Yellow Page Co’s Do Local Search Arbitrage For Fun And Profit

Having talked extensively with Google and Yahoo (and spent some time with the good folks at SME Global Solutions et al) about Local Search and its relationship with (online) newspapers & directories, I feel like I could write a book on this… but it’s late, and you don’t deserve that kind of punishment anyway.

So quickly:

– Agreed: Small businesses aren’t ready to adopt pay-for-performance SEM (local or web) in mass, as I’ve recently pointed out here ( announced), here (IAC Local Search), and here (what I learned at the last Kelsey conference).

– Agreed: A fixed price offering makes a lot more sense, and is easier to sell. (Though, if you follow the links above, you’ll find that I’d much rather see companies pushing pay-per-call and online-to-offline coupons to SMEs at this point in time.)

– Agreed: If I were a Yellow Page Co (IYP) or Newspaper Co, I’d be trying to figure out how to keep ahold of my customers as the search engine company onslaught heats up.

My main concern is with the value chain that gets built (from a Newspaper/YP perspective), which looks something like this:

Search Engine COs (note: plural, only to increase as fragmentation increases) –>

SEM interface aggregator (e.g., 24/7 Search) –>

Arbitrager, converts PPC to fixed price (e.g., SME Global Solutions) –>

Newspaper/YP Co –>


Guess what? Only the first and last entities will be needed in the future (especially when Advertisers realize that it’s not really that hard to manage your pay-for-performance spend and/or programmatic interfaces become the norm).

If anyone else remains in the picture, it’s probably the SEM aggregator, who makes dealing with a fragmented search engine marketplace much easier by abstracting the interface.

Of course, there are strategies for Newspaper Co’s and IYPs to deal (and even profit handsomely) from this scenario, but it requires a commitment to the dreaded “investment” and “development” words.

In the mean time, there are dollars to be had by taking the low road and setting the fixed price click fee well above the pay-for-performance bidded price… so long as one is careful with their approach to arbitrage…

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