Google Express Goes Local

Plus there is the added difficulty in reaching out to business owners who may have never advertised on the Internet and may not even have their own Web sites. Their lack of experience may be pushing them to overpay for keywords.

"There is some irrational bidding going on," says Rodney Rice, co-chief executive of InterActiveCorp's(IACI Quote) ServiceMagic business, which uses search engines to help match people with local contractors. ServiceMagic counts on vetted user reviews, in addition to keyword advertising, to help "brand" local businesses, he says.

Investors look at keyword prices as an indication of how Google, which provides little information or earnings guidance, is performing. This is a metric that garners added interest, since Google's shares are down 6.3% this year.

Keyword prices don't tell the whole story. Advertisers have found that it isn't always beneficial or cost effective to be highlighted as the first advertisement on a Google search.

"There are people who are bidding more wisely," says Chuck Richard, vice president and lead analyst with Outsell, an information-content research firm.

All of the engines have talked a good game about local search.

"The search engines haven't cracked the code to make it really easy for consumers to find local services and local products," Magun says. "The local search product is where the national search product was three or four years ago."