SMBs and SEM Churn

Once upon a time in the world of advertising, life was simple. If you were a brand, the fastest way to reach the biggest consumer audience was through TV. That’s still true though TV is no longer as effective in getting consumers’ attention.
With High Churn, Local SEM at a Crossroads

Once upon a time in the world of advertising, life was simple. If you were a brand, the fastest way to reach the biggest consumer audience was through TV. That’s still true though TV is no longer as effective in getting consumers’ attention. If you were a local, small business (SMB), the parallel imperative was to buy print yellow pages. Though SMBs sometimes grumbled at pricing, the yellow pages indisputably delivered value.

Enter the New Digital Reality

Along came the Internet and broadband and the result is the messy fragmented media marketplace we have today – only getting more fragmented with mobile. It’s now very challenging to reach consumers and even harder to maintain their attention. Advertisers large and small are still trying to figure out and navigate this relatively new reality.

Traditional media still deliver value but not at the same level as before. The Internet offers theoretically precise audience targeting and broad reach, but also complexity not found in traditional media. This complexity and the related fragmentation confounds even sophisticated advertisers who, for example, have yet to master “social media” despite the enormous popularity of sites like Facebook and YouTube.

SMBs, for their part, are often confused and even terribly frustrated by the complexity of marketing in the digital era. According to an August 2008 Opus Research/ small business survey, confusion, lack of budget and lack of time or personnel are among the reasons a clear majority of SMBs don’t advertise online:

Source: Opus/ survey (survey base 1,000, question n=615)

SMBs have clearly been much slower than their customers to adopt online marketing. And some even maintain the fallacy that the Internet is “not relevant” to their business. Some of the answers in the graphic above reflect a lack of understanding of how the Internet is used by consumers.

The massive SMB market in the US has always been a very attractive target for online publishers and ad networks from the earliest days of the Internet. But the difficulty of reaching SMB advertisers has resulted in development of the current “local search ecosystem” – an awkward set of alliances between traditional (mostly yellow pages) publishers, local search marketing (SEM) vendors and search engines, among a few others. It all works “on paper” but in practice it may be breaking down.

BellSouth and “Local SEM”

In late 2003 or early 2004 BellSouth (now part of AT&T) introduced a product that offered to put SMBs on search engines in addition to the publisher’s own yellow pages site. It was in essence a simplified SEM offering geared specifically to SMBs who wanted to “be on Google,” but didn’t know how. That became the template going forward.

Search engines, unable to acquire large numbers of SMB advertisers directly through self service, turned to established “sales channels” such as yellow pages publishers that could use their “feet on the street” sales reps to reach local businesses. Yellow pages publishers, seeking more traffic than their sites were generating and to prevent potential advertiser defections, all developed similar products: local SEM offerings.

Rather than explaining keywords and bidding strategies, the sale to the SMB was simplified by offering “guaranteed clicks” for a fixed price. That original model has evolved in most cases. But what it permitted was an easy “close” by the sales rep. The complexity of search marketing — setting up and managing a paid-search campaign – was totally outsourced and hidden from the local business. The search engine got ad dollars it might not have otherwise and the publisher kept the advertiser. The publisher-partner/vendor got the headache of fulfillment and managing the campaign itself. This is quite common.

A Perfect Solution That’s Breaking Down

Though a theoretically perfect solution for all players, these local SEM offerings are starting to break down in some cases. There are lots of companies operating in the space and having varying degrees of success. Let’s be clear: what I’m saying doesn’t apply equally to all players in the segment. But in more than a few cases, Local SEM churn rates are between 50% and 100% on an annualized basis.

What that means as a practical matter is that half to all of the SMB advertisers signing up for these local SEM programs are leaving them before the year is out. In some cases, it happens after only a couple of months. In investigating what’s going on, I’ve been offered several explanations by a number of parties in the segment:

Local advertisers are not being properly educated about SEM and expectations are not being properly set accordingly
Not enough time is being allowed by the SMB to optimize campaigns
Sales reps are rewarded according to sales figures only and not retention numbers
Not enough of the advertiser spend is going directly to media (search) buying, which diminishes the performance of the campaign
Beyond this, the margins for publishers and vendors are thin and nothing like the 50%+ margins of traditional print media. Accordingly yellow pages and some online publishers such as Citysearch are forming direct alliances and trading traffic to start to minimize their direct dependence on search engines and SEM. More broadly publishers and sales channels are seeking to diversify qualified traffic sources to get more and better traffic for less money.

I see this and other related moves in the market as a partial breakdown of the local search ecosystem alliances that formed over the past few years around simple products (i.e., guaranteed clicks) as a way to bring more SMBs online and solve common problems.

The Next-Generation Products

Let’s assume for argument that many of these local SEM products now being sold are unsustainable, what will take their place? After all, the Internet isn’t going away and SMB advertisers can’t return to an all-print strategy.

The challenge for everyone focused on the local space is creating products that can scale, deliver healthy margins and, especially, provide real value to SMBs. But most of what’s in the market today fails in one or more of those areas.

More sophisticated versions of existing SEM offerings that reach broadly into more traffic sources are starting to emerge. And a growing number of SMBs may be able to manage their own marketing on places like Facebook and Twitter because of their relative simplicity. Yet the majority of SMB advertisers will still need help and want to outsource their online marketing to trusted third parties. Accordingly there’s still plenty of opportunity to get the products right and deliver better value to local advertisers.

The marketplace isn’t getting simpler; it’s only getting more complex.

See for more content on local marketing

Google Maps Optimization

Google Maps Reaches Out to Small Businesses
I received an interesting invitation yesterday from the Google Maps team.


They are reaching out to local small business owners hosting an event in San Francisco city hall called “Favorite Places – Celebrating Local Businesses.”

This is the first event like this that I’ve seen from the Google Local Business Center. Given some of the trouble that small business owners have had communicating with Google about issues with their local profiles, I’m hoping this is the beginning of a broader outreach effort by Google to local business owners.

Google Favorite Places event invite
Many small business owners that have set up a nice profile in the Google Local Business Center have really come to depend on the traffic and customer inquiries generated from their local profiles and related search results in the Google 10-Pack.

But when problems happen – I know several local business owner who’s profiles were mixed up with other businesses – there is almost no way for them to get the issues corrected.

As many of my colleagues have pointed out, Google is providing a very valuable service here, but business owners need better communication and support from Google.

Let’s hope this event is the beginning of a new “proactive” outreach program by Google to small business owners!

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Tags: Google Maps, local business center

This entry was posted on Wednesday, July 8th, 2014 at 11:54 am and is filed under Google Maps, Local SEO. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
2 Responses to “Google Maps Reaches Out to Small Businesses”

JoyfulLocal says:
July 8, 2014 at 12:19 pm
In addition to being a good opportunity of communication for business owners and local SEOs, it looks like Google really started seeking for some advertising revenue from local search too.

It’s also interesting how this event is scheduled 2 days before the Local Search Summit. This conference will have a lot to talk about for sure! Exciting!!
Mal Milligan says:
July 26, 2014 at 11:03 am
My biggest problem with Google Local Business listings is dealing with multiple listings for the same client. Google generates local listings automatically when they find citations from trusted authorities. I had a client who had 5 different listings to his one website. It took Google 9 weeks to remove the first “duplicate place” after I tagged it as such. I do hope they reach out better, but better yet, I hope they listen better when a SMB or an SEO tags a duplicate listing. Getting your company listed above the fold for free is and incredible deal. I’ve had clients get as many as 2,000 impressions a month – totally free with Google Local

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