The Praized Blog

Pat Marshall has been in the online directory industry basically since it was created. In fact, when introducing him, John Kelsey and Charles Laughlin (both from the Kelsey Group) called him “the father of Internet Yellow Pages”. According to the press release announcing his Yellow Book nomination, “ Marshall has spent more than 28 years in marketing leadership positions, including as a senior executive with Verizon, Frontier Corporation and R. H. Donnelley. At Verizon, Marshall led the launch and management of SuperPages.com.” So, it was with great pleasure I sat down to listen to this conversation between the Kelsey Group folks and Pat Marshall.

Q: Why did you get back into the Internet yellow pages (IYP) business?

A: I did not want to get back in IYP, I wanted to get back into local search. I also wanted to get back into action (as opposed to the consulting I had been doing in the last few years)

Q: So, is Yellow Book in the local search business?

A: Today we’re more IYP than local search, but the trajectory is going towards local search. IYPs are really good at finding who but not good at finding what.

Q: What are the areas you need to move into to to go into local search?

A: Three things: 1) Infrastructure. Business directories are yearly things and this does not work in the local search world. 2) Traffic. a key directory publisher axiom: advertisers advertise because users use. You need a qualified audience and we’ve done well with that (see this Comscore release). 3) Having inventory. Present a merchant in a context that’s appropriate for him. We don’t have enough inventory today.

Q: Where are you now on a scale of 1 to 5?

A: We’re at 3. We’ve made a lot of progress but I would like to move at twice the current speed. As a senior executive, I need to create the environment where that can happen. We need to focus on the collective IQ.

Q: What are you doing to develop a local search solution supported by research?

A: When people are using local search, they’re not shopping. They’re hiring. You don’t shop for a pool service, a lawyer. You hire these people. The process is three dimensional: urgency, risk, satisfaction.

Q: Let’s talk about verticals. Would the IYP product be further ahead if verticals had been developed earlier and deeper?

A: I don’t think we would have been better off. The industry has gone through enormous changes to get to 2008. In 1995, sales forces were unidimensional. The first year of Superpages.com, we generated $100K in revenues. We missed our target and it was the first time in my life I missed my target. Sales was afraid to bring Internet in conversations because they were afraid merchants would know more than them.

Q: Where is the value in Yellow Book’s online offers? Is it search engine marketing, is it YellowBook.com?

A: It really depends what the customer wants. In some situation, they only want what we called “Googlecaine”. So, you should sell what people are buying.

Q: What kind of partnerships are you looking for?

A: Anyone that can help me solve my three problems listed above. 1) Infrastructure products/services that reduce our costs (but bring a business case), 2) traffic (we’re always interested but talk about the quality of the traffic and how it fits with us), and 3) advertising/inventory products (talk to us about why it’s good for our customers, what skin are you willing to put in the game).

Q: Is it important for Yellow Book that Google, Yahoo!, MSN be successful in local search?

A: Yes, definitely. I doubt that they will invest into a local channel. So, they will come to us to resell their products.

While browsing through this morning’s interesting web links, I found a praized-worthy combo of articles. The first one talks about lawyers advertising in business directories:

“The Yellow Pages AssociationT (YPAT) recently announced that, according to a new Attorney Advertising Perceptions Study from Wiese Research Associates, consumers have rated Yellow Pages as the most acceptable form of attorney advertising. Almost half of respondents said they would use the Yellow Pages to select an attorney if they were not familiar with or referred to a particular attorney. So, it’s no surprise the “Attorneys-Lawyers” Yellow Pages heading ranks sixth out of more than 4,000 headings and generates nearly 290 million references annually.” (via the West Virginia Record)

The second is a letter from a reader of the Sarasota Herald-Tribune talking about their new Superpages directory:

“My new Verizon phone book arrived, and in leafing through it, I discovered that lawyering appears to be the biggest business in town. Before I even cracked the covers of the new directory, I was exposed to five attorney advertisements on the cover’s front and back and on the binding and bottom. Inside, many residential pages had ads for attorneys. And the Yellow Pages? There were 87 pages for attorneys but only 45 for restaurants and 42 for physicians.” (source: HeraldTribune.com)

What it means: this is what I call a great vertical for directory publishers: high usage and advertising revenues. But a comment from one of the lawyers interviewed in the Record makes me think this heading might come under assault by social media soon. “Most of my clients are referrals and former clients” says Charleston attorney Rusty Webb. If the web is truly becoming a big word-of-mouth machine, usage might migrate to social media in the future and this might impact revenues if publishers do not have a social media plan in place.

(Flickr picture by brookenovak)

Over at Search Engine Land, in a blog post titled “Yellow Pages Will Be Toast In Four Years”, Chris “Silver” Smith (who used to work at Superpages) predicts the demise of online directory sites based on his analysis of specific keyword searches in Google Trends. He extrapolates that, based on current trends, searches for the words “yellow pages” might wither down to nothing by 2011.

