton of people who use Yahoo as their homepage, let alone their various properties like Sports, Real Estate, and News.
User Base Loyalty: Fairly committed.
Business Owner Volume: Seems pretty large.
Business Owner Loyalty: Unknown.
Monetization Potential: Unclear.  Yahoo essentially had Google Tags a couple of years ago with their ‘merchant verified’ checkmarks, but didn’t make those push into Universal results.  They had the opportunity to promote local businesses on IP-targeted Yahoo homepages, but didn’t do that either…
Intangibles: Lack of corporate leadership or product direction?
Comments: Two years ago, I thought Yahoo’s Local product was the best in the business.  But I haven’t seen much innovation from the company recently…they just haven’t engaged with those of us in the Local Search space at all.  Either they’re working on something REALLY great and just haven’t told any of us (which is entirely possible), or Local has been allowed to wither on the vine by Carol Bartz.
Analogy: Yahoo is Africa.  It has its own exceptionally passionate userbase but it’s a bit of a ‘dark continent’ in terms of product innovation and business owner outreach. Plus, Bing might end up taking it over from across the Atlantic anyway…I could also definitely see some sort of ‘let’s gang up on Google’ partnership coming between the Yellowpages, Yahoo, and CityGrid as well.

Facebook

User Base Volume: Um, Facebook is already the world’s third largest country.
User Base Loyalty: For some users, it’s enormous. For others, it’s fleeting.
Business Owner Volume: Reasonably large.  I think I remember reading there are more business Fan Pages on Facebook than claimed Google Place Pages.  But I can’t seem to find that reference.
Business Owner Loyalty: There are businesses who update their Fan Pages assiduously and others who haven’t removed spam comments from their Walls in a year.  From an ad standpoint…see below.
Monetization Potential: Pretty darn big.  I’ve used Facebook Ads already for a couple of clients in niche professional services industries and the ROI has been on the order of 10x.  I would imagine it might be even higher in entertainment and hospitality verticals.  Facebook Ads are also MUCH easier to set up than Adwords.  There’s no real keyword research to be done–Facebook suggests plenty of relevant interests to ponder and makes geographic targeting a snap.
Intangibles: Focused on user check-ins rather than business owners (?), privacy issues for users.
Comments: I personally am not a big Facebook user.  I find it hard to separate wheaty Wall updates from chaffy ones.  But it’s just so much easier for the average business owner to ‘grok’ than any other prospective Local search portal.  And if Facebook devotes focus on making things easy for business owners while respecting users’ privacy, they could very quickly eat into Google’s huge market share as the #1 destination on the entire ‘Net.
Analogy: Despite being the newest entrant into the space, I’m going to award Facebook North America.  They were already a major player without even having a true Local index.  Also, Google may have forgotten that Facebook could attack Kamchatka across the Bering Sea.

IYPs

User Base Volume: Medium, I guess–I was surprised to see Greg note this morning that YP.com had 24 million monthly uniques last month.
User Base Loyalty: Low. I’m not sure many people think “YP.com” or “Yellowbook.com” etc. first when they’re looking for a business.
Business Owner Volume: Substantial. There are probably still more business owners advertising in Yellowpages print products than have claimed their Google Place page or created a Facebook Fan Page.
Business Owner Loyalty: Low–if Mike Blumenthal is a typical example, most business owners felt like they were raked over the coals by their sales reps in the late 90’s and more are starting to see a dimmer future for print advertising.
Monetization Potential: Poor–as long as they’re selling their own ad inventory.
Intangibles: A tried-and-true sales process.
Comments: If the Yellow Pages can somehow train their representatives to sell other people’s services and advertising, they could still make significant margins.  If all they’re doing is bundling Google Adwords clicks, they’re going to continue to get squeezed.  But if they can truly become trusted advisors that help SMBs navigate the online world, they’ve still got a fighting chance at what would be a remarkable comeback.

Incidentally I was struck by Susan Esparza’s liveblog of the SES San Francisco keynote the other day which featured Kodak’s CMO–the eerie parallels for the Yellow Pages industry with a company whose entire business model was turned upside down by digital media–and yet they saw it coming and landed on their feet.
Analogy: Right now I’m going to say that these guys are probably the Ukraine of Local Search–a road apple; weak and feeble. OK, not really weak and feeble, but I’d been dying to make that analogy for months.  Seriously, though, they ARE getting majorly squeezed by both CityGrid and Google.

