If you are looking for help with your water heater in Plano, Texas, Harvey West is your man. Type in “water heater plano texas” on Yahoo and this ad will come up as the top sponsored result: Harvey West Plumbing Company: Water Heater. Family owned and operated repair and replacement plumbing company with fair prices and fast service. $25.00 discount to all new customers.

Off to the right, you’ll see sponsored results from the likes of Lowe’s, eBay, Target and BizRate. But West, who sold his 35-person plumbing company and now works solely with his son-in-law, manages to get the primo spot on search engines these days.

Run a Google search with the same keywords and, once again, Harvey West will be the top dog.

West admits pricing varies by geography and estimates that he shells out a mere $2 per click. Because it’s so cost-effective, Internet advertising is the only marketing the Texan plumber does these days, and it accounts for most of his leads. West is on to something: Local search is growing at an astonishing rate, and the numbers are absolutely staggering.

Searching for Profits

According to comScore Media Metrix, more than 421 million local Web searches were conducted in February. That means the number of times users conducted Web searches for local information more than doubled from January 2004 to February 2005.

Online merchants are eager to capitalize on the trend. Commerce sites typically convert 2.4 percent of visitors into customers, according to a study by retailer association Shop.org. The typical brick-and-mortar conversion rate is about 1 percent. The proliferation of broadband should help e-commerce grow even more. As people can more quickly find results, they are more likely to make purchases.

Industry observers say the already sizable local search market is likely to lift even further. Total local online advertising sales are expected to grow to $5 billion by 2009, with $3.4 billion of that coming from search engines, The Kelsey Group predicts.

Compare that figure to $670 million in 2004, with $162 million coming from search engines.

Sales of sponsored links and other forms of search advertising are expected to increase at a 12 percent compound annual growth rate, generating more revenue than display ads by 2010, according to JupiterResearch.

ComScore found that 111 million people execute 46 billion Internet searches yearly. And The Kelsey Group-BizRate estimates that 25 percent of all Internet searches are local in nature, meaning local consumers are looking for local merchants.

Although local search has really taken off only recently, local search queries already account for more than a third of all search engine queries. If surfers add a geographic term (like city or ZIP code) to their search queries, the results show them businesses within their area, usually giving them results they want – happy searchers, happy local businesses and happy publishers.

Make fun of the Yellow Pages if you want; the local listings are laughing all the way to the bank. This market has been dominated by local phone directories, like the Yellow Pages, with profit margins of 50 percent or more.

SBC made a hefty $2 billion in profits from its publishing unit last year on revenues of $3.8 billion. Researchers at The Kelsey Group predict at least $3 billion of Yellow Pages money will move online by 2008. To put that in perspective, the total Internet ad market was $9.6 billion last year.

But search engines attract 66 percent of online local search users, according to comScore. Clearly, local search is exploding. There is a huge potential to make money – it’s reportedly a $1.2 billion market – and that’s why search localization is the focus of efforts by AOL, Google, MSN and Yahoo.

Competitive Landscape

New data from Hitwise, an online competitive intelligence service, show that the top three search engines – Google, Yahoo Search and MSN Search – accounted for 93.5 percent of U.S. Internet searches across major engines in July 2005.

Visits to Yahoo Local (local.yahoo.com) were 4.4 times greater than visits to Google Local (local.google.com) in July 2005. However, Google Local’s market share increased 61 percent between February and July, while Yahoo Local grew 14 percent.

Google Local’s catch-up is occurring amid the growth of Google Maps (maps.google.com), which has quickly grown to become the third-ranked site in the Hitwise Travel-Maps category in July 2005. Maps have become important to local search users, as 17 percent of Yahoo Local’s visitors went directly on to Yahoo Maps in July 2005.

Yahoo has another advantage when it comes to local search: it has 176 million registered users, so it can direct local ads to people who have provided their cities or ZIP codes upon registration. While Google and Yahoo currently dominate the landscape, MSN has the financial resources to maneuver its way into search superiority. Microsoft spent $44 million marketing various MSN services in the first four months of 2005, while Yahoo spent $14 million – versus just $2 million for Google, says TNS Media Intelligence.

Still, underdog AOL is striving to play catch-up. AOL has long been for members only but it recently opened up its borders, enabling more of America to access its content. The move is meant to encourage advertisers, both national brands and local businesses, to fork over ad dollars because their ads will be seen by more than just AOL subscribers. It is clearly intent on trying to grab a share of search profits. And for good reason: Internet search advertising is set to overtake pedestrian online banner advertising by 2010, as online sales double to $18.9 billion, up from $9.3 billion at the end of 2004, according to JupiterResearch.

