SEMPO yesterday released a “POV” white paper that seeks to orient search marketers to the growing mobile market, mobile SEO and mobile paid search in particular. It cites the dramatic growth of mobile web usage and anticipated future growth in arguing that search marketers now need to take mobile seriously. Developed by SEMPO’s Emerging Technologies Committee, the report asks (and seeks to answer) several key questions:

• What mobile channels are available to search marketers and which show the most promise?
• What are the prospects for search, particularly local search, on mobile devices, and how is the landscape changing?
• What steps can marketers take to effectively target and reach consumers using mobile?

The report generally advises:

• Create usable content designed around the specific wants, needs, and usage patterns of mobile consumers.
• Redirect users to that content via SEO and paid search efforts calibrated to the smaller screen real estate available on mobile devices.
• Location, location, location: remember that mobile is about location, specifically where the mobile user is at any given moment.  Take into account  the specific behaviors and needs that accompany on-the-go Internet access when crafting advertising messages.
• Brands that value their site stickiness and hard-earned search equity should create versions of their desktop Web content synthesized specifically for the wants and needs of the mobile user.
• Marketers need to segment the market by demographics and mobile device traffic.  Mobile is not a one-size-fits-all proposition.

Overall it’s a very helpful primer on mobile marketing and search marketing to mobile device users, for those just starting to think about it. The report provides concrete best practices advice, identifies challenges and differences between mobile and PC SEO and paid search. It also segments the audience by device and demographics.

Earlier this year, SEMPO released its annual findings on the State of Search Marketing, based on data collected in December, 2008. It found that just under half of survey respondents were interested in mobile search marketing. There was also a mixed picture in terms of location targeting on mobile devices. I suspect these numbers would be much higher just nine months later.

At SMX East there will be several panels directly or indirectly addressing mobile, with one directly about mobile search marketing.

First to pounce on the SEC 8-K filing by Yahoo was PaidContent, which provides an extensive bulleted list of many of the deal terms not revealed last week during the frenzy of conference calls and articles that followed the official announcement of the Microsoft-Yahoo search deal. CNET also writes about selected aspects of the deal contained in the filing, specifically an “escape clause” (termination) for Yahoo (see below). And the AP has a short piece on how the deal terms require Microsoft to hire at least 400 Yahoo employees.

Here are some verbatim excerpts from the SEC filing:

Negotiation and Execution of the Definitive Agreements

Pursuant to the terms of the Letter Agreement, the parties will negotiate and execute the Definitive Agreements as soon as practicable but in any event by October 27, 2009 (the “Negotiation Period”). If the Definitive Agreements are not executed during the Negotiation Period, the parties will submit any disputes regarding the final terms of the Definitive Agreements to an arbitration panel.

Conditions to Commencement and Termination Prior to Commencement

Prior to the Commencement Date, the Letter Agreement and Definitive Agreements may be terminated only by (a) mutual consent, (b) if a breach renders a condition incapable of being satisfied by the Termination Date (as defined below), or (c) if the conditions to commencement have not been satisfied by July 29, 2010 (the “Termination Date”); provided that Yahoo!, in its sole discretion, has the right to extend the Termination Date by six (6) months if the required antitrust approvals have not yet been obtained.

Search and Advertising Services and Sales Agreement

For a period of ten (10) years beginning on the Commencement Date (the “Term”), Microsoft will be Yahoo!’s exclusive technology provider for algorithmic and paid search services and Microsoft will provide contextual advertising to Yahoo! on a non-exclusive basis. Yahoo! will be the exclusive worldwide relationship sales force for Yahoo!’s and Microsoft’s premium search advertisers.

The services provided by Microsoft under the Search Agreement will be provided on all web sites, applications and other online digital properties owned or operated by or on behalf of (a) Yahoo!, Yahoo! subsidiaries and Yahoo! joint venture relationships, as well as on software applications developed or distributed by Yahoo! or Yahoo! subsidiaries that provide access to or enable algorithmic search services or paid search services (“Yahoo! Properties”) and (b) Yahoo! Syndication Partners (as defined below), as well as software applications developed or distributed by Yahoo!’s Syndication Partners that provide access to or enable algorithmic search services or paid search services from Yahoo! (“Syndication Properties”). “Syndication Partner” means a third party with whom Yahoo! has contracted to provide algorithmic search services or paid search services.

