Broadband Consumers Make Local Search a Reality

I speak at and attend a lot of conferences, often billed as the “local search guy.” And people want to know whether local search will materialize or whether it’s a bunch of hype. I’ve been tracking this phenomenon since its inception several years ago and the short answer is: it was at one time but it isn’t any more.

Skepticism often confronts the advertiser side of the equation: how and when will small businesses adopt the Internet as an advertising medium in large numbers? The response to that question represents a long detour and the subject of a future article. The bottom line is that small business advertisers will be compelled to do so by consumer behavior.

To illustrate the point, I’d like to dig into some of The Kelsey Group’s most recent consumer data.

Two Studies: Then and Now
In September 2003, we conducted a telephone-based survey of 1,000 consumers to determine their attitudes and behavior regarding local media. Among many other questions, we asked consumers, “In the past year, which of the following sources of information have you used or referred to when shopping for products or services in your local area?”

That study found that traditional yellow pages, white pages and newspapers were the dominant sources of local information. The Internet was then in fourth position. A follow-up survey with 500 consumers earlier this year found that, remarkably, the Internet had moved into a tie for first position. The following bullets are the top-level findings of the most recent survey:

• Residential Internet Access: Home Internet access has increased in the 16 months since the first survey, from 67 percent of U.S. Internet households in October 2003 to 74 percent in February 2005. High-speed access increased from 42 percent to 57 percent.
• Search Growth, Broadband Key: Most of the Internet’s growth as a local shopping resource has taken place via major search engines, the usage of which increased from 47 percent to 55 percent. That growth came exclusively from broadband users; dial-up consumers used search engines less in the second survey than the first.
• Internet Use for Local: The reach of the Internet as a source of local information has increased from 60 percent of total households to 70 percent (equal to traditional newspapers). /li>
• Traditional Yellow Pages Usage: Printed yellow pages were rated very highly on providing the phone number of businesses and on finding a certain type of business within a specific location. However, traditional yellow pages use declined from 75 percent to 62 percent (in terms of reach).
• More Time Spent Online: There was an increase of time spent online by both dial-up and broadband users – an average of 10.8 hours per week, including both home and work access. Also, the number of people who do not use the Internet at all has declined. Among broadband Internet users, 51 percent said they are either spending “somewhat” or “considerably” more time online.

Accordingly, the Internet now features a local reach equal to or greater than any other medium. Most of the Internet’s growth as a local shopping resource is due to the rise of search engines. In turn, search engine usage is almost entirely a function of broadband Internet access.

We also asked consumers to rate the various media on a 10-point excellence scale. Among all survey respondents, traditional yellow pages were rated most highly, followed by newspapers and search engines in that order. However, among users who were “familiar with the source,” the Internet climbed to the first position, followed by print yellow pages and then newspapers.

There were also a number of questions directed at unearthing the circumstances and rationale surrounding local media usage (and word of mouth). For example, we asked people what local media sources they would use first and for what types of lookups. We also queried them about the sources that led them most directly to their purchase decisions in three categories: professional services, trade services and retail ($500 or more).

In all cases, the Internet moved up into the top or second position of influence. In particular, in the professional services category, “word of mouth” dropped from the top source to the third position in terms of “first source used.”

The Internet Flexes Its Local Muscles

Traditional yellow pages and newspapers remain powerful local shopping resources but have lost some of their reach. The Internet has emerged as a potent source for local business information. However, “the Internet” is itself a universe of numerous types of Web sites, including Internet yellow pages, online newspapers and search engines.

Search engines in particular – driven by broadband adoption – have shown significant growth. Yet consumers do not regard search engines as reliable sources for local information in all cases.

One should resist the temptation to see Internet adoption as a zero-sum game vis-à-vis print media. Use of the Internet does not mean that consumers have abandoned traditional media. But it does mean that their local influence has diminished somewhat.

These data broadly reflect that the local market is becoming more crowded and complex. The Internet introduces fragmentation that previously did not exist. That will only continue as more online competitors enter the marketplace creating greater complexity (and probably confusion) on the advertiser side – especially for small businesses.

Yet small businesses ultimately will have no choice but to find ways to get in front of consumers who are using the Internet to find local information.

Discuss this article in the Small Business Ideas forum.
May 31, 2005