The Praized Blog

Very interesting first half-day yesterday at the Kelsey Group’s Drilling Down on Local ‘08. The theme of the conference is “Marketplaces”. It regroups products such as classifieds, auctions and vertical sites. Here are highlights from the first two sessions:

As an introduction, the Kelsey Group’s team provided us with some background information on “Marketplaces”. Neal Polachek first described the local end game as “better search, discovery, and engagement”. He even quoted the Cluetrain Manifesto’s “Markets are conversation”. He also talked about their latest global ad revenue forecast for 2007-2012, stating that the biggest category winner would be Internet and the biggest loser would be newspapers. As I wrote last week, the Kelsey group believes that Verticals will capture a large chunk of online advertising by 2012. Matt Booth then talked about three specific verticals (travel, automotive, home services) that have had a tremendous impact on offline/online business and media spending. For example, Matt showed two juxtaposed graphs showing the decline of newspapers’ automotive revenues vs. Autotrader.com’s revenue increase. Peter Krasilovsky finished the intro by stating that it’s now time to “uncouple” print and online media bundles. As print revenues decline, you need to have online-only ad products to compensate. Peter added that you also want to “verticalize” your offer to expand your revenues.

The second session “Remaking the Los Angeles Times (Online)” starred Rob Barrett, Senior VP of Interactive Media, GM, LATimes.com. He started by mentioning that most of what he’s currently working on is not very visible online now. He spent the first couple of years at the LA Times refocusing the online business. His main focus has been to build the display ad business (as opposed to classifieds). It’s going to generate $25M in revenues this year. Barrett says it’s now “time to finally break the newspaper paradigm online”. The LA Times’ online strategy needs to be local as opposed to national as it will allow them to differentiate their offer versus other “national” newspapers like the New York Times. They’ve realized that local users are key to online revenues as they generate more monthly page views and twice the display revenue per page views. Their product approach is “we want to own Los Angeles”, i.e. be integral to life of Angelinos, be the source of news and information about Los Angeles to the world and be an information retailer by creating, aggregating and curating LA content.

The Latimes.com web site is slowly transforming itself into a hyperlocal social network. All content pieces are going to be tagged and indexed by category and geography. By targeting on demographics and on geo, the LA Times is hoping to raise their average CPMs and improve ad effectiveness. They are creating the best targeting machine for the LA DNA. Barrett then showed us pilots of various new vertical sections that are very promising:

• The Travel section: http://travel.latimes.com
• A hyperlocal arts & entertainment guide: http://theguide.latimes.com
• Hollywood backlot to show pictures of movies shooting: launching next week
• User-generated photo and video content: photos & videos, http://yourscene.latimes.com
• The Homicide map: http://www.latimes.com/news/local/crime/homicidemap/

The Kelsey Group (TKG) just released their 2008 Local Media trends. They believe 2008 will be a pivotal year for the global Yellow Pages industry. Here are the highlights:

• Print local media: TKG wonders if the directory business will continue to be as recession-proof as it used to be, as more ROI-driven online local ad products are launched. For large US urban areas, they also talk about the creation of print opt-out plans, important market rescoping and the launching of new directory formats. They also expect higher cannibalization of traditional media sales, mostly from search engine click packages.

• Online local media: 2008 is the year where user-generated content becomes a critical aspect of consumers’ decision-making process. Merchants will be widely invited to join that conversation as well. In addition, auto and real estate verticals will continue to develop in the local search context, new devices will lead to new sources of searches and local search inventory will increase drastically.

• Sales: 2008 will continue to see the uphill struggle to build independent local sales channels.

• ROI/Performance-based products: this year, we will see the beginning of the untethering of print and online usage and more use of robust ad reporting. TKG thinks that 2008 is the year where the promise of pay-per-call gets realized as multi-channel management becomes a critical success factor.

• Verticalization: from a seller perspective, high ad spend categories will attract lots of sales competition from many different sources: SEO/SEM firms, newspapers, vertical sites, start-ups, etc. In national sales, we will see more ad localization.

• New products: Video, Mobile and Outdoor, with a mention that “video is where the immediate action is”.

You can find the Praized blog’s 2008 predictions here.

What it means: As a regular attendee of Kelsey Conferences, I am usually well aware of most of the local media trends but there are a couple of surprises in there for me. First, the creation of opt-out programs for print directories in some US markets. I did not realize the pressure was high on US publishers to create these mechanisms. The second one is Outdoor as a new product. I wasn’t aware that local media companies were looking actively to sell “outdoor” products. In my mind, it’s the kind of interesting opportunity that’s always discussed but is never “low-hanging fruit” enough to execute. Will be interesting to follow. I also like the call to disconnect print and online usage. TKG was the first organization to warn directory companies not to couple print and online value for too long (back in 2001-2002). What they’re saying is: there used to be a time where bundling print and online usage was useful to sell but online is now strong enough to sell on its own.

