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Why Is Google Focusing on Local Inventory Ads?

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Local inventory ads are becoming popular

Local inventory ads provide users with the real-time information on their mobile devices. The ads provide information about the products that are in stock in a local store—closer to their locations. Google (GOOG) (GOOGL) announced this feature in October. During the 4Q14 earnings conference call, Google mentioned that major retailers, like Macy’s (M) and REI, took advantage of local inventory ads during the holiday season.

Google also expanded local inventory ads’ technology to countries outside the US—including the United Kingdom, France, Germany, Japan (EWJ), and Australia.

These ads are a win-win situation for Google, consumers, and retailers. Google earns ad revenue, consumers benefit from access to local information, and retailers benefit from increased business as more consumers visit their stores.

According to a report from eMarketer, citing research by Harris Poll for Placecast, US smartphone owners ranked the ability to search for a retail location nearby using apps as the third most popular activity after text messaging and internet access on mobile.

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Local mobile ad spending poised for strong growth

The eMarketer report also mentioned that the local inventory ads business is poised for fast growth. The above chart shows that US location-targeted ad spending could grow from $4.37 billion in 2014 to $17.86 billion in 2019 at a CAGR (compound annual growth rate) of 33%. During the same time period, the spending that isn’t location-targeted could increase from $8.98 billion to $23.77 billion at a CAGR of 21%.

This shows that the local inventory ads business has huge growth potential. It means that Google is set to benefit from this growth. In addition to Google, local review site Yelp (YELP) will also benefit. eMarketer forecasted that Yelp’s mobile ad revenue will increase 88% from $242 million in 2015 to $397 million in 2016.

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