For local searches in particular, paid listings are more relevant than organic ones. After all, marketers only want to pay for relevant clicks, and there’s never been a foolproof way for Google or the other search engines to identify the optimal local results for a specific query.

Google has launched a new flat fee Local Listings product in San Diego and San Francisco that, when it rolls out nationally (and eventually internationally), will have a profound impact on local search results. The SERPs (define) will become almost fully dominated by non-organic listings even on a high-resolution browser. A 1024 x 768 SERP for a local result has up to 75 percent of the browser screen covered with advertising. However, not just any advertising is displayed. The ads are highly relevant; it’s a situation that I can see evolving to the point where a fourth ad starts showing up on non-local ads. Time will tell.

Some might see Google’s move to monetize page inventory at the expense of organic clicks as ruthless: it’s crowding the SERPS with paid listings to improve monetization. However, Google has managed to simultaneously improve relevance and generate more revenue per thousand searches.

If you have a local presence and serve people who potentially have a preference to shop locally rather than online, you should consider these ads as part of your paid search strategy. I don’t own a business in San Diego or San Francisco, and most of my clients are still deciding whether to run a test, so I reached out to Dave Beltramini, director of paid advertising for G5 Search Marketing. He’s running a couple of clients in the new local platform. Some of G5′s clients have a very strong retail presence in San Francisco or San Diego, including Self Storage and Senior Housing. They even have more than one client in the same industry, which gave them a unique opportunity to experiment. As you can see from this screenshot, below, if an advertiser has a lot of local presence, their local listings ads can be quite compelling.

According to the tests run by G5:

“The click-through rate for the storage vertical is running at about one third to one fourth of our pay per click campaign’s CTR. They are running at one sixth of our locally-targeted PPC campaigns.For Senior Housing — the click-through rate is on par with our average PPC campaign.

The biggest hurdle is pricing. Based on per-location costs, Senior Housing is a good price per click but the Self Storage vertical remains challenging in a cost-benefit sense.”

There is clearly some potential in this flat fee ad product, but success may be driven by consumer behavior, costs, and one’s industry vertical. Some of the challenges include:

• When your business name doesn’t include keywords, your ad is less noticeable.
• Figuring out if your ad is working (in other words, profitable) may take some time given the size of your targeted region.
• As Google takes in more local advertisers, will your rotation and visibility drop, reducing the profitability of ads?
• Determining if a blockade strategy is appropriate if you have many retail locations or whether selective use of the paid local ads is better.

It’s too early to know the answers to some of these questions, plus we don’t know how Google will treat major retail players that have many locations within a region. Will blockades be accepted or will Google reduce the cost and rotation rates of additional ads?

Local Listings ads in Google are not keyword-based, at least not directly. Google maps keywords to categories, much like the local yellow pages. Advertisers can select from one or more categories and, as expected, the more categories, the higher the cost.

Measuring profitability and response in Local Listings will require a bit of a change in mindset from what you might currently be doing. The local listings, because they display a telephone number, will be using “free call-tracking, announcing each forwarded customer call. ‘This caller brought to you by Google’.” While this may seem great, for some cities, such as New York City, it’s doubtful that Google has the 212 area code available, and like it or not, a company’s telephone exchange communicates the age of companies in New York. A 646 or 917 area code is considered sub-par compared to 212. I hope Google implements an optional toll-free service at a slight additional cost per call or cost per minute. This should stimulate additional calls, perhaps even more than a regional number (even though these days nearly everyone is on unlimited local and sometimes national calling plans at a residential level, and business people may not care about toll-free).

I look forward to testing this for multichannel clients and my wife’s local business.