No. 97
May 29th, 2008

What Google’s ZIP Code Targeting Means for Local Businesses

“Super Target” by Daniel Greene

ZIP Code Targeting: A Tipping Point for Local Search?

Greg Sterling wrote a quick blurb last week that inspired quite a bit of discussion on his own blog, including from yours truly. For my money, news hasn’t made a large enough ripple among the general SEO community (and even the general public), though, so I want to follow up with a more in-depth response of my own.

The Cliffs Notes version of Greg’s post is that for generic searches like “pizza,” Google is now asking users point blank what their ZIP code is above the results that they return for that search. I surmise that for users that log in with their Google account prior to searching, Google already knows their ZIP code and is able to even skip this step of asking.

Why is Google doing this?

1. Better Results

I truly do believe that Google is seeking to return the best results for the typical user, first and foremost. The average user simply doesn’t know how to search very well yet. They use one- and two-word phrases without any geo-modifiers (like pizza parlor), when they’re actually looking for something in their general neighborhood (pizza parlor in portland oregon).

In the client Adwords accounts that I manage, it’s typical to see ten times or more search volume for generic terms than for geo-targeted terms. Google probably sees this ZIP code modifier as a way to better gauge the intent of a searcher, and rightly so.

1a. Keep Searchers on Google

In concert with the “better results” theme, this goes back to a point I made last year in The REAL Problem with Local Search that Google doesn’t want to promote organic listings that just take searchers to another search engine. These results are poorer quality (with Google serving only as an intermediary). The sites that rank organically for generic terms are by-and-large national directories and search engines. Google would prefer to keep the potential ad revenue those searchers represent to themselves, a concept I discuss more in the “What Does This Mean?” section below.

2. Alternative Ad Targeting

Yes, geo-targeted Adwords campaigns help capture that traffic. But if you’re a local business, let’s say Oliveto’s Restaurant in the Rockridge neighborhood of Oakland, trying to reach your main audience, the “San Francisco-Oakland-San Jose” metro area is about the best you can do right now. Now that Google has a firm handle on the ZIP code of a user, you could advertise just in the 94611, 94618, 94610, 94608, 94704, and 94705 ZIP codes which are going to bring you 80%+ of your business. You’re no longer paying for wasted clicks from people in San Jose or Burlingame who are never going to drive an hour and a half in rush hour traffic just to go to dinner. Your ad budget stretches that much further, and is that much more successful in its ROI.

What Does It All Mean?

Bottom Line: We’re going to see even MORE 10-packs integrated into Universal search results.

Greg’s post focuses mainly on the Adwords targeting implications of this decision, but the organic implications are incredibly significant as well: LOCAL Search has just broken into the GENERIC space.

Take “lawyers” as an example. Without any geo-modifiers, I get the bureau of labor statistics, Wikipedia (of course) and then more search engines like Martindale-Hubbell and Findlaw. But here’s what’s new: a 10-pack RIGHT IN THE MIDDLE OF THE SERP that has tried to figure out my ZIP code. Now, that 10-pack happens to be targeting the WRONG location for me, but there’s a nice little link that allows me to tell Google which ZIP code I actually want it to search (see below).

That search is a little different from “lawyers portland or.” Here we see a 10-pack in its more typical location, at the top of the SERP (I have a feeling the “lawyers” 10-pack will move to the top position fairly soon as well). There are still a smattering of other search engines for the geo-targeted search, but this time they’re things like SuperPages, CitySearch, and the specific Portland directory pages for Findlaw–dramatically higher-quality results. There are also four INDIVIDUAL LAW FIRMS that rank in the top 10 organic results, again, something they’d never have a chance to do for a generic term like “lawyers…”

…until now!

With the ZIP Code-Targeted 10-pack, Google is inflating the rankings of “Mom and Pop” for GENERIC terms and taking serious clicks away from competitors like SuperPages, Citysearch, and Yelp (and industry specific sites like Findlaw and Martindale-Hubbell).

Back to the “Why is Google doing this?” section, I’d like to add a hypothetical #3. Knowing the ZIP code pushes nationwide organically-ranked websites into Pay-Per-Click if they want to appear above the fold, and recover even a fraction of the traffic they once had before the 10-pack was introduced. I spoke about this hypothesis in the aforementioned “Real Problem with Local Search / Why Google REALLY Introduced Universal.” But now this effect is even more pronounced, given the 10x multiplier associated with generic terms vs. geo-targeted terms.

I’d also like to briefly reply to an insightful comment left by Sebastian Provencher on Greg’s post related to the 10-pack. I’ve LONG bemoaned the dominance of the centroid as a ranking factor in Local search. Google’s ZIP code “fix” has the potential to alleviate this weakness in its Local algorithm by creating a more relevant centroid for each searcher.

Hope you enjoyed reading & I’d love to hear everyone else’s thoughts about this development, which I think heralds a kind of “tipping point” for Local, in the comments.