Estimate: Google Pulls in $200 Million from ‘Local’

Google doesn’t break out its revenue for local, but we can speculate. Piper Jaffray has said that 10 percent of Google’s revenues are attributable to “geotargeting,” per Greg Sterling. Based on Q2 earnings of $2.46 billion, that would mean Google grossed about $240 million from local in Q2, up from $225 million in Q1.

We might cut Google’s figure a little for the U.S. Since Google makes 5 of 6 of its dollars in the U.S., Google’s U.S. figure for local might be closer to $200 million in Q2, or $800 million per year. If Google takes in 60 percent + of all the local search dollars in the U.S., as Borrell Associates estimates, that would make the entire local search category worth over $1.3 billion in 2006 (pretending that every quarter is the same).

Take out partner shares and whatnot — perhaps 60 percent of the pie — and Google’s net still ends up with $80 million from local in the U.S. in Q1, or close to $320 million per year.

BC’s The Tyee Pursues Alternative Revs

The Tyee, a community site based in Vancouver, BC, is pursuing a rich base of community advertisers and foundations left behind by the “establishment” views of CanWest, the publisher of The Vancouver Sun and other Canadian titles.

CanWest is a local business booster in Vancouver that supports the upcoming Winter Olympics, Real Estate developers and the (conservative) Liberal Party, explained publisher David Beers. That opens up an opportunity for an alternative voice, he said.

“Indy media is not my model,” said Beers, noting that indy media such as alternative weeklies “have no impact on the media ecology of British Columbia.” Instead, The Tyee is entrepreneurially seeking support from donors, foundations, governmental cultural entities, and local alternative advertisers.

Online Implications of the Tribune/Chandler Fight

The fight between Tribune and the Chandler family is really all about the money. Basically, it looks like the Chandlers got a tax-free transaction going into the sale of Times Mirror that later proved to be a $1 billion tax liability. Now that the chips are down for Tribune (and other newspaper and TV companies), the Chandlers are looking for another tax free- or advantageous transaction to get out.

But from where I sit, the questions being raised about Tribune’s overall strategies are mostly a smokescreen. Had the Chandlers remained in the driver’s seat, there is no evidence they would have discouraged the ultimately failed attempts to find broadcast/newspaper synergies. Nor would they have killed the investment in national online verticals that are actually turning out to be strong winners. And have you noticed that no one talks about the changed journalism? It is not a real issue here.

Smokescreen or not, a key question is raised by the possible breakup of Tribune’s properties: Can they thrive without the online infrastructure that Tribune has created, specifically in the form of CareerBuilder, Cars.com, Homescape and ShopLocal? Is it enough to be a “renter” of the verticals, rather than an owner? Online revenues are only five percent or so, and haven’t been considered a key part of the newspapers’ valuation. But they are, by far, the newspapers’ fastest growing sector.

GeoDomain Expo: High Values for City URLs

Associated Cities, the trade association for the burgeoning city name URL industry, held it’s GeoDomain Expo in Chicago June 2-3, attracting roughly 120-140 attendees and about a dozen sponsors, including Google, Local.com and others. Associated Cities was started in 2005 by four URL aggregators, and now has 96 city URLs in its network, including destination cities, major cities, mid-sized cities and suburbs.

Much of the appeal of the city names, and of the association’s national network of city names is that they’re considered “search engine independent.” Up to 80 percent of city name traffic comes from people simply typing the city names into their browser as they are looking for travel or real estate information.

This is what’s lead to interest in the business not only from individuals, but also from aggregation-oriented companies such as Local Matters and Marchex, which have paid down big bucks to purchase travel-oriented aggregation/search sites. Local Matters paid up to $26 million for AreaGuides.net, and MarchEx just paid $13 million for Open List (previously known as Local i).

Merchant Circle Seeks to Provide YP Alternative

“Small business,” “marketing tools” and “viral marketing” = a new generation of Yellow Pages that will really help businesses get more local customers. Or so hopes Merchant Circle, a well-funded startup that officially launches in June.

Like a blogroll, small businesses add other small businesses from their community to their network, trade ads, and get mutual attention from local consumers – hence the “Merchant Circle” name. Other features on the current, pre-beta version have been more come-and-go.

President and CEO Ben Smith, a Rustic Canyon entrepreneur in residence (who co-founded Spoke Software with Chris Tolles of Topix), told Local Onliner that everything’s in flux prior to the June launch. “It is all about testing. It is not close to being done. We are constantly revising. There is lots of new stuff coming for launch in June and then a second wave in late June.” But some basic goals have been established. “The milestone here is to get 20 percent of merchants” in a community, said Smith.

$5.8 Billion in Local Revs Projected for 2006

My friends (and former colleagues) at Borrell Associates are out with their fourth annual survey of local online revenues. As usual, the survey is a data goldmine, based on confidential reporting from 2,266 local sites- a very impressive count. Borrell found that local online revenues were $4.8 billion in 2005. For 2006, they’re projected to surpass $5.8 billion in 2006.

Borrell indicates that a perfect storm has kicked local up a notch. Traditional media companies have accelerated their efforts on the Web; the portals have ramped up their local initiatives; thousands of entrepreneurs are selling local advertising; and there is a natural migration of local advertisers, who are finally accepting the Web as part of their marketing plans. “It is no longer a case of artificial upselling,” says Borrell.

Major trends include a jump in local search revenues from five to nine percent, and the rise of targeted advertising, including paid search, lead generation, directories and classifieds. Display ads such as banners and popups are down to just 14 percent of revenues.

McClatchy Takes (Some of) KR

McClatchy won its bid for Knight Ridder. But KR fits into McClatchy’s plans less as a traditional newspaper company, than as part of a long-term transition to direct marketing, with the news playing an increasingly smaller role. The Internet, however, looms ever larger.

McClatchy’s leadership is secure and unsentimental. It doesn’t place a premium on ‘size for size’ sake. Instead, it hopes to re-impress Wall Street with fast growth across multiple channels, including print, the Web, direct mail –and possibly directories.

As The New York Times noted in its coverage, “the average rate of household growth for the dozen papers that McClatchy plans to divest is 4.8 percent for the next five years; for the 20 papers the company would keep, the growth rate is 11.1 percent. Including the 11.9 percent growth rate of the current 12 McClatchy papers, the new company’s papers will have an average household growth rate of 11.4 percent.”