In This Issue

What the Competition is Doing in Local Search
NAA Marketing Conference
2008 Local Online to Grow
Local Online Ad Sector
Local Papers Web Scramble

Welcome to the first issue of Search Initiatives Newsletter in 2008

Based on our readers' feedback, we've made some enhancements to the newsletter. As a subscriber, you will continue to receive these valuable local search marketing insights, best practice stories for local search and inspiring success stories from our customers and other leaders in the local search field.

Plus, you'll get these exciting new additions in the coming month:

• Fresh "local search" perspectives from additional members of Search Initiatives and eLocal's family of experts
• Hands-on product "how-to's" that show how you can effectively use our Local Search Suite of services to incrementally garner new ad revenue.
• Important updates about useful new features and products available to our customers and readers through our services and third parties
• Event Updates on SI and eLocal shows, conferences and events.

Content for each issue will focus on themes central to successful local search engine marketing. For starters, this month's theme is to highlight the 2008 online search engine marketing opportunity.

This issue is packed with background informational to get you thinking about your local search strategies for the year ahead. Local search engine marketing and local search can dramatically drive incremental new ad revenue, targeted audience reach, and growing consumer/site visitor engagement.

We welcome your feedback on our new emphasis and always want to hear how we can better serve you with this monthly online newsletter.

All the best,

Jeff Rapson
Editor, Search Initiatives Newsletter

Mobile, video, customer reviews growing rapidly

Categories: Mobile Devices Local Search Online Video

Two people separately told me some newspaper people are looking for competitive information - specifically, what are other types of media doing in the local search space.

The answer, in a nutshell, is video, mobile and reviews. The following is an overview and some resources to learn more, and I'll add to this today as more information comes in during the ILM:07 conference.

Mobile: "2008 will be the year of mobile," according to The Kelsey Group. They are predicting mobile will become the next big search product, with sales forces pushing local advertisers in this direction. That's already happening -- mobile services in the local search area include ad-supported directory assistance, browser-style searching on mobile devices, and text or SMS-response search.

Examples of mobile search worth a peek include Yahoo OneSearch and services from several newspapers (examples: The Arizona Republic, Palm Beach Post). Some companies are even doing mobile video, especially in the real estate vertical.

A lot of mobile search services are incorporating maps, and Wednesday's Google announcement is an interesting move in this direction. Other major developments in mobile (from portals, actually) Google launched AdWords for mobile earlier this year, and AOL launched Mobile Search. There are many non-portal mobile search services in existence that should not be ignored, either, such as Loki.com.

In addition, companies like AT&T are moving into selling local search assistance to small businesses, focusing on directory assistance for mobile, creating even more competition for small business advertising.
Wednesday, the Yellow Pages Association announced it has added a mobile-specific section to its useful Local Search Guide, a directory of Internet Yellow Pages, search engines, search tools, vertical directories and (now) mobile tools.

The Local Search Guide is available at www.localsearchguide.org.
Several people at the ILM:07 conference are saying mobile local search (or "mo-lo") will really take off in 2008. Some challenges the area has faced up to this point inclue slow network speeds, small screens and the slow adoption of GPS-enabled mobile devices. Those problems are all dissolving as the technology advances.

"Just when you think you've refreshed it, it's out of date," said CitySearch President Jay Herratti this afternoon, citing the most difficult challenge for all local search - keeping up to date.

Herratti told attendees the number of competitors in the local search space has grown hugely - search engines, social media and community sites, online directories and city guides are all competing for the same information. Citysearch is part of a newly expanded IAC/InterActive Corp that includes multiple search-related brands.
To compete, portals are offering more and more robust microsites for small and local businesses, and heavily promoting the customer review feature on those pages. Profile pages for businesses often include basic information plus coupons, maps, etc. Some portals are offering video commercials or photo gallery capabilities, as well.

