The Quandaries of Local Search and Vertical Directories

This article originally ran on on April 3, 2009. Its lessons for PPC search advertisers remain current and timely, however, because online business directories and locally-oriented web services continue to grow in importance, posing new opportunites and challenges for marketers.

In paid search, many local marketers and niche businesses have a difficult decision. Nearly every major industry sector has one or more vertical directories, vertical search engines, or “vortals” (vertical portals). Often, those vertical directories/vortals buy paid search listings, and some may also have a reasonably high organic position for the same or similar keywords.

If you’re a local or niche marketer, the decision boils down to the following courses of action (which aren’t necessarily mutually exclusive):

  • Buy a directory listing based on whatever ad revenue model the directory uses in order to get either the visibility within the directory or clicks from the directory to your site. Buy paid search listings and compete with both your competitors and the vertical directory, selectively buying the clicks most valuable to you.
  • Engage in SEO for the terms of interest, competing for position with both your direct competition and the vertical directory.
  • Decide the glut of competition is escalating the price and reducing the ROI so dramatically that alternate media options will have a higher predicted ROI.

Why do vertical portals exist? A primary driver is a supply-demand skew between spots in the organic and paid search results and the number of businesses within a major metropolitan region looking to advertise.

When making a decision on the above choices, look at the following data: the competitive landscape, how the directory charges, the demonstrated value of the directory clicks or impression compared to the clicks you can buy directly, and perhaps other value the directory provides beyond clicks to your site. Each vertical directory has its own business model and way of charging you for a listing, profile page, or participation.

The typical vertical directory pricing models include:

  • Annual membership: Memberships may be tiered and include à la carte features that may be in the list below or may be highly specific to the industry sector being covered.
  • Cost per click: Some directories charge on a CPC basis. If you’re considering participating in one of these directories, consider the source of its traffic because you’re paying for clicks originating from somewhere else and ending up at a directory. If the directory gets its traffic from organic placement on the big three search engine databases (that power far more search engines through syndication deals), then the clicks you get as a directory customer are essentially delayed clicks from organic engine placements. If the directory buys many of its clicks from questionable sources, then those clicks are mixed in with your paid directory clicks. If the directory ranks high for your most coveted keywords in the organic listings, then one can make a compelling case for the clicks because they’re essentially delayed clicks from organic positions you’d find hard to replicate.
  • Sponsorships by region or specialty: Banner or text link sponsorships are sold on a fixed-fee basis.
  • Banner advertising: Targeted on a run-of-site basis or based on registrant/visitor behavior.
  • Cost per lead: Some directories ask their visitors for information match those leads with advertisers. The biggest challenge for this business model happens when the leads are non-exclusive, meaning that many of your competitors also receive the same leads at the same time.

To understand how these business models come together, let’s pick an example from the legal field, a highly competitive sector with many vertical portals. A recent search for “New York Lawyer” in Google, Yahoo, and MSN turned up the following directories in the paid and organic results.

  • This directory sells a landing page banner program for $900 annually, plus a $199 listing. However, no specific guarantees and the search engine used is a Google CSE (Customized Search Engine) deployment. So, you’d need good SEO on top of paying to be included in their CSE result.
  • Run by LexisNexis, a division of Reed Elsevier, is an example of when a powerhouse within an industry decides to build and run the industry online directory. This type of scenario has positives and negatives. The positives are the resources that the parent group can bring to bear. The downside is that your competitors are far more likely to be participating here than in a directory with fewer marketing and sales resources.
  • This directory has a diversity of packages and nearly all are sponsorship or fixed-fee based as far as I can tell from reading the descriptions. It seems to have adopted a yellow-pages style model of having something that appeals to everyone at many price points.
  • As its name suggests, this directory allows the consumer or business to fill out a form and then participating lawyers get the leads to follow up on. As with most lead-gen directories, a combination of lead quality and level of competitiveness combine with the price per lead to determine whether participation is warranted.

Similar directory models exist in a wide diversity of industries. The easy thing is finding the directories. A simple search in the top search engines for your profession’s keywords will reveal all your options. Often these directories can be used in conjunction with a highly targeted and profit-centric PPC campaign to enhance visibility for your business.