CityGrid

User Base Volume: Collectively, it’s probably substantial.
User Base Loyalty: I do know some diehard Citysearch users, but it’s probably not as high as Yelp or Facebook.
Business Owner Volume: Low. I haven’t seen any numbers of claimed listings; this is just speculation.
Business Owner Loyalty: Low. Without its excellent sales team explaining how Citygrid works, I’m not sure business owners would have the same blind faith in Citysearch they have in Google.
Monetization Potential: Significant. Even though Yelp is the userbase darling, Citysearch has always been more profitable. Clearly they know how to relate to, and sell to, business owners.
Intangibles: Forward-thinking; ease of integration.
Comments: As I commented on Greg’s blog recently, Citysearch seems to be doing plenty of innovating these days, and their announcement of the CityGrid API earlier in the year was sheer genius.  An “everything else is on CityGrid” strategy could keep them profitable for many, many years.
Analogy: Eastern Europe.  Strategically positioned to make a lot of possible moves, even though they’re clearly vulnerable to a lot of the major players in the space in terms of mindshare.

Yelp

User Base Volume: Extremely high in urban areas; not so much in rural areas.
User Base Loyalty: Legendarily fanatical.
Business Owner Volume: Medium.
Business Owner Loyalty: Mixed. Seems like half of the business owners I see interviewed hate Yelp’s sales practices or Yelpers’ arrogance and the other half would be out of business if it weren’t for the notoriety they’ve gained via Yelp.
Monetization Potential: Substantial if they can break into the higher-value verticals like doctors, lawyers, insurance agents and the like.  Mostly short-tail in the larger cities currently.
Intangibles: (Previously?) poor reputation among business owners; limited vertical reach beyond food, beverage, and entertainment categories compared to Google.
Comments: I’ve praised Yelp on this blog before for their seemingly 180 degree turn around in terms of their stance “towards” business owners.  I truly believe that it used to be adversarial and thanks largely to Yelp for Business Owners its now much more of a partnership.  If they can continue to build on the goodwill they’ve created so far in 2010 the future is bright for them.  The fact they’ve been able to create such a stable independent brand in a market with so many larger, better-capitalized players is remarkable.
Analogy: Western Europe. A desirable acquisition target for a lot of the big players, and yet fighting furiously to expand to more locales and service categories. Constantly compared to its less sexy yet possibly stronger rival to the east.  Could obviate some of the independent check-in services depending on what happens with Facebook.

Independent Check-in Services (Foursquare / Gowalla / etc)

User Base Volume: Minuscule outside of a few large metro areas.
User Base Loyalty: Fanatical.
Business Owner Volume: Minuscule.
Business Owner Loyalty: Not very high (only 10%) if they have to pay for the service.
Monetization Potential: Pretty small.
Intangibles: Nimble, still might be desirable acquisition targets for the larger players in terms of user data.
Comments: I see Foursquare aficionados/early adopters continuing to use the service fanatically, but these guys are going to have to innovate faster than ever or risk losing most of their potential users to Facebook and/or Yelp.
Analogy: If the IYPs are the Ukraine, these guys might be Greenland–“teetering on the brink of annihilation,” under attack from both Western Europe (Yelp) and North America (Facebook). Partnering with Facebook was their only hope for survival.  The alternative to Greenland is The Congo, taken by either Bing or Yahoo as a penalty for not selling out sooner…

Twitter

User Base Volume: Reasonably high.
User Base Loyalty: Medium.  Somewhere between Facebook and Yelp.
Business Owner Volume: Low, but rising pretty quickly.
Business Owner Loyalty: Mixed. Somewhat like Yelp, it seems like half of business owners post a couple of tweets and give up, and the other half get a significant number of customers from Twitter.
Monetization Potential: Would have been much higher if they moved a little faster with their own Places directory.
Intangibles: Still hard for business owners to ‘grok’ the potential of the service, despite an excellent Twitter for Business guide.
Comments: Business owners do seem to be catching on gradually to the whole Twitter thing but Facebook may have just stolen the sexy label away from Twitter…we’ll see how the next couple of months go.
Analogy: Twitter is Oceania.  It’s small, not high on most business owners’ priority lists (yet), but it keeps plugging away with its two points per turn, taking its time to figure out its next move.  Because it does what it does better than anyone else can, I don’t see it “losing” any market share anytime soon.

Conclusion

I’ll do my best to revisit this map in a year or so, but for now, here’s how I’d break down the world of Local Search.  Time for someone to roll the dice…


29 Responses to “Local Search War Gets Hot: Facebook Joins Game”

  1. Jim Rudnick says at

    WOW! David…shades of Risk my all time fav game from the 70’s, eh!