Subject to certain specified restrictions, Yahoo! will have full flexibility with respect to the user experience, content and look and feel on all of its web pages, and will also be entitled to use the paid search services and algorithmic search services for non-internet search queries with minimal restriction . . .

Microsoft’s mapping services and mobile search services. Yahoo! may implement each of the mapping services and the mobile search services on a non-exclusive or an exclusive basis. Yahoo! also has the option to work with Microsoft to implement the services on other platforms. If Yahoo! elects to receive services for other platforms, it must receive such services on an exclusive basis.

Revenue Share Payments and Other Payments

During the first five years of the Term, Yahoo! will be entitled to receive 88% of the net revenues generated from Microsoft’s services on Yahoo! Properties (the “Revenue Share Rate”). Yahoo! will also be entitled to receive its share (at the Revenue Share Rate) of the net revenues generated on Syndication Properties after the Syndication Partner’s share of net revenues is deducted. For new Syndication Properties during the Term, and for all Syndication Properties after the first five years of the Term, Yahoo! will receive its share (at the Revenue Share Rate) of the net revenues generated from Microsoft’s services on Syndication Properties after the Syndication Partner’s share of net revenues and certain Microsoft costs are deducted.

On the fifth anniversary of the Commencement Date, Microsoft will have the option to terminate Yahoo!’s sales exclusivity for premium search advertisers. If Microsoft exercises its option, the Revenue Share Rate will increase to 93% for the remainder of the Term, unless Yahoo! exercises its option to retain its sales exclusivity, in which case the Revenue Share Rate would be reduced to 83% for the remainder of the Term. If Microsoft does not exercise such option, the Revenue Share Rate will be 90% for the remainder of the Term.

Microsoft will also pay Yahoo! a payment of $50 million annually during the first three (3) years of the Search Agreement. Yahoo! may use these payments to partially cover transition and implementation costs not otherwise covered under the Search Agreement.

Termination Provisions

Yahoo! may terminate the Search Agreement if the trailing 12-month average of the RPS in the United States (the “U.S. RPS”) of Yahoo! and Microsoft’s combined queries falls below a specified percentage of Google Inc.’s (“Google”) estimated RPS measured on a comparable basis or if the combined Yahoo! and Microsoft query market share in the United States falls below a specified percentage; (d) on the fifth anniversary of the Search Agreement, and any time thereafter, Yahoo! has the right to terminate the Search Agreement if the trailing 12-month average of Yahoo!’s U.S. RPS is less than a specified percentage of Google’s estimated RPS; or (e) subject to exceptions, either party may terminate if a law, regulation or order would have a significant, adverse impact on a primary aspect of such party’s intended benefit of the Search Agreement.

Transition and Implementation Plan

Microsoft will hire not less than 400 Yahoo! employees (the “Transferred Employees”) and will offer the Transferred Employees market competitive compensation packages. In addition, Yahoo! and Microsoft will mutually agree on a retention plan to be paid for by Microsoft to assist in retaining the Transferred Employees and an additional 150 Yahoo! employees to be mutually agreed upon between Microsoft and Yahoo! to assist with providing the transition services.

The deal seems broader than the “web, image and video” search scope we heard before. Yahoo can terminate the deal if certain targets aren’t meet surrounding revenue per search, benchmarked to Google. At the five year mark the parties can change who runs “premium sales.” The rev share percentages change accordingly.

On a related note, there’s an opinion piece in the Wall Street Journal that argues these terms give Redmond a bigger win than Yahoo in Microsoft CEO Steve Ballmer’s “win-win” scenario but that, in the larger scheme of things, Google may have already won the game:

The deal is a clear win for Microsoft and a qualified win for Yahoo. The big question is whether it makes any difference in the only contest that really matters, which is the one with Google. The risk for both Microsoft and Yahoo is that the contest is already over. Second place won’t really matter, especially as the competition shifts to Microsoft’s home turf: operating systems.

