The Praized Blog

A few weeks ago, with the release of the latest revenue numbers from the Newspaper Association of America, we were treated with very Chicken Little-esque headlines including “Decline Of US Newspapers Accelerating“, “NAA Reveals Biggest Ad Revenue Plunge in More Than 50 Years “ and ”NAA to newspapers: advertise this“. 

Highlights of these articles included:

• “Total print advertising revenue in 2007 plunged 9.4% to $42 billion compared to 2006″
• “Signs that online growth rate is beginning to slow as well. Internet ad revenue in 2007 grew 18.8% to $3.2 billion compared to 2006.”
• “But an even more important reason why paper ads are declining is that their cost-to-value ratio is way out of whack with what advertisers can get elsewhere, particularly the Internet.”

One reader in Techcrunch (a former journalist) had an especially enlightening comment:

Across the board, three dynamics are pretty consistently hammering nails into the dailies’ collective coffin faster than might be occur otherwise:

* Despite talk about fundamental disruption in the business, there’s still an attitude that this is a storm to be ridden out rather than a complete sea change. Even when the folks at the top (owners, publishers) get it, there are many, many layers of upper and middle managers who don’t — and who are afraid of losing head count because that somehow diminishes their authority.

* Sales has been given increasing control of the organization. Mind you, sales are crucial — but it’s hard to find a group of folks less strategic than salespeople on commission.

* Too many lifers. When you get into key operational areas (marketing, product development, news management) you find a lot of people who’ve been in the daily news business their whole careers, which isn’t necessarily bad, but nor is it a hotbed of innovation. What’s more shocking is the number of people you run across who’ve been at the same paper for 15, 20 or 25 years.

Chris Anderson, Wired’s Editor-in-Chief, had a different take on things, one that I definitely agree with:

The truth is that the newspaper business is still a huge industry and will be around in one form or another for the rest of my life. That is not to dismiss the declines, but only to note that there’s still a lot of money there and what is required is strategic change, not giving up the ghost.

Growth industries are different from sunset industries, but in many cases the second category is larger (one example: the Yellow Pages is still a $16 billion business).  Managing companies on the way up takes a different set of skills than milking them for cash on the way down (and often different people, witness the buyout guys), but fortunes are just as often made the second way.

What people forget is that industries peak at the top. Which is to say, at the very time that the first and second derivative people are writing off a business, those who can stand back and see the value still left in it can make a mint. Laugh at newspapers if you will, but I’ll bet some private equity firm out there is looking at the chart above and licking their chops.

With all this doom and gloom, I was pleasantly surprised when the Canadian Newspaper Association released their numbers last week.  Highlights from the Financial post and The Windsor Star:

• “Revenue at Canadian newspapers fell about one per cent last year”
• “The healthier financial picture in Canada reflects newspapers that are doing a better job maintaining their readership numbers”
• “a 30 per cent rise in online advertising revenue offsetting a two per cent drop on the print side.”
• “The ongoing challenge for newspaper companies (…) is to figure out how to use print content in digital form across various platforms such as home computers or mobile devices.”
• “The narrative about newspapers in the U.S. has been consistently negative in recent years, and that negativity has unduly influenced perceptions of the health of the newspaper industry in Canada”

What it means: as I don’t know the intricacies of both regions in the newspaper industry, it’s very difficult for me to comment on the why of those major differences.  But it’s something we also see in the directory industry, where Canada (or by proxy Yellow Pages Group) usually experiences better financial results than its US peers.  From a newspaper usage perspective, I do have one recent ”focus group of one” anecdote though.  Ever since I got my HTC Touch with a cheap unlimited data plan from Bell Mobility, I find myself reaching for the phone much more often than the printed newspaper when I have a few minutes during the day.  Radio-Canada (the French CBC) has become my default source for mobile news as they refresh their feed very often, have tons of original content and have a mobile-specific version.  If I (a self-proclaimed newspaper junkie) am reaching for the phone instead of the paper, it’s a sure sign that mobile will be next opportunity/challenge facing the newspaper industry and I think it will be the same in the directory business.

