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Online Yellow Pages to Pump Local Ads?

Small biz is advertising online, begrudgingly.

A vast proportion of local ad spending goes into yellow pages directories. While a national yellow pages market exists, it will reach only $2.2 billion in 2007, compared with $12.4 billion going to the local pages, according to Universal McCann.

Internet yellow pages (IYP) might seem to be the most obvious online parallel to the traditional yellow pages, but that is not the way it turns out.

"When people use the Web to look for local retailers and service providers, they tend not to research by business categories as the print yellow pages are organized," said eMarketer senior analyst David Hallerman. "Instead, they go to search engines, which rely on keywords and are far less structured than a yellow pages index."

According to "The User Revolution," a February 2007 report from Piper Jaffray, the offline yellow pages and classifieds market—at $37 billion—shows the potential of local ad dollars. If only 20% of that budget shifts to the Internet, for example, that would add $7 billion to local online ad spending.

Research from The Kelsey Group supports the move from print yellow pages to search engines.

As reported in The Wall Street Journal in July 2006, "Only about 14% of US print yellow-Page [sic] advertisers—about 600,000—are currently purchasing online ads from the yellow pages as well … by 2010, the number is forecast to hit 1.2 million advertisers, or about 30%."

That translates to about $600 million for IYP revenues in 2006, nearly quadrupling to $2.3 billion by 2011, according to Kelsey.

By contrast, local paid search spending will likely reach at least $4 billion in 2011. At that point, some of the distinctions between IYPs and search engines will become increasingly irrelevant as advertisers buy "space" on both types of sites with a single purchase.

Other studies contradict the tendency away from yellow pages and toward search engines.

According to the JupiterResearch report "Local Advertising: Blending Categories to Compete Effectively," 59% of US local advertisers buy ads in print yellow pages and 45% go the IYPs, but only 26% engage in search marketing.

A JupiterResearch analyst told Ahorre.com that "[l]ocal marketers are not yet completely convinced about local search."

The article notes how "in part, this is because local advertisers are used to yellow pages advertising, which requires little work on their part."

Yellow pages ads have a strange place in local online marketing. Advertisers resist taking out ads, so Internet searchers get incomplete results. This begs a question: If local advertisers have no search ads, will they be found?

"That the target audience for local yellow pages advertising does more of its searching online is clearly a force pushing local businesses to advertise online, whether it be with the yellow pages, search, local directories or newspapers," Mr. Hallerman said.

Learn how small business ads make for big online sales. Please read eMarketer's Local Online Advertising: Measuring the Market report.

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