Related coverage:

• It’s Finally Official, Microsoft & Yahoo Make A Deal, Yahoo Gives Up On Search
• Live Blogging The MSFT – YHOO Search Press Conference
• Microsoft-Yahoo Deals 2008 & 2009, Side-By-Side
• A Search Eulogy For Yahoo
• Micro-Hoo Details: Q&A With Mehdi & Schneider
• The Microsoft-Yahoo Search Deal, In Simple Terms

Tim Cohn tipped us to his blog post about the end of Google’s Business Pages for Mobile Ads product. When logged into his AdWords account, Tim found this alert:

“AdWords Business Pages for mobile ads are being retired. As the first stage, you will no longer be able to edit your mobile Business Page after March 23. Please make any necessary changes before that time.”

Business Pages for Mobile Ads was a free service tied into mobile ad campaigns, and it included a “wizard” to simplify the creation of mobile business web pages. Google launched the service in November, 2007.

Tim suggests in his post that low usage may have contributed to the decision to end the service. Greg Sterling says in an email that it may also be a case of Google no longer seeing these pages as necessary over the long term.

Google has announced new mobile advertising options to target the iPhone, G1, and other mobile devices with full HTML web browsers.

Advertisers can now create separate campaigns that are targeted specifically toward mobile searchers with smart phones. You can write mobile-specific ads and get performance data separate from your other AdWords campaigns.

This new mobile targeting is turned on by default for current AdWords advertisers. To throttle it on or off, look for the “Device Platform” option of the “Networks and bidding” section on the “Campaign Settings” page in your account (shown above). A checkbox lets you turn this mobile targeting option on or off. Barry Schwartz reported on this about 10 days ago on Search Engine Roundtable, when some advertisers began seeing the new option in their AdWords accounts.

Not long ago, Google rolled out its “Geolocation API” (via Google Gears). Initially it was intended to enable third party publishers and developers to get location for their apps on mobile devices using a combination of the phone’s inherent location-awareness technologies (i.e., GPS) and Google’s cell-tower database (which has been expanded now to include WiFi locations). However it also works for destkop browsers, provided that Gears is installed on the computer.

Here’s the Google Code Blog discussing the impact:

When we originally proposed the Gears Geolocation API our goal was to make it easy for developers to deliver location enabled web sites on mobile phones. However we realized laptop users would benefit from location enabled web sites too. Today we are adding WiFi signals to the Geolocation API so that laptop users can benefit from location enabled web sites for the first time and mobile users from the increased accuracy. And because the Geolocation API is the same for developers in both desktop and mobile browsers you can even use the same code on both platforms!

In Chrome and Android, with Gears built in, you can deliver a location enabled web site without requiring your users to install a plug-in, but in other browsers they will need to go through a simple plug-in install process. We also submitted a simplified version of the Geolocation API as a WC3 specification and the upcoming Firefox 3.1 plans to support the W3C version directly. The Gears Geolocation API is completely free to developers and users through the default Google location provider.

So what does all this mean? We know about location-aware content and services and their potential in mobile. But what about on the desktop?

It essentially means that developers can tap into location and create more locally relevant versions of their sites or provide locally relevant information without requiring the user to enter location. There are some hoops here though: the user must have Google Gears installed in most cases. This is not true for Chrome users and will not be true for users of the next Firefox browser update 3.1.

If Gears is not installed, users at some point in the process are asked to install it. Then they are asked to opt-in and share their location. There’s essentially a double opt-in process. Google will ask if you want to share location and the app/publisher online will do the same. This is quite cumbersome right now, but as these technologies move directly into the browser, as with Firefox and Chrome, users will just need to allow sharing of their location. Ultimately it will be very much like location sharing on the iPhone.

Yahoo’s FireEagle does this already on a “manual” basis: users tell FireEagle where they are (much like updating one’s Facebook status) and third party sites can tap into the API and get access to that information. Sprint’s (Clearwire’s) new WiMax ISP Xohm provides location-specific content to users on a default homepage. And Skyhook Wireless’ Loki toolbar has been providing locally tailored content for a few years.

