Google searches for local edge with guidebook deal

NEW YORK Tue Aug 14, 2012 3:59am EDT

NEW YORK Aug 13 (Reuters Breakingviews) - Frommer's travel guides may be better known among frugal travelers with comfortable shoes than with the digital cool kids. Yet Google's purchase of the publisher looks like a smart way to further its push into the booming local online advertising market, building on last year's purchase of Zagat, the dining curator.

The growth of smartphones - more than half of Americans now have one - is profoundly affecting Google. While users flock to the devices, advertisers haven't yet. This can be easily seen in the search firm's results - while the number of clicks on ads rose more than 40 percent in the last quarter, the amount of revenue Google fetches per click fell 16 percent.

Google's de facto monopoly on mobile search, however, could crack this nut. It has greater than 95 percent market share, according to research outfit StatCounter. The company is using this to muscle into local online ads, a fast-growing market which should be worth close to $35 billion in 2014, estimates research outfit BIA/Kelsey.

Customers use their phones to look for everything from restaurants to dry cleaners. Small businesses should be willing to pay up to influence and land some of this traffic - that is, if the process is easy and, more importantly, cost-effective.

Google (GOOG.O) figures offering more and better information will make both advertiser and searcher happier. For example, if a user types in sushi, it lists all the local restaurants and plots them on a map. Moreover, it provides Zagat's vetted reviews, and user comments from its social network, Google+. Buying Frommer's offers a way for Google to plug reviews of everything from restaurants to hotels to nightclubs into this matrix. Frommer's also fits nicely with flight and travel information Google provides through ITA Software.

Finally, Google rivals like Yelp (YELP.N) have complained that the search engine has acted unfairly by making its own content appear higher in users' searches, and therefore catches more than a fair share of ad dollars. Offering professional content may defuse this critique. After all, Google can claim credibly that Frommer's reviews appear first because they're of higher quality than those made by random Interneters. Google may just find a local edge with this guidebook deal.

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

(Editing by Rob Cox and Martin Langfield)