The first part of this post can be found here.
Birth of Local Search Marketing
Local media providers didn’t have the expertise to create and manage the pay-per-click campaigns in scale, so they turned to newly formed “local search” companies as partners. In the early days of local search, the predominant product was a “guaranteed” traffic product that consisted of a contractual agreement to send a minimum number of clicks a month to the customer’s website and also send the customer an email confirming the number of clicks generated. The “guaranteed” product was easy to sell because there was no apparent risk to the customer because they would always get at least the number of clicks that was promised. The customer was happy because they were getting “visitors” to their websites. Behind the scenes though, the local search companies were having a difficult time delivering on the product.
The “Guarantee” Gets Difficult
Most of the PPC campaigns up to this point were managed by individuals or agencies with the focus on fewer clients and more media spend. The local search approach was an economy of scale effort where media companies were acquiring large numbers of clients with smaller PPC campaigns. Additionally, many of the new SMB customers were not within the largest cities but rather in smaller cities and towns and this created some unique challenges. The “guaranteed” clicks product was based on a promise of a fixed click quota per month. From the click fulfillment perspective, there were a number of serious challenges.
The first challenge was that although the click quote was fixed, the click cost to the local search company was not. Click pricing, as is the situation today, is based on supply and demand. Click prices fall when demand is low and supply is high and rise when the demand is high and the supply is low. When the “guaranteed” clicks product was first offered, it predominantly attracted certain business segments like dentists, roofing contractors, attorneys and other businesses with high dollar sales transactions. Many of these SMBs operated their businesses in communities outside of the largest cities.
This is significant because search inventory, the total number of relevant searches performed by consumers, is finite, meaning that it is limited in quantity or supply. This limited supply of relevant clicks was also geographically constrained, which means that relevant search traffic for a dentist, for example, may only be the surrounding community (let’s say a five mile radius). The relevant search traffic inventory (think available clicks) may be less that the guaranteed clicks quota or, at the very least, create a supply and demand problem that increases the click price to a point where the click fulfillment provide is not profitable on the product.
Challenged with search inventory problems, some local search companies turned to second tier search engine traffic to satisfy their click quotas to SMBs. During that particular time period, second tier search traffic was perceived to be of lower quality and less likely to convert into a sale for the SMB client. All of these issues contributed to the decline of the guaranteed traffic product which gave rise to the guaranteed “budget” product.
A discussion of the “Guaranteed Budget” product and the rise of contemporary Local Search Products will be forthcoming in Part 3 of this article.