Let’s just say that within a year location awareness to within 200 meters (or less) will be available through most desktop browsers to publishers — and advertisers. The current IP targeting methodology used by Google and Yahoo for AdWords and Panama will be replaced with much greater location precision. It will make that customized location map in AdWords a real thing. Targeting will become available by neighborhood and not just DMA/City (Yahoo just added Zip-Level targeting).

This will be easiest for AdWords where end users are on Chrome or Firefox, but it will eventually come to IE as well. Users will need to enable location on the browser but then the ad platforms will be able to tap into that location, serving much more locally targeted ads (provided advertisers create them). This will also be possible for display advertising as well.

I’ve argued in the past that once location-awareness on the desktop gets to the neighborhood level, you get to tap into US Census and other public data (which could be incorporated into AdWords or Panama or adCenter) to allow for demographic targeting on a national scale. This represents — and I’m speculating about where all this will go — a potentially radical transformation of the current state of online and search geotargeting.

Imagine that an automaker like BMW wanted to target its demographic online — I’m guessing 25 to 50 year olds in upper income segments — it could now do that through a search campaign with a high degree of reliability. (Forget about the current AdSense demo targeting.) BMW could bid on all the same BMW brand and generic terms, but those ads could be restricted to users in specific geographic areas, tied to the neighborhood-level Census data (income, age, education, etc.). In other words, it would become possible for BMW to select the audiences to whom it wanted its ads exposed on a national scale (upon the right query triggers) and the system would use the coming improvements in location targeting, assuming the incorporation of Census and other related data, as a way to reach those audiences.

In other words, the same search term(s) list might trigger a BMW ad for one user in location A and no BMW ad in location B. Here’s another interesting scenario, this time with GM. It could show an ad for a car in a certain price range to a person in location A and a different ad for a high-end model in another location. These different ads could both be triggered by the same keywords, but the location/demographic data would determine whether to show the ad at all or which ad to show. You can obviously see the marketing power here.

It would operate largely as conventional direct mail does today (which uses Zip-level lists and neighborhood profiles). And all this would be enabled by more precise location targeting vis-a-vis the browser, as described above. Would such as system be foolproof? No, clearly not. For example, what about work locations where there’s no Census data about audience composition? It also requires better location awareness to be implemented in the browser first and then requires the search ad platforms to incorporate the Census and other data, tied to location.

Nonetheless, this is where I see these geolocation improvements taking the market. They open up a potential revolution for search (and brand advertisers’ use of search) — all tied to better location targeting.

There is a belief, held by many, that there is a bright future for ad-supported or subsidized mobile services. Google’s CEO Eric Schmidt floated this idea as far back as November 2006. Now, the long-delayed Blyk in the U.K is live and MySpace in the U.S. has announced an ad-supported model (and a richer subscription model) for a mobile version of its application in an effort to attract usage.

Blyk is a mobile operator aimed at 16-24 year olds and will offer a limited number of free, ad-supported minutes and text messages. According to the site:

When you join Blyk you get a free SIM with 217 free texts and 43 free minutes, to any UK network. Sounds good? Well it gets better, because every month Blyk refills this SIM and, like magic, your free balance returns to 217 texts and 43 free minutes.

If you want to text or talk more than that, you can top-up at 10p/text and 15p/minute.

Virgin Mobile has had a similar experiment going on in the U.S. since last year. Free minutes are earned by looking at or interacting with ads. I’m unaware of how this has performed, but it clearly hasn’t set the world on fire.

There’s varying data on user attitudes toward and acceptance of mobile advertising. The Blyk offering is aimed at a segment that is likely to be more receptive to the model and willing to watch (or pretend to pay attention) to the ads than older or business users.

Earlier this year Ingenio released mobile survey data (collected by Harris), involving approximately 4,000 U.S. adults, showing that a majority of consumers (70 percent) could not remember having seen (or heard) mobile ads within the past year. For the 30 percent of mobile users who had received a promotional message or ad of some sort, a full 95 percent either deleted the ad or ignored it. By contrast, 5 percent took some sort of action.

But there’s other data that argues users are receptive to “relevant” ads on their mobile phones.