Many small businesses are opting to include customer reviews on their profile pages -- a "significant influence" on purchases, comScore reported at the ILM:07 conference Thursday morning. comScore's Brian Jurutka said people see reviews as unbiased, third-party information that are efficient. a comScore study earlier this year found people also find reviews provide potential customers with information they might not have thought to research on their own. In addition, potential customers reported they value peer-reviews (user-generated) more than professional reviews. Jurutka said this morning comScore research revealed 24 percent of people who shop on the Web look at customer reviews. (See more on the effectiveness and importance of customer reviews from ForeSee via DestinationCRM.com.)
One of the best ways to figure out what the portals are doing - outside of flat-out asking them - is by going to the Web sites and simply searching for things on the local level. The YPA Local Search Guide is a helpful place to start.

IYPs: As search engines index more pages (and search becomes more effective), consumers are using portal searches like Google or Yahoo more often to find local information. This trend means "usage per user session" of Internet Yellow Pages (IYPs) is going down - Web users are searching for "plumber + zip code" through Google instead of going to the yellow pages Web site.

However, YP sales channels are still largely controlling local business advertising sales and remain very effective sales organizations, according to The Kelsey Group. It seems that yellow pages sales channels have the most existing local accounts, but not front door Internet traffic. IYPs are working on changing that through cross-platform access points and mergers such as mobile.

YellowPages.com this morning announced the addition of two new video services for advertisers. One product allows advertisers to work with a third party video company to produce a professional commercial, the other allows advertisers to create a photo-audio slideshow ad. In October, the company announced new mobile search capabilities.

In addition to YellowPages.com, DexKnows.com, owned by R.H. Donnelly, is certainly worth a look. (Note: Jake Winebaum of R.H. Donnelly's interactive division presentd at this week's ILM:07.)

DexKnows.com includes features like itinerary and route mapping for consumers, side-by-side comparisons and searching by landmark. (Jake Winebaum, President of Business.com - also owned by RHDi, the interactive division of R.H. Donnelly - presented at the Kelsey conference today.)

For information on what newspapers are doing, see the 2007 report (written by Peter Krasilovsky, now of The Kelsey Group) "The Newspaper Online Shopping Report." Also, be sure to check out some of the newer newspaper-based local guides, such as the Lawrence Journal-World's Marketplace and the NAA Snapshot from the Edge piece on the Bakersfield Californian's InsideGuide.

For more examples, see the past Digital Edge Award winners for best local shopping and directory strategy.

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Come See us at the NAA Marketing Conference - Booth 621

Search Initiatives' Search Suite Services include:

Those provided on monthly fee for services basis include:

1) Integrated Local Search against all the publisher's content.
2) On Line Yellow Page Directory with complete local listings offered under the paper's brand.
3) Local ad platform for text and coupons ads displayed in MarketSquares (an iFrame).

Those provided on a Revenue share basis include:

4) Local advertiser Search Engine Optimization (SEO) co-branded with publisher's online offerings. Please review - www.eLocalListing.com.
5) Call center support to upsell on line packages and enhance Local Directory listings.

See you in Orlando!

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According to the Executive Summary of a newly released Borrell Associates study on the 2008 outlook for local Online advertising, a 48 percent increase in local online ad spending is anticipated in 2008, bringing it to $12.6 billion.

Driving most of the growth, says the Summary, is the popularity of local search and online video advertising. Local search advertising will more than double next year, to $5 billion, while locally placed online video will triple, to almost $1.3 billion. A major component of local video advertising will be long-form pieces for home, automotive and health-related categories. 2008, however, will be challenging for local media companies trying to market on the Web. Most yellow pages publishers, cable companies, newspapers, radio stations and TV stations are still pinning their hopes on their traditional sales reps being able sell online ad packages.

There is increasing evidence, says the report, to support the idea that a greater investment in an independent online sales force will be necessary to continue the growth these properties have enjoyed for the past few years. The growth rates for most local media operators have slipped well below the overall growth rate for local online ad buys - which means these properties are losing market share. Much of that share is being captured by pure-play Internet companies hungry for the growth they see in the local market, although they are seeing benefits to partnering with local media companies to supplement their own efforts.

Key advertising segments for 2008 will continue to be the "Big 3" classified categories of automotive, recruitment and real estate, with online political marketing holding promise for local sites as state and presidential campaigns heat up.

Marketing budgets will accelerate their shift out of traditional advertising formats (both online and offline) and into non-ad activities such as promotions and public relations, which are better at delivering the improved targeting and accountability that advertisers are demanding.

