CitySearch Sees Future Local-Search Growth

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CitySearch's performance-based search advertising program added 24,000 local businesses in its first nine months, parent company InterActiveCorp said yesterday.

IAC said the Los Angeles-based local search service added 3,000 performance-based listings in the last three months of 2003, ending the year nearly halfway to IAC CEO Barry Diller's goal of 50,000 local search advertisers by the end of 2004. Pay-for-performance revenue at CitySearch rose 14 percent from the previous quarter.

Diller said in a conference call with investors yesterday during the fourth-quarter earnings report that CitySearch was not profitable but would break even during 2004.

"With all the doubters about our CitySearch investment still yet to pay off one dime, I'm going to say again and again that people live locally and local Internet services will play the central role in making those lives so much easier," he said.

CitySearch this week named Anne Busquet, a former American Express executive, to lead its local services unit, which includes CitySearch, coupon-book marketer Entertainment Publications Inc. and online invitation service Evite. The chief executives of all three companies in the unit will report to Busquet.

Local services in the fourth quarter accounted for $147.5 million in revenue and $40.5 million in operating income, mostly thanks to EPI's traditionally strong holiday sales. Without EPI, the division would have lost $16.2 million in the quarter.

CitySearch began its paid listings program last March, allowing local restaurants and bars to bid for pay-per-click listings tied to user searches.

Google and Yahoo's Overture Services have tested local search services that serve locally relevant ads after a user enters a search term and ZIP code. Google also offers advertisers an option that serves ads only to searchers from certain regions based on their Internet addresses.

In October, Diller said IAC held talks with Google about a partnership. CitySearch already has ties to major search players. It supplies entertainment and arts listings to Yahoo's city guides, and it provides content for MSN's local channel.

CitySearch sees its local sales force as an advantage over the search engines, arguing that the sales force can reach local businesses better than the self-service systems in place at paid search providers.

The local search market is widely predicted to take off this year, building on the success of paid listings. The Kelsey Group estimates the local search market could be worth $2.5 billion in 2008. Internet yellow pages providers like Verizon's and have geared up for increased competition from search engines by streamlining their sites and offering new advertiser options.

CitySearch overhauled its own site in December, also following Google's lead with a cleaner layout that emphasizes the site's search function for local restaurant and nightlife listings.

The company said it would continue to move its business model away from flat-fee directory listings to pay-for-performance listings. Diller said IAC would continue integrating its various online businesses, including offering CitySearch users discount coupons through EPI.

"We think local is a great area," he said, "and we're going to make investments in that area."

Brian Morrissey covers search marketing for DM To keep up with the latest search marketing news subscribe to our free e-mail weekly newsletter Search Engine Marketing by visiting .


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