MediaPost’s OnlineMediaDaily reports on a speech given by Team Detroit SVP Cary Tilds at CTIA Wireless in Las Vegas:

Mobile is mainstream–no longer emerging–which means advertisers and marketers need to be always on to reach consumers, according to Tilds, an executive from an agency created about a year ago combining JWT, Y&R Wunderman, Ogilvy and GroupM. “The more mobile data people use, the more they search, and I think it will continue to increase this way,” she said. “People are using mobile for impulse local searches, impulses, and restaurant and entertainment. Today, hotels make up about two thirds of the pay-per-call ads served.”

What do consumers search for on mobile phones? People look for local listings first–which gives smaller businesses an opportunity to reach a wider audience, followed by news and information, and mobile content. Tilds told conference attendees it’s not just about sending and receiving text, but rather about finding things online to consume.

What it means: mobile and local search, approaching a turning point. Will become strategic before the end of the year for anyone playing in the local search space. The merger of Local Matters and mobilePeople makes complete sense in that context.

Annual revenues from mobile search services are expected to hit $4.8 billion by 2013, according to a new report from Juniper Research. Among the factors driving growth are the decline of carriers’ “walled garden” approach, falling data costs and the entrance of search heavyweights such as Google and Yahoo.

Local search will be the most popular service among advertisers, attracting 40% of mobile search ad spending over the next five years. Globally, China and the Far East are expected to generate most revenues from mobile search in the coming years, followed by Western Europe and North America.

(via Online Media Daily)

Related update: Matt Waddell, a product manager for Google mobile said in a Reuters interview: “We have very much hit a watershed moment in terms of mobile Internet usage. We are seeing that mobile Internet use is in fact accelerating.”

Second related update: M:Metrics reports on iPhone feature usage: “Two featured widgets, YouTube and Google Maps, are extremely popular among iPhone users: 30.4 percent accessed YouTube and 36 percent used Google Maps. In comparison, only one percent of all mobile subscribers accessed YouTube and 2.6 percent checked out Google Maps.”

What it means: more indication that local mobile search is about to happen.

“We thought it was a mistake and made our engineers check the logs again”

According to Apple Insider, “Google on Wednesday said it has seen 50 times more search requests coming from Apple iPhones than any other mobile handset — a revelation so astonishing that the company originally suspected it had made an error culling its own data.”

What it means: oh, oh! I think that’s he first real sign that mobile and local is coming… Get ready for the next evolution. More info in this Financial Times article.

As this week’s Mobile World Congress slowly winds down (tomorrow’s the last day), I thought it was appropriate to summarize the top 10 trends of the conference as identified by Infoworld magazine.

1. GPS on board. Amongst the manufacturers, Nokia “plans to sell 35 million phones with GPS” this year.
2. Better cameras with “face detection, image stabilization, and the ability to take better pictures in the dark”.
3. Linux. Google Android prototypes. ’nuff said.
4. Movies on your phone.
5. Geotagging that “combines built-in support for navigation and photography. When you take a picture, your location is also saved. Then you can overlay that information on services like Google Maps and see where you’ve been.”
6. Windows Mobile. “Four out of five of the biggest phone makers have phones based on Microsoft’s Windows Mobile operating system”
7. High-speed mobile Internet
8. Wi-Fi on board.
9. FM transmitters.
10. Touch-based interfaces.

What it means: phones are becoming more and more like mini-portable computers and trying to be at the center of your mobile life. In addition, more GPS on board and the geotagging functionality are very exciting stuff for a local search freak like me! I was also intrigued by the better face detection. Expect a day where you can take a picture of someone and, with his/her permission, become a “friend” in a social network…

Nokia announced this morning at the Mobile World Congress in Barcelona the launch of their Maps 2.0 service, for its Series 60 and 40 phones. According to the BBC News Web site,

Nokia has launched navigation tools designed to make the paper street map obsolete for pedestrians. The firm’s next generation of digital maps gives real-time walking directions on the mobile phone screen, just like sat-nav systems which guide drivers. “Nokia is taking navigation services out of the car so it can always be with you,” said Olli-Pekka Kallasvuo, president and CEO of the firm. “Struggling with oversized paper maps will become a thing of the past.”