    I have read this now twice. And it’s too much to contemplate, so I’m printing it out to noodle on this weekend….but yes, I’d have to agree from the outset with your sectioning on a continental basis….with some minor squabbles with the IYP area…but that’s still being ‘thunk-on!’

    Exemplary & superb piece, David! Very well done!

    :)

    Jim

  2. Andrew Shotland says at

    I actually think the independent check-in services are more of a wild card than Greenland. With the advent of Facebook Places we are going to see a lot of innovation built on top of check-ins. With that we are going to see a lot of fragmentation but I bet there will be a few apps that emerge as dominant, at least until the next one comes along. It might be Foursquare or GoWalla or it might be something that doesn’t exist yet. At the least I would also give these guys Irkutsk.

  3. David Mihm says at

    Thanks Jim. As I said in the article itself, I was probably a little harsh on the IYPs’ position but someone had to be The Ukraine, and other than Foursquare, I do think they are the most vulnerable…Greg pointed out in his response to my Citygrid comment that the IYPs should have ‘invented’ Citygrid but failed to seize that opportunity…I could not agree more.

  4. Cecily Crout says at

    Love the RISK analogy, love the map. Looking forward to the revisit in a years time. It will be interesting to see how it all pans out.

  5. David Mihm says at

    Andrew, you may be right that collectively they’ll be able to leverage or layer the Facebook API with their own creativity, but don’t you think Facebook or Yelp will swallow the most innovative ones up (or crush them) before they become bonafide competitors?

  6. Andrew Shotland says at

    You mean like the way Google was able to swallow Yelp?

  7. David Mihm says at

    A) I don’t think that little skirmish is over yet…
    B) Yelp has WAAAAY more users than Foursquare, don’t they?

  8. Andrew Shotland says at

    A) Agreed
    B) So if a new service starts to show extraordinary growth they most certainly will be checked out by the bigger players, at which point they will make the bet as to whether to take the deal or swing for the fences. The really strong players will likely swing for the fences.

  9. Andrew Shotland says at

    And the fragmented nature of local means that there as just as likely to be as big a battle between small states as their will be between countries.

  10. David Mihm says at

    B) Yes, I think they might make it to Iceland or Newfoundland but that’s about it…whereas Twitter and Yelp are already large enough that they can continue to make it. I suppose we can’t know what ‘the next Facebook’ or ‘the next Google’ will look like, though, so I’ll grant you some of your wildcard status.

  11. Mike Ramsey says at

    I am loving the risk analogy. And, I always start in Oceania so it looks like twitter is sitting in the untouchable spot while the battle will rage (most likely a cold war).

    Very fun, very creative and very well positioned. I think most important though is realizing that a good game in risk takes a couple days to complete in game hours which are equal to about 2.7 years in real time so we might not see a world domination by a single player for 5.4 years.

  12. Andrew Shotland says at

    I am more of a Stratego guy anyhow

  13. Benjamin Riedel says at

    hello guys,

    a very informational post. I’m curious… who will be the winner of the battle? Facebook Places will soon start in Germany.

    greetings
    from germany

  14. Josh Kelson says at

    Hahaha! Love the Seinfeld references and a great, informative post. I think if foursquare can gain some significant traction they will be a major player in adding to the algorithms of local search…”the Ukraine is not weak!”…well, maybe for now they are, but with some more “troops” they could make a significant addition to nearby armies.

  15. ulstrup says at

    Great stuff, I’m still sceptical about FB Places, basen on intuition, I’d say that Places makes it all a little too invacive privacy, which is a trending topic right now too.

  16. Menachem Pritzker says at

    Amazing post. love the Risk analogy.

    I agree with Andrew about the independent check-in services’ worth. While their user base may be small, their fanatical loyalty (and obsessiveness) is definitely a force multiplier that puts them up on par with the others.

    You also underestimate Ukraine’s worth. Whoever has Asia needs to take the Ukraine, and conquer Australia. That way, they can defend the whole thing with only 3 border states – Ukraine, Kamchatka, and the Middle East.

    Not say Ukraine is weak! Ukraine is strong!

  17. Micaheath says at

    Absolutely amazing David!

    I think that you nailed the countries right on the head! Especially Google and Facebook. To be honest, I believe those are the only two that are really going to matter in the end. I think ALL of us are seriously underestimating what Facebook Places is going to morph into. I’m on the younger side of the spectrum for the SEO industry, and I can’t begin to tell you the change in online usage behaviors I am seeing from my peers. MOBILE IS HUGE, all of these guys need to be focusing more on how to continue to develop this as a strategic weapon if they want any chance at staying in the game.

