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MIHMORANDUM
No. 653
August 20th, 2010


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Local Search War Gets Hot: Facebook Joins Game

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…