Vertical digital directories, which are online properties that provide structured content for a niche category such as real estate, home improvement or travel, serve as a bridge to online and paid search advertising for many local businesses, according to an industry group study.

Vertical directories play a dual role online. They provide content to search engines in response to local search queries and offer a gateway to paid search advertising for small and medium-sized businesses like real estate companies.

The Kelsey Group, which provides research and analysis of Yellow Pages, electronic directories and local media, today released a 63-page white paper that examines the role of vertical directories in local advertising. The report is available only to clients of The Kelsey Group’s Digital Directories: Interactive Local Media Continuous Advisory Service.

“Online vertical directories have the resources and expertise necessary to buy pay-per-click advertising and compete successfully with sophisticated, large advertisers for limited ad inventory on search engines,” said Greg Sterling, director of The Kelsey Group’s Digital Directories: Interactive Local Media Continuous Advisory Service.

Vertical directories such as HomeGain.com and Lawyers.com help facilitate paid-search advertising adoption and educate local businesses about search-engine marketing by offering search engine marketing services to their users–whether directly or indirectly, the study found.

Also, verticals increasingly are mimicking search engines and adopting the “search box” as a primary way for users to find information.

“Many verticals have also adopted the search engine model for both consumers and advertisers,” Sterling said.

Search engines generally benefit from the existence of vertical directories, even though the two are potential competitors for advertisers. By investing in paid search, verticals deliver valuable content and local listings (typically indirectly) to the search engines.

Vertical-search engine/portal relationships will, in the short term, benefit both sets of parties, according to the report. Partnerships appear to be the best strategy for the groups to acquire local content and drive traffic to their sites.

“Going Deep: Digital Vertical Directories,” features a detailed look at verticals in the legal, health care, auto, shopping, real estate/relocation, home-improvement and restaurant/entertainment categories, and includes in-depth profiles of leading Internet properties within these key vertical segments.

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