How to Profit From Mobile Local Search
Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Mobile local search, or internet searches conducted using a mobile device, provides people not only with a list of local business locations, but also customer reviews. An integral part of algorithms for measuring the popularity of websites, Google (NASDAQ: GOOG) and other search engines like Yahoo! (NASDAQ: YHOO) and Bing, owned by Microsoft (NASDAQ: MSFT), use customer reviews in part to determine web page rankings. High rankings (based on the number of positive reviews) can translate into more sales and revenue for local businesses. Those with lower rankings may see a decline or no change in revenue or popularity.
Not only does mobile local search help customers find businesses such as restaurants, movie theaters, bars, and other retail outlets easily, this service also helps search engines and websites that provide a platform for customer reviews generate additional profits - this market could grow into a $5.8 billion dollar industry by 2016.
In its third quarter 2012 earnings report, Google announced that revenues from online advertising totaled $11.53 billion - a 19 percent increase from this time last year. Google also reported $14.10 billion in total sales/revenue for this quarter - a 45 percent increase over last year.
And while it's difficult to know exactly how much mobile local search contributed to increased revenue for the company, Google has stated that 50 percent of mobile search conducted by its customers is local.
Yahoo! reported third quarter 2012 sales/revenue from online search totaled $473 million - a one percent increase from this time last year. With total sales/revenue of $1.2 billion for the quarter - a 1 percent decrease from last year, Yahoo! has seen less success with mobile local search than Google.
Microsoft reported third quarter 2012 sales/revenue totaling $697 million from its Online Services Division - a nine percent increase from last year. Microsoft also mentioned that online revenue from search has grown 15 percent mostly due to an increase in revenue per search. Overall, Microsoft earned $16.01 billion for the quarter.
Even though Yahoo! and Microsoft trail Google in profits from mobile local search, both companies have seen an increase in revenue which means local search continues to remain profitable.
Local Search Websites
In addition to browsing search engines, people can also visit websites like Yelp (NYSE: YELP) and Foursquare to find local retailers or to read the latest reviews. To remain competitive, Foursquare recently created its own internal search engine to help people find exactly what they're looking for in less time. Yelp, which had cornered this market for a long time, continues to improve its website with new and interesting ways for reviewers and readers to interact with each other, but may have to alter its business plan to attract more users looking for specific information about a business location.
It seems that there are two emerging groups using mobile local search - those that want to read reviews and those solely looking for information about a business. Merging these two demands on one website will take time as local search companies must find a way to do so without disrupting current operations.
Local search websites generate profits in similar ways as Google, Yahoo! and Bing - by offering advertising space for businesses to promote goods and services. Other local search websites like OpenTable (OPEN) charge restaurants to list in its directory. Customers can find and reserve a table at restaurants through the site and receive discounts when using the service often.
With the emergence of mobile technology, more and more people now use mobile local search options to find local businesses. For businesses, advertising and maintaining positive reviews has become a larger part of overall marketing campaigns.
Business Promotion Through Local Search
In the old days, customers relied on phone books and word-of-mouth to find great local businesses. Now, customers can easily find a business, determine hours of operation, make a reservation and read reviews by other customers. Businesses that receive mixed or bad reviews may see web page rankings slide and a decline in patronage. Companies like ReviewBoost help businesses maintain or improve web page rankings by contacting satisfied customers and performing surveys which become positive reviews.
Competing for web page relevance can only take a business so far, however. Providing quality customer service and great products helps increase good reviews. Unfortunately, for some businesses, bad reviews may overshadow good ones simple because those with complaints uploaded reviews while those that had a terrific experience may not voice their opinions. ReviewBoost hopes to even the playing field by finding customers that had positive experiences and encourage them to share their stories.
Mobile technology not only helps those living in a specific area find new hot spots, but also helps business travelers and tourists find places to eat, relax, or create memories with family and friends. With limited time to impress customers, search engines and review websites must make it as easy as possible for customers to find what they're looking for. This is where competition leads to innovation.
In the past, search engines offered detailed maps showing the location, hours of operation, and reviews of local businesses. With the growing popularity of review websites, search engines have created their own places for customers to post reviews. Google relies on its social media site Google + to inform customers about local businesses and encourage others to leave reviews. Yahoo! and Bing each have their own review websites - Yahoo! Local and Bing Local.
With multiple resources, customers can read reviews from one or more websites to make informed decisions.
Investing in Google, Yahoo!, and Microsoft
Google continues to dominate the search engine market and will continue to do so even with increased competition from websites such as Foursquare and Yelp. Google investors should hold onto this stock as Google will remain a strong player in the online search market. According to comScore, Google now controls 66.7 percent of the market.
Yahoo! has struggled to find its place in online search. With only 12.2 percent of the online search market, the company has some work to do if it wants a bigger piece of the pie. Investors should continue to monitor the stock and maybe consider buying into other companies such as Google or Microsoft which controls 15.9 percent of the online search market.
StockCroc1 has no positions in the stocks mentioned above. The Motley Fool owns shares of Google and Microsoft. Motley Fool newsletter services recommend Google, Microsoft, and Yahoo!. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!