He concludes: “I think that classic Yellow Pages sites are going to decline, but the companies behind those sites may evolve and merge with other players so that they will survive in new incarnations.”

If Google Trends was a reliable and trusted data source (it’s not! It’s like Alexa IMHO), I think the only thing you could conclude is that consumers search patterns are evolving and they are using these specific keywords less often. They might in fact be doing more precise local searches (plumbers new york, restaurants chicago, etc.) instead of generic ones. But you absolutely cannot predict the evolution of a whole industry based on that limited information.

In that case, I have to ask, why pick such an alarmist title?

Update: Donna Bogatin offers an explanation: “It is not surprising that Search Engine Land would go the route of sensationalist Yellow Pages extinction headlining, on the eve of its “Local” conference. After all, the conference Danny Sullivan hopes to compete against–The Kelsey Group–addressed “Why Yellow Pages Still Matter” just last week.”

Update2: Chris clarifies some of his thoughts on his blog.

Just bumped into a friend while checking in at the hotel of the Kelsey Group Conference. He tells me Infospace has just sold Switchboard.com to Idearc (Superpages). Turns out Infospace has sold its whole online directory business to Idearc.

Excerpts from the Reuters article:

InfoSpace Inc said it agreed to sell its online directory business, including Switchboard.com, to Yellow-pages directories publisher Idearc Inc for $225 million in cash.

“What we did here was pick an asset that really the market was not valuing at all and turned it into real cash,” Bellevue, Washington-based InfoSpace’s CEO Voelker said by phone.

The 47 employees in the directory business are going to be offered jobs in Idearc, Voelker said.

The online directory business contributed about $17 million to the company’s first-half 2007 revenue of about $157 million.

The Kelsey Group blog has more info.

What it means: traffic consolidation. Superpages.com continues to build its online reach and frequency through this acquisition.

Yesterday, I attended a webinar called “Delivering Quality Leads to Platform Neutral Advertisers”. Organized by eStara, I was exposed to some interesting pay-per-call data in a presentation by Robyn Rose, Vice President of Marketing for Superpages.com. Five case studies involving different individual advertisers (florist, satellite TV provider, locksmith, personal injury lawyer, laser eye surgery) were presented.

Highlights:

• Average monthly spend went from $300 (locksmith) to $2500 (satellite TV)
• Average cost per call was spread between $3.70 (laser surgery) to $35.00 (locksmith)
• The estimated conversion rate went from 30% (lawyer) to 82% (florist)
• Average sales were between $64 (florist) and $1992 (laser surgery)
• Sales ROI was between 2 (locksmith) to 309 (laser surgery)

In addition, we were told that the actual cost per call at Superpages.com is completely determined by market demand. Advertisers set budgets and determine how much they want to bid in their vertical (heading) and in their geography. Superpages doesn’t believe in package of calls at a fixed price and they prefer to let the market decide. They’ve also found that the product is really successful for service-based businesses (plumbers, landscapers, realtors, medical professions, florists, etc.) but some product-based companies embrace it as well if they have a call center. Businesses attracted to the product are either local or national in scope.

What it means: Superpages has to be commended for sharing some ROI information around pay-per-call as there’s not a lot of data out there. People that have been around me for a couple of years know that I’m a big, big proponent of pay-per-call as a future way to monetize online and print directory searches. Looking at the some of the numbers above, call-based advertising could be very attractive from a business case point of view.

1) My friends at the Kelsey Group just released their 2007 Global Yellow Pages report. It’s always excellent information and worth the purchase.

Highlights:

• In 2006, worldwide, Yellow Pages generated estimated revenues of US$30.5 billion and estimated earnings before interest, taxes, depreciation and amortization (EBITDA) of US$13.6 billion,
• By applying a conservative multiple of 10 times EBITDA, the entire global Yellow Pages industry would have a market valuation of US$136 billion.
• The global Yellow Pages industry employed just over 74,000 people in 2006, more than 41,000 of whom worked in sales or sales management, up from 36,000 in 2004.
• Print Yellow Pages will stay level globally over the next five years.
• By 2011, almost 30 percent of global Yellow Pages revenues will be online, compared with 12.4 percent in 2006.
• Yellow Pages share of the total global advertising pie stands at 7.1 percent.

2) My friends at illumiCell just signed a distribution deal with Idearc that allows the Texas publisher to place its Superpages.com advertisers’ content on an instant messenging local search service provided by illumiCell. Under this agreement, Superpages.com’s performance-based advertisers will be featured over AOL’s Instant Messenger (AIM) network. The illumiCell local search service will launch on AIM in the United States in the third quarter of 2007. illumiCell already has a partnership with Yellow Pages Group in Canada.