For more, please visit Borrell Associates

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The local Web ad terrain is nowhere near smooth. Yet 2007 brought new ad offerings for local businesses, recognition of the Web's viability among more small advertisers, and a realization that partnering with old enemies might be the only way to survive the road ahead.

"It remains a very hard market," said Greg Sterling, principal analyst of Sterling Market Intelligence. Both advertisers and consumers have a paralyzing array of local online media to choose from.

In June, Borrell Associates estimated local advertisers will spend $7.5 billion on the Web in 2007, up over 31 percent from 2006. Next year's outlook is even brighter. The local media research firm projects a 48 percent increase in local online ad spending in 2008 to $12.6 billion. Local search and video ads will be major drivers of that spending, according to Borrell.

Not only have online directories firms and city guide publishers offered search engine marketing services to ad clients, they began exploring local online video ad models this year. Both IAC/InterActiveCorp's local business review site Citysearch and Idearc Media's Internet yellow pages (IYP) provider Superpages.com introduced custom video for local advertisers in '07. <SI editor's note-we'll be adding video to our profiles in February 2008>

However, publishers have yet to determine which video offerings will appeal to local advertisers, and how best to sell them. Selling Web video ads is also a struggle for some traditional media outlets, according to Peter Krasilovsky, principal of local media consulting firm Krasilovsky Consulting and program director, Marketplaces for The Kelsey Group. He told ClickZ News he's heard mixed reports suggesting some local sales teams aren't doing a good job of selling video advertising.

To be sure, traditional media outfits like newspapers and TV sites still need help selling online display ads to local advertisers. That could simply be because online ad novices like small local advertisers tend to gravitate first towards search text ads, online classifieds, IYP ads, or other performance-based advertising, said Shawn Riegsecker, president of Centro, a media services and technology company that facilitates ad buys on local sites.

"Out of the gates, the first spending people do on the Web is pay-for-performance and search marketing," said Riegsecker. "Local display is still probably four years away," he continued, adding that small local businesses "have to invest in a Web site in order to really do display advertising."

Riegsecker expected local ad revenues from regional businesses such as supermarkets, banks, hospitals and tire dealer chains to "really take off in 2008." And, while realtors and auto dealers have been big online local advertisers for years, he predicts a boost in local Web ad spending by retailers next year.

"They've been testing for the last five years, and this is the first year retail will be big," said Riegsecker, who believes new metrics and measurements for proving return on investment and offline conversions to retailers have contributed to their increased interest in online advertising.

Krasilovsky agreed enhanced reporting offerings have helped local advertisers recognize the value of the Web, but IYPs and pure-plays like Google are the ones offering them. "In 2008, if local ad channels are not providing these comprehensive reports, they're going to be out of the picture by the end of the year," he predicted.

This year, media outlets continued forging partnerships in the hopes of harvesting more national ad dollars for their local sites. Yahoo's expanding alignments with newspapers grabbed attention throughout the year; although while some believe the relationships could help the struggling paper publishers collect more national online ad dollars, complete implementation and integration is a ways off. "There's a lot of work to be done," said Riegsecker.

Despite their woes, newspaper sites this past year exhibited a willingness to innovate. Some enabled social features to build ad inventory, and others began reeducating sales forces to better navigate the digital media map.

Just as newspaper sites have aligned with longtime competitor Yahoo, local Web radio and TV networks MediaSpan and Broadcast Interactive Media also partnered this year in the hopes of garnering more national ad dollars.

Regardless of the challenges even well-branded media firms face, startups flock to the local media space hoping to cash in on the inevitable flow of marketing dollars from millions of small and medium businesses that have yet to hit the Web.

"What most of these local sites are really angling for is some sort of acquisition," said Sterling. Local search and reviews network Insider Pages managed to do just that this year, getting scooped up by Citysearch this year.

However, while consumer demand and venture capitalist interest is high, "There seems to be insufficient patience among investors to allow local sites to grow," he added, noting long-term foresight is crucial for success in the local media market.

Local shopping deals site Judy's Book suffered just such a fate this year, announcing in October its decision to cut its full-time workforce and seek a buyer. Local community site network Backfence also locked its gates this year.
There will be more failures in the coming year in local, Sterling prognosticated. "As the Web becomes a noisier and noisier place, the value of brand becomes more and more significant," he said. "It's hard for little startups unless they offer something really unique to build audiences."

