Google Lures Local Advertisers by Subverting Its Own Search Policies

Two-City Test Takes on Yellow Pages With New Pricing System, Ad Model

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NEW YORK ( -- Google is experimenting with its deepest foray into local advertising and along the way is branching out from one of its most cherished philosophies of search advertising: the keyword auction.

In a bid to get more local advertisers to buy search ads, starting this week Google is trying out a new type of search ad and pricing system in the San Francisco and San Diego markets.

Rather than ask businesses to set up a campaign and bid for keywords, they're offering local advertisers (or non-advertisers) a search ad for a flat fee. The fee is set by Google and based on the average that similar businesses are paying for a given keyword in that market.

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The goal is to simplify search advertising for local businesses that may not want to bid on keywords or to set up and optimize a search campaign.

"When we talk to small businesses, they don't always want to know what an auction is, how to create an ad, or bid on keywords, it's complicated, so our goal has been to, 'How can we make this really simple for them where they just pay a flat fee per month,'" Susan Wojcicki, Google VP of product management, said.

Familiar model
It's a model much more familiar to local businesses, such as plumbers, electricians, hair salons and restaurants, or any local business that has advertised in the yellow pages. But Google is offering an additional perk: the option to link the ad to a Google voice number so they know which calls are being referred from the search ad.

Calls that come in via the Google Voice number are identified by what Google is calling by a soft "whisper": "This call brought to you by Google."

The voice number allows businesses that don't have websites -- and don't care about clicks or conversions -- the ability to track the performance of their ad.

"You get the benefits of simplicity and a simple startup but also the measureability of AdWords so we tell you how many visitors you got and what value you are getting for the investment you made," said Jeff Huber, Google senior VP of engineering.

The program has been live for two days in San Francisco and San Diego, and right now there are no immediate plans to expand it. Google isn't first to market with this; companies such as WebVisible and Marchex have been packaging search inventory and reselling it to local businesses for some time.

Improving relevance
But those companies aren't Google, which for many people has become the de facto yellow pages as it improves local search relevance. Google believes it could vastly expand the number of local businesses using AdWords by allowing them to easily convert an organic listing into a paid ad for a flat fee.

Max Kalehoff, VP of marketing for Clickable, said Google's move may address the tendency of local advertises to "churn," or start a campaign and give up on it for whatever reason. "Some businesses don't want to do search advertising; they just want to put a dollar in and receive phone calls," he said.

The new local ads come as Google is nearing the end of a top-to-bottom revamp of its search advertising system over the last six months known internally as AdWords 3.0. That system was first launched in 1999 and turned Google from a small startup against the likes of Inktomi and Altavista into a company that generates $25 billion in revenue, mostly from search advertising.

As part of the revamp, Google is trying to give more relevant results for local searches, which plays into its local strategy. A user who searches for a restaurant, for example, no longer has to specify where they are; that is determined by the IP address or browser, and relevant local results are returned, along with a map.

The experiment in flat-fee ads is part of Google's Local Business Center interface, which Mr. Huber said serves "over a million" small businesses worldwide.

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