I’m just coming out of the last session of this year’s DDC conference organized by the Kelsey Group. Again, a very good conference with interesting topics and multiple networking opportunities. Here are some random data points from the various speech and panels I heard in the last two days.

• Print media still represents 90% of total directory industry revenues
• 60% of SMEs do at least half of their business with other businesses
• 21% of SMEs have embraced cell phones and VOIP lines (instead of the traditional phone company land line)
• 34% of SMEs ad budget is dedicated to online media (including web site expenditures)
• Automotive represents 60% of Trader Corp’s revenues (Trader Canada)
• Jingle: at least 90% of their revenues come from national advertisers. 5% of their queries are category-based. They have close to 100,000 advertisers.
• White Directory Publishers will generate $3-4M in online video revenues in 2008.
• The optimal length for an online local video ad is 45 seconds.

A selection of some of the praized-worthy news in the last few days:

1) ContactAtOnce!, a provider of presence-aware solutions (click-to-call, IM, etc.) just announced that BargainNews.com, one of their customers, improved the conversion rate of its auto classified website by 77% after adding the ContactAtOnce! service (see screenshot below) to their enhanced advertising packages.

2) Bret Taylor and Jim Norris (both seen below), two of the masterminds behind Google Maps and several other Google products, have joined Benchmark Capital as “Entrepreneurs in Residence.” This gives them paid positions to hang out at Benchmark’s offices on Silicon Valley’s Sand Hill Road and think through starting a business. They have a specific idea in mind, but are secretive about it, telling VentureBeat only that it’s a “consumer Internet” company. I’ve had the chance to work closely with Bret when Google launched their Local site in Canada and it was great fun. I wish them both good luck! (via VentureBeat)

3) R.H. Donnelley officially launched DexKnows.com, their new local search web site powered by Local Matters (previously known as Dexonline.com). It now includes comparison shopping, a better mapping experience and some personalization tools.

4) Yellow Pages Group in Canada released their latest heading modifications. It’s always interesting as it gives us a perspective into changes in culture and society. Amongst others, Pilates, Organic Products, Geothermal Energy, Tapas, Brunch, Vegetarian & Vegan Foods are in. Telephone Booths, Shoulder Pads, Chewing Gum and Buttonhole Makers are out.

(via the Center for media research)

According to preliminary estimates from the Newspaper Association of America, advertising expenditures for newspaper Web sites increased by 22.3 percent to $750 million in the first quarter versus the same period a year ago. Advertising on newspaper Web sites made up 7.1 percent of total newspaper ad spending in the first quarter compared with 5.5 percent for the same period a year ago. (…) Advertising expenditures at newspapers and their Web sites totaled $10.6 billion for the first quarter of 2007, a 4.8 percent decrease from the same period a year earlier. Spending for print ads in newspapers totaled $9.8 billion, down 6.4 percent versus the same period a year earlier.

Of note in the first quarter of 2007, classified advertising fell 13.2 percent to $3.4 billion with the following detailed information:

• Real estate advertising fell 14.2 percent to $953 million
  
• Recruitment dropped 14.3 percent to $975.3 million
• Automotive was down 20.1 percent to $751.3 million
• All other classifieds were down 0.5 percent to $699.3 million

What it means: clearly, growth in online advertising revenues at newspapers does not compensate for loss of print revenues. Especially important are drop in automotive, real estate and recruitment (three verticals that are really strong online). What’s most important at this point is making sure newspapers increase the traffic to their web properties by all means (distribution agreements, search engine optimization, launch of new verticals and hyperlocal sites, etc.).
The creation of forced Print/Online bundles might also help them sustain their total revenues while online monetization improves in the future.

Just read about this new start-up, Boompa, which describes itself as Myspace for car lovers. Founded 5 months ago by two guys that used to work at CNET, David Snider and Ethan Lance, the site allows you to “upload photos of your car and put up a profile of it, create a blog, post on other members’ blogs, or share instructions on how to replace a main bearing in the “Guides” section. You can also pit your car against another in a contest called a “Battle,” resembling hotornot.com.” (via the Contra Costa Times)

They have a sales agreement with John Battelle’s Federated Media. According to the article, it seems like there is already quite a number of Web sites trying to compete in this social network vertical like CarSpace.com, CarDomain, Motortopia and Carster.

What it means: Love the user interface and the “hot or not” concept around cars. Love the fact that they have a lean & mean operation, which means their costs are quite low. But given the high-level of competition, is this becoming more a feature than a site? Definitely, any traditional online or offline media already in the car space has a need for similar functionalities and if Boompa does not generate enough traffic on its own, they could always become a technology enabler. In any case, a media company focussed on automotive could also syndicate their ad network to sites such as Boompa to expand their own network.