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Google Takes Local Angle

Reports that Google (GOOG) is amassing a radio-advertising salesforce sparked a wave of speculation last week, ranging from a possible partnership with Clear Channel (CCU - Get Report) to an all-out acquisition of the broadcaster.

But regardless of whether Google announces any sort of deal, the buildup is something that investors in the Internet sector should watch. It will have serious implications for the increasingly important local-search space.

Last week, a research note by RBC Capital Markets analyst David Bank set off a firestorm by reporting that Google had hired high-profile radio-ad salespeople, and was in the process of bringing in 100 more. Bank found the development odd because Google doesn't currently have many places to put radio ads.

Google's hirings led Bank -- who covers broadcasting, not the Internet -- to hypothesize that Google could strike a deal with Clear Channel. With control of 20% of local radio industry revenue, ClearChannel is the player most receptive to new technologies and sales strategies -- and one widely believed to be on the block.

While it's in a commanding position where online advertising and tech-savvy businesses are concerned, Google is far from having a lead in lucrative local search, where many elusive small businesses still dominate. Instead, Google is neck-and-neck with rival Yahoo! (YHOO - Get Report), which actually could push into the lead if it continues to build on new technology it will introduce early next year.

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