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Web companies now beginning to dominate the market for local ads online, newspaper publishers are scrambling to change the way they sell ads, hiring sales teams that specialize in the digital market and creating new editorial packages to sell. But it may be a case of too little, too late.

McClatchy, which publishes 31 daily newspapers around the country, is revamping its commission and incentive plans to better reward staff for online sales. Gannett now operates 50 mom-centric social-networking sites around the U.S. as part of a broader strategy to boost online revenue through what it calls "hyper-localized" sites.

Other publishers, from Lee Enterprises to Media General, are taking steps of their own to jump-start sales of local online ads.

But time may be running out. Now, for the first time, pure-play Web companies have the biggest share of the local online-ad market. In 2007, Internet companies had a 43.7% share of the $8.5 billion local online-ad market, while newspaper companies had a 33.4% share, according to the media research firm Borrell Associates. Just three years ago, newspapers had 44.1% of the local online-ad market. (Directories such as the Yellow Pages have 10.1%, and local television outlets 9.3%.)

Local media companies, because they are based in the communities they serve, would seem to have an edge over Internet sellers when it comes to persuading the diner or corner hardware store to take out an ad. But they have largely failed to convert that advantage into sales. Instead of tailoring their sales to local businesses, many newspaper companies initially focused on selling ads to bigger advertisers who were already buying space in their print products.

While this strategy allowed them to quickly and cheaply create a customer base for their online ventures, it also limited their growth, because they weren't expanding their customer base. Many newspapers also hurt themselves by simply plopping their papers online instead of creating new Web sites that offered advertisers something they couldn't get in print. Meanwhile, Web companies such as Google and Local.com are growing rapidly because they have made it cheap and easy for local companies to take out ads.

With "Newspapers are tied too closely to defending their print products and have not seen the Internet as an innovative and competitive tool to go out and compete," says Gordon Borrell, chief executive of Borrell Associates.

Newspapers are feeling the biggest effects of this competition -- local TV outlets and directory businesses aren't experiencing the same degree of erosion in their core ad revenue. Analysts say newspapers may have maxed out on the amount of ads their existing print customers will buy online. They point to a slowing in the growth of online revenue across the newspaper industry. Online-ad revenues rose 21.1% in the third quarter to $773 million, down from 23% in the same quarter last year. The growth was as high as 39.7% in the first quarter of 2005. For newspapers, this slowing trend is taking place amid steep declines in the sales of print ads.

"All of the players, from Google to other local media companies, are putting more attention on going after the local dollar," says Jack Williams, president of Gannett Digital, the Gannett unit responsible for developing online revenue.

On the plus side for newspapers, there is still a huge potential opportunity: Spending for local online ads is expected to grow 48% next year to $12.6 billion.

On the flip side, newspapers have a massive challenge ahead: Online-ad revenue at newspapers made up only 7.1% of total revenue in the third quarter, according to the Newspaper Association of America. Analysts say that ideally that figure should be in the low double digits, then hit the midteens in about five years as the drop in print revenues stabilizes.

Increasingly, newspapers are deciding to form deeper alliances with their main competition. More than a year ago, Yahoo struck a deal with about a half-dozen newspapers to create a national online-ad sales network. Since then, additional newspapers have signed up. In the coming year, papers in the alliance will start using Yahoo technology on their sites so that they can sell more-sophisticated ad offerings, such as behaviorally targeted ads. Separately, a group of 11 newspaper companies representing nearly 300 newspapers recently formed a partnership with real-estate site Zillow.com to tap into more real-estate classified ads.

Analysts say these kinds of steps will help but that none is a silver bullet. "Ultimately, it is going to take a lot of singles to really have a significant impact on the overall operations of the company," says John Janedis, a publishing-industry analyst at Wachovia Securities.
Write to Emily Steel at emily.steel@wsj.com

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That's all for this round.

Please stop by and see us at the NAA Marketing Conference, Booth 621.

Best Regards,

Jeff Rapson
Search Initiatives, LLC

email: jeff.rapson@searchinitiatives.com
phone: 603-689-7134
web: http://www.searchinitiatives.com