The outlook for mobile advertising will be on the agenda at SMX Local & Mobile next week in Denver. If you still haven’t registered, you can do so here.

Postscript: In a related story appearing in the New York Times, a company called Pudding Media is going to offer free, ad-subsidized calling via the Internet (like Skype), using technology to eavesdrop and offer contextually relevant ads based on the content of the conversation. Think of it as like what Google is doing with text ads in Gmail. However, this seems quite a bit more intrusive. But the company, according to the article, says it is not collecting data on individuals. Eventually, the company will extend the technology to mobile phones.

Google recently opted-in many of their clients’ PPC ads to appear in Google Mobile search results. Yahoo has been offering a small suite of mobile ads for a while now, too, so I thought it’d be interesting to compare their current mobile ad offerings.

This article is part of Local Search Week here at Search Engine Land, a special look at local search marketing issues in the run-up to our SMX Local & Mobile conference next month.

Google’s announcement that they would automatically opt-in many of their ads to appear on the mobile platform seems somewhat controversial, since one supposes that a number of advertisers might not notice the change and might be irritated that their ads may now be running on an unanticipated platform. After all, many online retailers who advertise expect that some percentage of users clicking through would be placing online purchases, and mobile devices don’t effectively support transactions yet. Google’s patent for Gpay might pave the way for this, but it hasn’t launched yet.

On one level, Google’s act to opt everyone into this program might not seem all that bad—after all, advertisers are paying for exposure and referrals, too. Greg Sterling reports that Google’s opt-out policy during this trial period is similar to policies Yahoo and Microsoft have used in the past for new/underutilized programs. Since it can be reasonably supposed that CTR on mobile ads is likely relatively low, the cost to advertisers is probably low-to-nil, and Google’s motive is likely just a desire to get research data on mobile ads while also introducing many advertisers to the medium.

A New York Times article quotes Dilip Venkatachari, Product Management Director for AdSense, as saying that “the ads would provide a new source of revenue for publishers and could encourage more online sites to create mobile-focused Web sites. Like most other Google advertising systems, ad prices will be set through an auction and advertisers will pay when a user clicks on its ad.”

So, this should encourage more sites to create mobile friendly versions of their sites? While it’s an idealistic desire, the lack of standardization through the wireless devices pose significant challenges to large companies who are already challenged by making things simultaneously attractive, usable, cross-platform compatible, and optimal for search engines. Not to mention that devices such as the iPhone and Palm Treo for Windows are fast making it possible to view “non-mobilized” sites just fine, reducing any urgency that companies might feel about getting their content to work well for the new environment.

Interactive advertising on mobile is still very new, and there’s little research as to what’s effective and what works for consumers, much less developers. What many analysts are very sure of is that mobile search is likely to be particularly effective for locally-oriented businesses. As Paul J. Bruemmer reports, “While local search marketing is well established, local-mobile search marketing is barely getting started.”

Paul further voices a concern that many have expressed about the advent of ads on phones, a “General intolerance of advertising messages on a personal device.” At least thus far, I’m not hearing a lot of consumer complaints about this yet, perhaps because the ads are not all that obtrusive so far, and perhaps because internet users have already become so accustomed to seeing contextual ads.

For instance, check out these ads I found in Google when doing a search for “florists in Boston” on my Treo running Windows and Internet Explorer:

The ads are located down at the bottom of the search results, and they’re clearly labeled “Ad”, so I don’t find them all that annoying. I have seen one ad appear at the top of Google Mobile SERPs before, but it seems to be a very infrequent position for now.

Notice the ad with the URL that appears to be Google-hosted? I wonder if that’s one of the mobile landing pages that Google states that they may “adapt” for users who click through? This seems particularly odd to me, and it looks like the sort of thing where Google ought to spell out under what circumstances they’ll choose to automatically generate a landing page to “enhance” the user-experience. This seems very controversial to me, because Google is likely charging advertisers when they click through to those generated landing pages, and advertisers may not realize this, causing them to misinterpret effectiveness of apparent conversion rates.

