Small Business

Fine-Tuning Local Search


Small businesses may soon be able to target their online ads to prospective customers who are within a few blocks of their shops

Karl Murphy, president and co-owner of Carolina Auto Spa, a car wash and automotive detailer with two locations outside Raleigh, N.C., says his business depends on impulse decisions—no one makes an appointment to wash a car. So the company's entire $4,000 to $5,000 monthly advertising budget is devoted to inspiring high-income prospects in the immediate vicinity to pull in and drop some coin. "Car washes live or die within a five-mile radius. If you put a [compass] and draw around my site, that's where I advertise," says Murphy. "My best friends 24 miles away won't wash at my car wash—and I'd let them do it for free."

A few months ago, Murphy started spending about $300 a month on Google (GOOG) and Yahoo! (YHOO) pay-per-click advertising. Murphy says the pay-per-click model works reasonably well for his business but it "would be much better if it had more specificity of location." That way, Murphy says he could target more of the impulse purchasers—real estate agents and other "wired" professionals—who may not live in his area but are there for business with time to kill between appointments.

Skyhook Wireless, a small technology company in Boston, is working to target those kinds of prospective customers with a new software tool that—through partnerships with big search engines—will allow advertisers to restrict their ads to Web surfers who happen to be in the neighborhood. The company, which has mapped the 100 biggest U.S. cities, has pioneered a location technology that determines the latitude and longitude of any device with a Wi-Fi antenna, triangulating the location of individual PCs (and eventually other wireless devices), allowing ads to be served within a specific target area.

Bringing It to Small Biz

Skyhook's mapping currently covers 70% of the U.S. Its first location-based Internet search toolbar, called Loki, pinpoints users' locations and uses that information to present services and content that are geographically relevant.

At the moment, the service is geared toward consumers, but Skyhook is working to get its technology adopted by handset makers and major search engines. If they do, it could be a boon for small businesses, because it would mean they could get bigger bang for their online advertising buck. Right now, only about 5% of small and medium-size businesses are using paid search, according to consulting firm The Kelsey Group.

To bring more of the multibillion-dollar small-business advertising market online, Skyhook is working on relationships with Yahoo and Google, and the improved local search made possible through its technology will start to be available to small business over the next 6 to 12 months, says Ted Morgan, the company's founder and chief executive.

While the big search engines have been targeting some pay ads (not search results) for the past year or two, and can often limit search results by city or metropolitan area, they cannot limit ads to users within 5 or 10 blocks of the merchant (see BusinessWeek.com, Spring, 2006, "Search That Works"). With Skyhook technology, they could offer block-by-block control over online advertising so only people within a quarter-mile of a store would see those ads.

Unmet Challenges

Normally, pay-per-click advertising results in a 0.5% click-through rate, but with the help of Skyhook's technology, that rate rises to 4% to 5%, according to Morgan. He's sure the improvement will lure more small-business owners online. "It's going to make more local retail businesses do more effective—and therefore more—advertising online," says Murphy.

The Skyhook technology isn't a cure-all. Small businesses still often have a lot of trouble getting up and running online and maintaining an effective marketing campaign (see BusinessWeek.com, 9/5/06, "Secrets of Online Business Success"). "The challenge for them is how to get from where they are to the Internet—that's what Skyhook doesn't really solve for them," says Greg Sterling, principal of San Francisco tech consulting firm Sterling Market Intelligence (see BusinessWeek.com, 6/21/06, "Building a Web Presence on the Cheap").

But at the very least, small-business owners will be able to feel more confident that they're getting the same bang for their online advertising buck as big companies. "Local restaurants, bars, car washes, health clubs—all those folks have been reluctant to advertise on the Internet. But if they have the tools to just advertise around them, they can see the benefits that the big retailers and franchises have been using for years," says Morgan.

Jeffrey Gangemi is a freelance writer based in Mendoza, Argentina.

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