(via Wired)

London-based Geomas filed suit (.pdf) late last year against Verizon Communications and its spinoff Idearc Media in a Texas federal court, alleging their Superpages.com search site infringes upon patent No. 5,930,474, for an “Internet Organizer for Accessing Geographically and Topically Based Information.” Last month, U.S. District Judge T. John Ward ruled the case could proceed to the discovery phase.

The patent describes an internet search functionality in which users can locate a topic or business based on their location. If you’ve ever looked for a nearby doctor or plumber online using your ZIP code or city, according to Geomas, the site you used likely infringed upon the patent. “In a perfect world, we commercialize the technology and grab licensing fees,” said Jason Galanis, founder of Geomas, which was formerly called Yellowone Investments. “We aren’t necessarily looking to sue as our main business, but realistically I think that’s going to have to happen.”

If he’s right, those sites could be forced to pay, or shut down their local search services. Geomas could rake in hundreds of millions of dollars in the process, and as search stalwarts see more local and map-centric search traffic and advertising revenue, the Verizon suit could be just the tip of the legal and licensing iceberg. Galanis said he’s raised $20 million to support the venture and is attempting to arrange licensing meetings with at least 20 firms Geomas believes infringe upon the patent.

The patent appears broad and obvious today, but was filed in 1996, before internet search became so commonplace. Roughly 100 companies, including Verizon, cite ‘474 as prior art in their own patents. Unlike many of those other companies, however, Geomas hasn’t created a working technology based on the patent, which Perkins said could give defendants an advantage in court.

What it means: as the Wired article says, the patent appears quite broad and obvious. I am not a lawyer but I definitely invite everyone running a local search site to take a look at the filing and follow this one closely. I’d love to know what my friend Greg thinks (as he used to be a practicing attorney).

Chris Linnett over at SearchEngineLand talks about a world where local search would not necessarily be tied to map-based navigation.

Local search is a process involving many variables, more often determined by use case than sheer location on a map. Can maps be an important part of local search? Absolutely, but not always and not for everyone. Many use cases do not rely on maps, and many people do not find maps an effective cognitive tool. Therefore, should maps dominate local-search applications the way they often do, especially given the core essence of local search? (…)

Imagining a major local search site without maps is extreme, given the ubiquity of maps and their utility in certain cases, but it is a worthy exercise. Maps are a piece of the local-search puzzle. Text-based refinements greatly enhance the utility of a site. As an industry, our ability to fill in the space with effective and relevant discovery and decision-making tools will ultimately define the quality of the local-search experience.

What it means: I completely agree with Chris but I have to point out that this world already exists in directory publishers’ web sites. Maps are a part of local search but they should not be the be-all and end-all. I think the best example from an advertiser point of view is the locksmith or the plumber who do not have an actual office. These people’s offices are their cell phone and their truck. They don’t necessarily have a store front and, if they do, they don’t necessarily want you to go there. For that reason, they are being penalized by major local search sites like Ask City, Google Maps and MSN Live Local while sites like Superpages.com or YellowPages.ca will include them.

According to TechCrunch, InsiderPages has been sold to a public company. They add: “Our understanding is that the acquisition price is more than the total capital raised by the company, but not by much.”

SFDaddyo commented that “Rumor has it that they were for sale for less than $10 million”.

Peter Krasilovsky adds on The Kelsey Group’s blog: “I would speculate that possible purchasers are probably CitySearch, Yellowpages.com, or RH Donnelley. Theoretically, Yellowpages.com and RHD would have the most to gain from such an acquisition, since they could use the 600,000+ reviews as a building block for their own review archives. Yellowpages.com, in fact, has just rolled out a review feature, and it is going to be tough to ramp it up quickly. They could also use Insider’s crack tech team. But some people’s money would actually be on CitySearch as a buyer. While CitySearch wouldn’t incorporate the technology, it would like to get ahold of the 3 million+ unique viewers that come to the site every month. It could also gain from SEOing all the businesses that are covered. I bet there isn’t even ten percent overlap with CitySearch. Theoretically, City could also integrate “Insider Advice,” a Yahoo Answers-like feature. Still….$9 million or so is a lot for what are –basically– aging reviews.”

What it means: I had tried last week to do a “back-of-the-envelope” valuation model (based on the Switchboard.com acquisition by InfoSpace) which put their value at around three to four times the total raised by the company. If TechCrunch is right (and they’re usually pretty good!), my model was faulty as it looks like they we will be sold for a little
bit more than $10 million. Which might mean that the original investors will not get much out of the transaction (there were two investment rounds). I’m not sure Citysearch would get much out of Insiderpages though. I suspect the acquirer might be one of the big three US directory companies (YellowPages.com, RHD or Superpages).