Now, Yahoo provides advertisers with the ability to purchase similar mobile-friendly pages which I believe are intended for this very purpose, but I don’t think they automatically generate a page in the way that Google does—it’s voluntary. For instance, check out these ads for “shoes” from Yahoo Mobile:

When you click on a mobile ad in Yahoo, they provide an optimized mobile landing page. Here’s one that came up for me when I clicked on a Teleflora ad:

In some cases, Google is choosing to dump users onto the landing pages of the advertiser. For instance, here are ads for a “shoes” search in Google Mobile:

And when you click on the ad for Zappos, you get dumped onto their homepage which is not intended for mobile users:

I’m not sure why Google would land a user onto the graphic-intensive Zappos page in this case, instead of using their optimized mobile landing page. Perhaps Google Mobile didn’t think I needed it, since I’m running on a flavor of Internet Explorer? More likely, I’m supposing if the advertiser’s existing landing page includes a phone number, as every page on the Zappos site does, Google may conditionally choose not to automatically generate a more pared-down mobile landing page.

If you’re interested in seeing how your landing page or webpage might be automatically adapted by Google to appear for mobile users, check it out through this interface:

http://google.com/gwt/n

Just from observation, Yahoo’s Mobile Ad Service appears broader and more robustly envisioned, allowing a variety of ad types for mobile, including Display Ads, Search Ads, and Video Ads. Yahoo’s promo copy reads “…click through to a promotional site, enable the consumer to find or call a store directly, offer a coupon, send an SMS message—the options keep expanding. If you don’t have a promotional site to link to, Yahoo can create one to your specifications.”

Since Mobile Search and Local Mobile Search are still relatively virgin marketing territories, Google can be forgiven some early program gaffes. But, online marketers may want to go and opt-out some of their current campaigns from running automatically in the mobile end since it could obscure some of their conversion data, particularly if the ads are intended to primarily drive online transactions. It would be better to set up separate campaigns with separate reporting and check to see if an optimal mobile landing page can be associated with the ad.

Also, for mobile ads, be aware that there’s theoretically greater potential for click-fraud. As I earlier outlined in “A Thorny Issue: Detecting Mobile Search Click-Fraud“, invalid clicks may be a lot harder to identify for mobile ads.

Chris “Silver” Smith is Lead Strategist at Netconcepts and a writer for the Locals Only column at Search Engine Land.

The Kelsey Group added its mobile forecast to the range of other forecasts out in the market. The problem with all of these is that, like local search forecasts, there are fundamental definitional issues about how the marketplace is framed and conceptualized. Kelsey says “U.S. mobile search advertising revenues to grow from $33.2 million in 2007 to $1.4 billion in 2012, representing a compound annual growth rate (CAGR) of 112 percent.” eMarketer has lower numbers and Jupiter has higher numbers, among several others.

Google’s decision yesterday to push its AdWords advertisers out via mobile (absent an opt-out by marketers) has the potential to accelerate the market and ad dollars following into mobile. The advertising infrastructure to support mobile search is already present — as witnessed by the Google move, as one example. But questions remain over what sorts of ads mobile consumers will accept.

However, a more fundamental challenge is on the user side: driving adoption. As a general matter, where the usage is, the ad dollars will ultimately follow.

To that end, the frenzy over unlocking the iPhone reflects a popular desire (at least among influencers and gadgetheads) for more usable devices and mobile experiences. The impending Google mobile OS/GPhone hardware launch is another potential watershed moment (we’ll see) in the evolution toward better mobile user experiences.

We’ll be discussing many of these issues and mobile forecasts at SMX Local & Mobile in Denver in three weeks. I also discuss these forecasts and the market in some additional detail at Local Mobile Search.

And see our earlier Locals Only column on mobile search segmentation.

An Ingenio sponsored survey conducted by Harris Interactive, released today, captured a broad range of user attitudes and behaviors toward mobile phones and mobile advertising. The survey polled just over 4,000 adults in the US. Among other things, it confirmed that more people own mobile phones than landlines and that users were most receptive to the equivalent of paid-search ads vs. other types of mobile advertising.

Below are some of the highlights from the survey findings.

Forty-nine percent of mobile phone owners currently use their phones for more than just making and receiving phone calls. However the study found that 57 percent of respondents anticipated using their phones for more than just making and receiving phone calls in the next three years.

