Google is trying to solicit more hyper-local advertising by straying from the very ad formula that made it rich. AdAge reported yesterday that local ads will not use "keyword auctioning," the Google Ads system that chooses which advertiser to run by accepting automatic "bids" from each advertiser interested in certain terms. Instead, Google will offer local advertisers flat fees.
As Wikipedia explains:
The source of all AdSense income is the AdWords program, which in turn has a complex pricing model based on a Vickrey second price auction. AdSense commands an advertiser to submit a sealed bid (i.e., a bid not observable by competitors). Additionally, for any given click received, advertisers only pay one bid increment above the second-highest bid.
Complicated, right? That's what Google thinks is putting off small businesses. The flat fee will be cheaper, and will even integrate with Google Voice so that businesses know which calls were prompted by a Google ad. The new ads will be a part of Google's Local Business Center, and are available now.
The move will put Google squarely at odds with New York startup Foursquare, which is in the midst of developing a clever, alluring advertising ecosystem for restaurants, bars, and other neighborhood haunts. Google's success may ultimately be with non-Foursquare businesses—law offices, medical practices, shipping centers, and retail outlets, for example.