AOL Enters Local Search Market

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America Online has launched a local search service designed to let users of its search engine find information tied to a specific place, such as business listings, movie times, and events.

With this move AOL joins search engine rivals Google, Yahoo, and Ask Jeeves, which have similar services. The free service is available both to subscribers of the fee-based AOL online service and to Web users.

AOL estimates that about 20 percent of the queries run on its main Web search engine are for local information, so given the interest in this type of search it makes sense for AOL to have this service, says Dariusz Paczuski, vice president of marketing for AOL Search and Directional Media.

Also driving the interest from AOL and its rivals in local search is the new advertising opportunity in attracting local businesses that may not have been interested in seeing their ads run along with query results that weren't specific to the city or area in which they do business.

Info Sources

For the local search service, AOL is aggregating information from a variety of its existing properties and from several partners. For example, local search results will feature business listings gathered from the AOL Yellow Pages; local entertainment information, reviews, and ratings from AOL City Guide; maps and driving directions from AOL subsidiary MapQuest; and movie information from AOL's Moviefone.

On the partner side, AOL's local search will feature retail shopping information from CrossMedia Services' ShopLocal.com, restaurant information and reservation services from OpenTable, dining certificate offers from Restaurant.com, and event-ticket purchasing through AOL Tickets, which in turn partners with several ticketing services.

Features AOL plans to add to the local search service in the future include local news provided through Topix.net, as well as an index of general Web sites containing pertinent and timely local information that AOL will build in partnership with Fast Search & Transfer.

AOL has hit the bull's-eye with its approach to local search by providing not only useful information but also ways for users to act on the information, such as buying event tickets, obtaining driving directions, and making restaurant reservations, says Allen Weiner, a Gartner analyst. "That's one of the most powerful and valuable things I see in this local search service: actions with content," Weiner says.

A World-Class Internet Portal?

This service--as well as others that the Dulles, Virginia-based AOL has unveiled recently--makes it clear that the company is on the comeback trail, but a core issue remains unresolved: AOL's dual strategy of having a proprietary fee-based online service and a public portal open to all Web surfers, Weiner says.

AOL can make AOL.com a world-class Web destination that is in the same league as the offerings from Yahoo, Microsoft's MSN Internet division, and Google, Weiner says. But AOL will not be able to achieve that goal as long as it has to devote resources and efforts to its proprietary online service as well, he says.

Subscriptions to AOL's fee-based online service have been dropping consistently, and in response the company has begun devoting more attention and resources to AOL.com, whose business model is attracting Web traffic and selling advertising.

However, despite the erosion in its subscriber ranks, AOL, a Time Warner subsidiary, still has a significant number of members. Its U.S. subscriber base stood at 22.2 million at the end of the fourth quarter, 2 million less than a year earlier and down 464,000 from the immediate prior quarter.

This means that the fee-based online service still provides significant ongoing revenue for AOL, Weiner says. "AOL is waking up to the power that it has always had and packaging [its content and services] in a way that has tremendous value. But this doesn't negate [the fact] that they're still pursuing this dual strategy," Weiner says.

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