The study found that men are more likely than women to use their phones to check email, access the Internet for something other than search and find information using an mobile search engine. By contrast, women were more likely than men to use their phones to send or receive text messages and to take/send/receive photos.

The survey confirmed an existing data point: that there are now more mobile phones than landlines. According to the findings, more than four out of five U.S. adults (85 percent) own a mobile phone vs. seven in ten (71 percent) who have a landline. That becomes a bigger gap among younger users (18-34), where 89 percent own a mobile phone and only 57 percent have a landline.

Younger mobile phone owners are also more likely than to be receptive to mobile ads. The study found that only 30 percent of mobile phone users recall seeing or hearing an advertisement on their mobile phones in the past 12 months. In asking about different forms of mobile advertising, the survey discovered the most favorable response was to sponsored links following a mobile Web search. This was then followed by audio ads that play while waiting for someone to answer a call or text ads.

Other surveys have shown that mobile users are resistant to advertising unless they perceive ads to be “relevant,” which is consistent with the sponsored links finding above.

Ingenio provides mobile sponsored links and audio ads to Microsoft, 1-800-Free411, AOL Mobile, JumpTap and Medio Systems.

Last Thursday I did a webcast for Search Marketing Now on local search called “Local Search Advertising: Challenges and Opportunities.” The slide presentation and a recording of the webcast are available here. Those who didn’t attend can still hear the webcast and access the slides by registering for free.

The presentation was intended to be a very broad introduction and discussion of the topic and some of the complexities and issues associated with local search. One of my personal “projects” is to expand the definition of “local search” from the currently narrow idea of “searches performed on mapping sites, Internet yellow pages and local search engines” to the more expansive but more accurate concept of “a process whereby users seek information online with the ultimate intention of conducting an offline transaction.”

The presentation addressed user behavior, ad spending, local search market share, technical challenges and small business advertiser issues. Here are a few highlights:

• Locally targeted ad spending in traditional media is worth about $100 billion annually, which is roughly 35 percent of total ad spending in the U.S.

• Local search spending (narrowly defined) was worth about 15 percent of total online ad spending in 2006
• As many as 2.2 billion monthly search queries in the U.S. may carry a local intent, though as many as 50 percent of those may not include a geographic modifier
• While the hold traditional media had over the entire “local value chain” (advertisers, content, sales and audiences) has been disrupted by the Internet, they still exercise a significant influence over consumer buying behavior
• One of the hallmarks of the local search market is its enormous fragmentation, which makes it more complex for consumers but especially advertisers
• Marketers have had mixed experiences to date with local search, but believe it still holds great promise; consumers have largely favorable views of their local search experiences
• Small businesses understand the importance of the Internet but have been slower to adopt online and paid search marketing because of time, confusion and self-service challenges

At the end of the webcast there were numerous questions, which we couldn’t get to because the hour was up. I’ve selected a few of those questions (reproduced largely verbatim) and will attempt to provide short answers here. Q: What do you think is the biggest barrier keeping small local businesses from using online marketing?

As I suggested above, the main challenge is time. Small business owners are time-starved and have more than they can generally handle just with their own operations. Asking them to become online or search marketing experts is almost too much to expect. Having said that, small businesses were among the first to adopt search marketing; but the vast majority need help and guidance, and would prefer for someone to “DIFM” – do it form me. I go into some of the challenges and issues of small business and search marketing in this post. I also talk about a cottage industry that has emerged to help them adopt local search marketing in this post.

Currently, something less than 5 percent of the “addressable market” of small business advertisers is using some form of paid search.

Q: If you were a small business, would you try and do this yourself or use a third party like a SuperPages.com?

As I suggest above, it’s a function of time and inclination. Most small businesses would prefer to have someone handle SEM for them. However, some number of people prefer to do it in-house. In the second referenced post immediately above there is a list of companies that offer simplified search marketing, with simplified pricing, for small businesses. Many local media companies, such as yellow pages and newspapers, work with these local SEM firms to offer a branded version of their services to local advertisers.