    I could write for days about why I think Facebook Places is a game changer and why I think it will be the hands down winner (With the younger generation at least, Google will pick up the rest). But really it just comes down to user base, simplicity, curiosity, and social behaviors. We as a generation expect everything in one place (Walmart). We expect things simple (FB vs. Myspace). We want to know where everyone is and want people to be able to find us at all times (cell phones). I believe that these factors combined with the ease and cost of using FB for advertiser’s gives FB an insane advantage! But like Mike said, it will take some time to finish the game, there are always those players that manage to hang on by a thread, but I believe THIS game will be over much quicker then anyone realizes…

  18. Domenick says at

    As usual, good stuff Mr.Mihm. IMO, I say utilize all of them if it is possible, ultimately I think the “battle for local domination” between all of these companies benefits those who provide a service it. When one company does something, it’s making someone else step their game up. I love it! See you in Denver!

  19. MiriamEllis says at

    You don’t post often, David, but when you do, it’s always extraordinary! What a post! You didn’t mention my all time favorite Risk property, Irkutsk, but I guess Google has it by default. Like others have said, time will show us the accuracy of your marvelous predictions. In the meantime, what an effort on your part and what a fun read!

  20. Martijn Beijk says at

    Hey David,
    Might have missed this one in NL, super small but of course putting in a lot of effort! :-) http://feest.je/

  21. Val Spangler says at

    David (and other specialists),
    The hot training product/coaching program now focuses on the little guy trying to make a buck helping local businesses. Should that target group apply for their Search/Risk passports? Stay at home? Or is their risk being the “man without a country”? (Read that “person” please). Great fun! Now it’s just a matter of figuring out one’s itinerary or curling up with some … (can one really “curl-up with a Kindle”?) and stay home in the Maldives.

  22. Rasmus Himmelstrup says at

    Excellent way to illustrate the different location based services. However I wouldn’t put so much value in Bing and Yahoo. They have the local product, but haven’t been able to launch their services throughout the world – even though the services are pretty old.
    If Foursquare and Gowalla decides to partner up with Facebook Places as predicted – these services will have every chance of conquering their own continent and not be left far off in Greenland.

  23. Andy @ FirstFound says at

    If I remember one thing from Risk, it’s that grabbing Oceania means you’ve got a great chance to win. Keep building up, grab Siam as soon as you can and then the soft underbelly of Asia is there for the taking.

    Does that mean that Twitter can take Google? Possibly not. It depends on making and holding that first conquest, weakening Google and providing a great invasion route.

    Wow, Risk was a great analogy for this!

  24. Mike Stewart says at

    Alright… this will take a minute to digest! Subscribing for later fellas! Thanks.

    I am on my way to an appt with a client! Cheers!

  25. Nick Stamoulis says at

    What a great way to lay this all out using the game of Risk! You’ve got them all pretty well classified and I am still blown away by the analogy that I have gone back to read it over again!!!

  26. John Hoefer says at

    This is a tangental point regarding this article but I just noticed something new in my search results. When I type “chiropractor” or “doctor” or “auto repair” or “electrician” into the search box, I am getting local oriented results in the organic results, underneath the map. They include not only actual businesses, but also IYP sites like Yahoo local, Superpages and local directories.

    Here is how the page broke down: I am in Irvine, CA (google knows this, and knows all) and when I searched for Chiropractor, the first three organic results were wikipedia, bls.gov and a national directory for chiropractors, then came the local 7-box and then in the 7 remaining organic listings below the 7-box, three of the results were local to me. I had the same results with other keyword terms that were for a service one could only receive locally such as auto repair and doctor, but other terms like insurance or insurance agent did not produce the same results.

  27. Chris Wheeler says at

    This is a great post David. The way you have laid it out like risk is pure genius. In time we will obviously see whether this all comes true. Great Work!

  28. Dave Rodecker says at

    Great game setup.

    Cards now = iPhone, Droid, Vehical Nav System

    Too bad the locals-only network, CraigsList, can’t play.  Their unstructured land might be described as Atlantis. Perhaps one day they’ll take a token position with *paid* small biz ads and be relegated to Madagascar.

    Me; I’ll be in the space station with 15 scheduled overhead visits to each destination daily. Someone inform the SEC should the board be replaced with a Monopoly.

  29. Moritz Heinrich says at

    Now we have 4 years later and in my opinion Google is the winner.

    Facebook never startet the Local Ads successful the local campain.

    Bing and Yahoo have a poor market share. Do you agree?

Leave a Reply

You are here: Home > Blog > Local Search War Gets Hot: Facebook Joins Game