Online Directories – Will Booking Provide New Momentum?

Alexander Mahr Industry briefing Leave a Comment

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Online directories are losing relevance – it is a well-known secret. Users searching for local businesses’ information do not necessarily start their journey by visiting an online directory’s website any more.

The situation

Google as the dominant global search engine does a great job in being an one-stop shop for any kind of searches, including SMB data. Google’s product “Google My Business” is targeted to SMBs in order to collect their data, which are then enriched (e.g. information for in-shop traffic estimation or ratings) and neatly integrated in Google search results and Google Maps. And there are more players in the market for similar data and use cases, e.g. TripAdvisor, Yelp, Foursquare, Facebook, etc.

Using search data for three selected European online directories’ brands on Google as an indicator for consumers’ interest, we can clearly see the evidence of strongly declining relevance throughout the past five years.

Stryber search volume online directories

According to latest SimilarWeb data for desktop traffic (December 2015), these example online directories are heavily dependent on search engine-generated traffic., and have a direct traffic share of 26%, 29%, and 19%, respectively. 66%, 66%, and 72%, respectively, are dependent on search engines. Given the Google Trend data as shown in the graph above, the share of “branded SEO” is declining (users searching for brand name; SEO stands for search engine optimization and is used as a synonym for traffic coming from organic search results in this context). The “non-branded SEO” (users’ non-brand-related searches bringing up websites on the search result page) share of the traffic is depending on the search engine’s perception of the online directories’ relevance for the respective user search. Depending on the competitive situation in each country, this can be quite different. Google’s infamous Panda updates can strike quite heavily to the disadvantage of online directories (as reported by multiple search agencies). Other search engine-generated traffic can only be paid for, which leaves online directories in a difficult situation being dependent on their major competitor (i.e. Google).

Only a small fraction of an online directory’s revenues is generated by advertising (which is directly correlated with traffic), the major share comes from SMBs paying for their company profile listings on the online directory’s website – following the print / yellow pages’ logic. Typically, the print business is sharply declining and the directories are still benefiting from an offline-to-online migration of their clients. The average revenue per account on the online side is still increasing as online directories are complementing their offerings with other online marketing products, e.g. website services, listing management and others. Also, the contracts with SMBs are often multi-year contracts. As a consequence, the impact of a rather declining market position is not directly visible in the financials yet.

What can online directories do?

In order to play a future role in the game, online directories will have to please all stakeholders – users, SMBs and search engines (i.e. relevance for search results). Apart from a continuous effort to have the most accurate and complete local data, online directories try to enhance their value-add through various initiatives, e.g. by adding ratings and reviews to their entries. Another new hope comes from bookings.

The idea is that users can not only search for SMBs address or opening hours but also book an appointment with, for instance, a hair dresser or dentist. The most obvious need to actually book something on a frequent basis is restaurants. The restaurant booking market has been addressed early by now large players, such as OpenTable and others. Hence, by forging partnerships with relevant players in their respective markets, online directories can provide immediate coverage of this specific use case. However, this alone is not a real differentiator. What about the more difficult categories as mentioned earlier in order to be the one-stop shop for searching and booking SMBs?

Stryber booking online directories

Looking at our benchmark of selected online directories worldwide, we can find that players handle this topic quite differently by integration and type. Apart from unfavorable on-page and forwarding integrations, the user experience is struggling by one major flaw: there is hardly anything bookable. Even in more mature markets, booking penetration is not above 10%.

The online directories apply different strategies to the go-to-market for booking solutions – pure aggregators reduce their role to integrating third party solutions (potentially accompanied with venture capital investments in respective startups), sales partners forge startup partnerships on the product level leveraging their sales force in order to control the SMB relationship, and full stack players even use their proprietary products. Of course, the online directories’ value share of this business is lowest with pure aggregators and highest with full stack players.

Since bookable inventory seems to be much more difficult to develop across SMB categories as compared to the restaurant market, we believe a pure aggregator strategy will not lead to a sustainable position. Since SMB marketing products generally need a “push” approach, the involvement of online directories’ sales forces (which are typically strong) is needed to solve the chicken-egg problem on a region-by-region basis. Therefore, the strategy of sales partners or full stack players is more promising.

Photo credit: Flickr user Jamie.

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