Executives at the Big Three realize that local is the way to go. “The local search market should be larger than [Google’s] other markets because most people’s purchases are local,” said Google CEO Eric Schmidt, at an investor conference in May. And Google isn’t alone in its thinking. All the major players are looking for more ways to attract the most local search dollars.

The various search parties are using several approaches to move into local advertising. Maps are a leading tool. MSN has launched a beta of its Virtual Earth application. A Locate Me feature finds a present location and lets the consumer explore and discover the area around them. The Locate Me link activates Microsoft Location Finder, which uses Wi-Fi access points or Internet Protocol address geocoding, to determine a person’s location.

Google has its Keyhole technology. Google bought dodgeball.com and, at press time, aborted plans to acquire Meetroduction, “location-aware social networking software.” Google’s interest in social networking and mobile technologies show its commitment to localized services.

Mobile search is a promising prospect because people are attached to their cell phones and are often looking for goods and services while on the go. Eyeing this mobile climate, AOL bought mobile software company Wildseed; Google has local search for mobile phones; Yahoo introduced a texting service for getting local search listings. While mobile search is still in its infancy, it is likely to take off quickly and add another element to the local search wars.

Local Winners

In August 2005, Affinity Internet announced the launch of ValueTraffic Local, a service that helps small business to target their online advertising to Web searchers in specific geographic areas. Mastering the art of local search is a skill that few possess, but those who do stand to reap rich benefits.

Harvey West, the Texan plumber, is so good at bidding on keywords and tweaking ads that a number of other plumbing outfits, from Philadelphia to Palo Alto, Calif. hire him to help them with their local search efforts.

Cabrillo Plumbing & Heating in the San Francisco Bay Area does extensive advertising – TV spots on local cable, direct mail, Yellow Page ads and moving billboa

rds in the form of company trucks.

“We track every piece of advertising scientifically,” says President Jeff Meehan who handles Cabrillo’s advertising himself. He even shot Cabrillo’s TV commercial on 35 mm film in his mother’s kitchen.

But when it comes to Internet marketing, Meehan hands the reigns over to West. “I’ve given him carte blanche to get us at the top bar for our service area which is San Francisco and Palo Alto.”

West says a Philly plumber doesn’t have much competition and only has to pay around 75 cents a click. Meehan, however, forks over more like $4 or $5 a click because there’s more competition for eyeballs in the Bay Area.

“If you bid the most, you’ll get the highest listing,” explains West. But plumbing is a business where you can spend $300 acquiring new customers – he recalls the days when he spent $8,000 a month on Yellow Page ads alone – so $5 is a deal, says West. But local search isn’t something you let stay static.

Tweak, Tweak, Tweak

Searches for “yoga San Francisco” and “spa San Francisco” found International Orange, located in San Francisco.

“We do local search marketing for good reason,” says co-founder Amy Darland. “It’s effective, and you aren’t committed for a month or year. It’s a nice get-out-of-jail card.” Still, it’s such a tricky business that, like Meehan, she entrusts her search marketing to a Web advisor.

In the past year the average advertiser’s roster of keywords grew by 50 percent, according to Efficient Frontier a Mountain View, Calif., firm that manages $100 million in keyword purchases for its clients.

“People will go in and put in keywords and leave it like it was Yellow Pages,” says West. “You’ve got to tweak it, work on different ads, change it 15 times to see what gets the best clickthrough rates. As soon as it works, you’ll find it changes.”

Local search is a huge and expanding market. The major players are constantly changing and so it’s important to understand the evolving landscape. So how does local search impact primarily merchants and affiliates? It means that large, established merchants are bidding more to get top listings.

The growth of local search is a case of half-full, half-empty for affiliates. But they can take advantage of overlooked locales. They can bid for the top spot in small towns, getting local shoppers to connect to online merchants through their sites. While a spa search in San Francisco or New York results in a raft of sponsored results, there are many towns with only natural search results. So affiliate sites that link to SpaWish.com, for example, can take advantage of the undiscovered towns and bid to get sponsored spots that lead to commission payouts.

But affiliates hoping to be local leaders would be wise to heed Harvey West’s words: “You gotta keep on top of it.”

DIANE ANDERSON is an editor at Brandweek. She was the managing editor for Revenue magazine for Issue 4 and previously worked for the Industry Standard, HotWired and Wired News.