Video Deep Dive: What Nearby Ads and Other Developments Tell Us About Google’s Monetization of Local
Mike Blumenthal


This is the 24th installment this year of our Deep Dive Into Local series. For the week ending Monday, June 20th, Mary Bowling and Mike Blumenthal shared their thoughts about the previous week in local. The complete video, including links and commentary on critical happenings of the previous week is posted in the Local U forums (paywall). In the second half of that video, they take a deeper strategic and tactical dive into one interesting area that caught their attention during the week.

In this discussion Mary and Mike talk about the implications of Google’s Nearby ads and their aggressive mobile local monetization strategies.

Mike: So with that, I want to switch into our Deep Dive. I have three or four pieces of news about AdWords I wanted to cover. Some of them are directly and some of them are indirectly related to the deep dive. The first one is a very interesting article at about how a career con man led Federal investigators to bust Google’s selling of, promotion of AdWords sales into the pharmaceutical industries, even when employees knew it was illegal. And this happened time and time again. So they, the FBI, hired a con man who used to run these steroid websites from Mexico, and by reducing his sentence, convinced him to convince Google to repeatedly violate the law on selling AdWords. It was a great article. So if you just want to see how focus on corporate profit can circumvent moral righteousness, it’s a great article.

Joy had a related article, too, and she is seeing some search results for the Local Pack, where Google is removing the call buttons. Because previously, many of the Packs removed the driving direction buttons, and with the removal of the call button now, the user on the Local Pack needs to dive into the Local Finder to get the additional information they need to actually consummate the sale.

And then a third related tidbit was the ClickZ article where they analyzed the most expensive AdWords keywords in the United States. What was interesting to me about that was most of the 100 top keywords were local in nature. They were frequently around lawyers — a Dallas truck accident lawyer was $425 a click. Water damage was about $250 a click. And they were all typically local — car insurance, Philadelphia was $230.

And so, with that, the interesting breaking news that I discovered Friday while I was in Seattle at SMX, I saw an ad, what’s called a Nearby Ad. It’s a new ad display. I did a search on chiropractors Seattle and I was searching at 4:35 in the afternoon. And what we saw was a traditional 3-Pack display with small nearby ads at the top, just the one indication. Historically, we’ve seen each ad that indicates its ad. This was just an ad at the top of a 3-Pack, and they each had the driving directions and the website call-to-actions on them, which we noticed were just being taken away on the test by Joy. And they were very contextual.

I learned after searching an hour later that if the business was no longer open, these ads stopped showing. So they only showed if they were in proximity to the searcher, and they only showed if the business was still open. Adding more complex criteria to the already complicated AdWords’ relevance scores, quality scores, etc., and pricing and then adding time open and location to that.

What I saw was when I analyzed that 3-Pack versus the actual 3-Pack that was delivered — the actual 3-Pack had a radius of about 2 miles from the searcher to the most distant result, whereas this had a radius of 17 miles to the most distant, but one of them was only 1 mile away.

So one conclusion I came to was that these currently, for a lack of inventory, might have a larger radius. But that as Google develops more inventory on these, I have this sense that the radius will reduce much like Local Pack has reduced with Pigeon. It also gives Google this incredible ability to segment the ad world to create more opportunities for inventory in very limited markets.

And what we see with this pricing analysis is sometimes that those bids go totally crazy. So that conclusion here, I think maybe we can discuss these, but one conclusion is Google’s ad income is going to go up. And the other obvious conclusion for practitioners is that you need to develop — if you want to continue to be successful with Google, you need to develop a cost-effective, locally-focused AdWords display or move into something else.

Mary: Yeah, one of the things that really struck me about that ClickZ study was that they published the top 100 most expensive keywords, and even the least expensive one was over $200 a click.

Mike: Right.

Mary: And the fact that they’re shrinking the number of places people can appear without paying for ads and doing things that increase the competition, which of course drives the price, cost per click up. You know, I think that we truly are approaching a total paid Local Pack. And I know we have argued about this in the past.

Mike: Well, and, you know, last week at SMX, Joy did also report that Google said that they would actually be selling the first place in the Local Pack, as well.

Mary: Yeah, and with hotels…

Mike: And that’s in addition.

Mary: …they’re selling two places. So I just think that they’re easing people into a totally paid Local Pack. And that you’re not gonna be able to see anything on that first page of Google that isn’t a paid ad.

Mike: It’s for relevance. It’s for the consumer. It’s for…let’s see. What are all the reasons we hear?

Mary: Don’t be evil. Don’t be evil.

Mike: Profit isn’t evil. This is capitalism, Mary. Profit is moral. Profit is the highest form of success.

Mary: So just make sure that you own a good amount of Google stock, I guess.

Mike: There you go. That’s how you hedge this play in Local, right?

Mary: That’s right.

Mike: Buy Google stock. Well, I think their stock has…you know well, clearly their stock has gone up in the last couple years. And I think their income will continue to rise as they find more and more ways to monetize more and more of that search result. Now, the question becomes, at what point do people turn away from that search result?

Now, Google’s doing more to attract people back to the search result. We talked about this last week. With their apps, instant apps in search results, for example where they become a presentation layer of the internet. So search becomes almost an application in and of itself at the same time. So it’ll be an interesting sort of tension between Google’s effort to bring more functionality to the search results, and their desire to generate more profit from those search results. And the question becomes … will that tension make them less than appealing to consumers at some point? And will they shoot themselves in the foot?

Mary: Yeah. And then they have the whole issue of, you know, the FCC and the European Union, and the whole monopoly thing going on, which is what kind of shocks me that they’ve pushed things this far already. It’s almost like they’re asking to get slapped down.

Mike: Well, this nearby ad was so… I really question how it could possibly comply with Federal Trade Communication requirements that ads are just clearly marked. I mean, it was a little notation at the top. Each of the individual ads were not marked like they are currently. I don’t see how it could possibly comply with the requirements. So there’s that as well. Although, one could argue that if they have a right to put their paid stuff there and then they could get rid of the Pack all together and let Yelp have all that space below, right?

Mary: That’s right.

Mike: And that’s the way they could satisfy Yelp. Just make the top 10 results paid and then Yelp is number 11. This is what they’re saying to Yelp, right?

Mary: Exactly.

Mike: Alright. Anything else to add to that?

Mary: No.

Mike: Alright. With that, I think Mary and I will say goodbye. Thank you very much. Thanks for joining us.

Mary: Thanks everyone.

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