When you work with a third party, which is in turn outsourcing SEM to someone else, you’re going to pay additional costs. But it’s familiar a trade-off: time vs. money. SuperPages, for its part, acquired SEM firm Inceptor and does all the local SEM for its advertisers in house. Q: If I search for a “dentist” with out any geo qualifiers, it is my understanding that the search engines now use the IP of the router to deliver results (businesses) within that region. True?

Yes, all the major search engines are using IP targeting to serve ads when they can sufficiently identify the computer’s location and they “infer” the user is conducting a local search. It’s a fairly safe bet that queries such as “dentist,” “lawyer,” “plumber” or “sushi” are local because they are typically “fulfilled” locally. Google, for example, will serve a mix of local and non-local ads in such situations. And on Yahoo’s Panama platform, local ads, with local content, will potentially get a higher quality score than more “generic” national ads.

IP targeting is imperfect but works fairly well. Wifi “triangulation” can also be used to identify user location for ad serving. Having the user input a default location is another strategy. In all likelihood location awareness will eventually be incorporated into the browser. Q: Can you please discuss how in the future local search will track demographics?

As local search moves from DMA to zip to neighborhood it will become a proxy for demographic targeting in many cases. Demographic and pseudo-demographic ad targeting is currently available from the search engines. Microsoft and Yahoo use consumer registration data to offer varying degrees of demographic targeting. Google does it through site targeting now but may use registration data over time to do the same.

There are large amounts of of U.S. Census and other data that can be layered on top of maps. That data will ultimately be available through search engine ad platforms to help marketers refine their campaigns geographically.

Q: Why do consultants like you keep saying mobile is going to be huge when consumer surveys say people won’t want to pay to see ads or pay to get more information? And who are the big mobile platform players?

There are more than 2 billion mobile devices in the world and roughly 230 million in the U.S. For every survey that shows people are ambivalent about advertising on their mobile phones, there are others that argue people want access to content on the go and are willing to view ads that are “relevant” to their interests. Ad targeting makes a big difference in consumer receptiveness to mobile advertising.

Usability issues have so far kept large numbers of people from adopting mobile content and search but the situation is rapidly changing as carriers, search engines, handset makers and content providers all work to improve the user experience. Right now the overwhelming number of mobile users are using their phones for traditional voice communication, followed by text messaging – as many as 50 percent of mobile users have sent or received text messages – and then mobile Internet use (about 32 million in the U.S.)

Beyond the carriers, the major search engines and portals are the dominant players in mobile currently. There are “upstarts” (e.g., Twitter) and social networks (i.e., Facebook) that may find great success in mobile however. Q: Google seems to be making a big move into cost per action. My theory is because SMBs don’t have time to optimize PPC campaigns versus national companies.

I think there’s great potential for CPA in the local space. I’ve written fairly extensively about that here. I would argue it’s not so much about time as about the more “tangible” nature of the lead being delivered. On the continuum you move from CPM to PPC to PPCall to CPA in terms of the “concreteness” of the lead or action. Local businesses really don’t know what a click is but they do understand calls and, even more, sales.

Q: Could you please explain the implications of the Geomas lawsuit for Google, Yahoo and smaller players like Marchex and Local.com?

Here’s a post I recently wrote on the issue. Basically the patent is going to have to work its way through the courts. If the initial action against Verizon succeeds it will potentially mean that everyone providing local search (as defined by the patent’s scope) will have to pay licensing fees to Geomas. Ultimately, however, my belief is that the company is seeking to be acquired for its IP portfolio by one of the big local players.

It’s also possible that the action will not succeed under the U.S. Supreme Court’s new “obvious” test in patent litigation.

More to come

There were a number of highly specific, tactical questions about improving rankings in local search results and access to free sources of traffic that are beyond the scope of this particular column. However, those issues will be among those we’ll be addressing in future columns and at the forthcoming SMX Local & Mobile conference this fall.

Greg Sterling is the founding principal of Sterling Market Intelligence and publishes Screenwerk, a blog focusing on the relationship between the Internet and traditional media, with an emphasis on the local search marketplace. The Locals Only column appears on Mondays at Search Engine Land.