Tuesday, June 21, 2005

MSN service brings searches close to home

In its latest bid to catch up in the Internet search business, Microsoft Corp. is joining the ranks of companies offering enhanced search results narrowed to local geographies.

The company's MSN Local Search service, which came out in preliminary form yesterday, will add yellow pages listings and interactive maps to the MSN Search "near me" feature that debuted as part of the company's revamped Internet search engine earlier this year.

Microsoft's move reflects a growing industry focus on the ability to search within individual communities across the country. The company sees the initiative as an opportunity to make results more relevant, said Erik Jorgensen, general manager of MSN Local Search and MapPoint.

"The search engines have traditionally not done particularly well at helping people find answers to local questions," Jorgensen said.

In that way, an effective local search feature could attract more people to a particular search engine, said Neal Polachek, senior vice president at The Kelsey Group advisory and consulting firm in Princeton, N.J.

"I think one of people's frustrations with the Internet, still, is that while I can get information about the weather conditions in Bogota, Colombia, I can't get the school menu from the grade school down the street," Polachek said.

Another trend pushing search engines toward local search is the growing interest in online advertising among regional and local companies. The U.S. market for local search advertising, Internet yellow pages and related ads on wireless devices is projected to grow from $669 million in 2004 to $5.1 billion in 2009, according to Kelsey Group data. That would amount to about 22 percent of the overall online ad market in 2009.

"The local search market is reaching a tipping point in terms of local advertisers moving dollars online," said Stewart Barry, a financial analyst at ThinkEquity Partners who covers search technologies.

The preliminary, or beta, version of MSN Local Search largely brings Microsoft even with existing local search services from Yahoo! and Google. For example, along with their local search results, both Google and Microsoft offer corresponding online maps in either basic form or with satellite images transposed over them.

But Jorgensen said MSN will seek to differentiate its local search in future releases, adding functions including a "virtual earth" program that will include close-in aerial photographs taken at a 45-degree angle to give a clearer sense for a neighborhood. The company also is working on the ability to layer results from multiple local searches on one screen. For example, someone planning an evening could see a map with the location of a movie theater, a nearby restaurant and a coffee shop.

Microsoft's initial try at local search, through the stand-alone MSN Search "near me" feature, had mixed results. For example, in February, a search for "pizza" in the Redmond area -- one of the suggested queries in an MSN Search advertising campaign -- returned a listing for janitorial supplies as the first result.

For MSN Local Search, the company is contracting with Amacai Information Corp. for white and yellow pages listings, and it appears to be helping. The same search for "pizza" in Redmond yesterday on MSN Local Search yielded a long list of pizza shops in the city. Janitorial supplies were further down.

Microsoft is not the only Seattle-area company eyeing the local search market. Last year, Bellevue-based InfoSpace acquired online yellow pages operator Switchboard in an effort to strengthen its local search offering. And Seattle-based Marchex is licensing its local search marketing service to yellow page operators and newspapers -- including SBC Communications, BellSouth and The Hearst Corp.'s Houston Chronicle.

With about 25 percent of search queries tied to local products or services, Marchex Chief Executive Russ Horowitz said there is a tremendous opportunity for smaller merchants like auto mechanics and bookstores to take advantage of search marketing. He said regional phone companies and newspapers, which have long-standing relationships with smaller advertisers, also are experimenting with ways to offer search marketing tools to these companies.

Other industry players include CitySearch, owned by Barry Diller's IAC/InterActiveCorp., which has announced plans to acquire search company Ask Jeeves Inc.

But for all the interest in the local search business, the companies entering it still have tough competition from the good old phone book.

"The Internet has to be better than the yellow pages, and it hasn't necessarily been," said Gary Stein, a Jupiter Research analyst. "The yellow pages are so easy. There's just an ingrained habit of picking them up."

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