What it means: another local application attached to mobile devices. This one is squarely competing against any mapping web site or any site that relies heavily on mapping as a main attraction. It could also be a threat to paper travel guides (see also Travel Guides Still Selling Well, Saved by Portability) (pictures by Nokia)

“Microsoft to Pay $31 Per Share for Yahoo, Totaling $44.6 Billion in Cash and Stock. Microsoft said it sees at least $1 billion cost savings generated by the merger, and intends to offer significant retention packages to Yahoo engineers, key leaders and employees. The software giant said it believes the takeover would receive regulatory clearance and close in the second half of 2008.”

(via Yahoo Finance)

Update: just listened to the conference call. Clearly, vertical search and social media is high on the Microsoft priorities and buying Yahoo! gives them precious assets there. From a local search perspective, mobile was mentioned many times.

What it means: that rumor had been circulating for a long while now. This has the potential to create a powerhouse in local and social. More details during the conference call.

Skyhook’s technology uses signals from WiFi hot spots to triangulate and find a person’s location, instead of using a chip that lets a mobile device communicate with the satellite-based Global Positioning System.Skyhook, founded in 2003 by Ted Morgan and Michael Shean, has gathered and catalogued the WiFi fingerprint of streets in thousands of US cities and towns by driving along roads and collecting the unique signatures of 23 million WiFi signals that flow out of houses, businesses, and public access points. The company uses that data to let WiFi-enabled devices know where they are. (…)The software upgrade that includes the new location feature - it’s available free on an iPhone and for $19.99 on an iPod Touch - allows people to simply press a button to see where they are.

A map displays a bull’s-eye that’s centered on the user’s location; Morgan said Skyhook’s technology typically is accurate up to about 165 feet. The technology builds in the likely margin of error and draws a circle on the map, taking into account the likely error of the location technology, so that the user will be within the radius 95 percent of the time.

(via Boston.com)

(flickr photo by tibopoix)

What it means: I believe Apple is betting that location-based services represent the future growth for their iPod line of product. During Apple’s Q1 2008 conference call, their execs called it potentially the “first mainstream Wi-Fi mobile platform, running all kinds of mobile applications”. With the upcoming release of the iPhone SDK, we should be monitoring the growing installed base of these devices.

CNET’s News.com reports on a new forecast from Swedish analyst firm Berg Insight predicting that “the number of GPS-enabled handsets is set to more than triple during the next five years”.

Growth in the GPS-handset user base should also lead to more applications that use such information, Malm (a telecommunications analyst at Berg Insight) added, pointing to the success of currently available location-based services like Google Maps. “Perhaps it is not right to call them services, but small apps that use location as a filter or enhancement–we will see a lot of that going forward, once developers and users get more used to using location,” he said.

Berg’s press release adds “The availability of accurate position data in mobile devices creates exciting new opportunities for developers of local search, navigation and social networking applications”, said Mr Malm. “Nokia and Google will be two of the foremost players in this arena but there is a good chance that the development will also give birth to the next Facebook or MySpace.”

Flickr photo by Jimmy_Joe

What it means: I am truly excited about these numbers as local, social and mobile combined really has the potential to create the next big web phenomenon. But one thing concerns me currently in that space: the creation of an even playing field. In 1995, barriers to entry on the World Wide Web were low (even non-existent) and allowed the creation of Yahoo and eBay (current combined market cap: $67B). Still today, the barriers to entry for new Web projects remain very low. It’s not the same in mobile where there are a lot of gatekeepers. Handset manufacturers and Telcos come to mind, but the position of strength major portals and search engines enjoy through their relationships with the aforementioned gatekeepers make their stranglehold very difficult to break. Because of that, I wonder if we will see a real innovation burst in mobile/local in the short term. It will come, I have no doubt about it, but it might not come as quickly as it potentially could be.

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.