The Praized Blog

As many of you know, Idearc rebranded itself this week as SuperMedia, exited chapter 11 protection and are back trading on the stock market (NASDAQ this time) under the SPMD symbol. For the occasion, they issued a very advertiser-focused press release with a few quotes from CEO Scott Klein.

“SuperMedia will serve as a “catalyst of commerce” for local businesses across the country” (…)

“I have great faith in the strength and promise of America’s small businesses,” Klein said. “Over these past two years the outstanding men and women that drive these local businesses have seen more than their fair share of heartache, instability and struggles.” Klein pointed to the more than 12 million small and medium businesses that are the heart and soul of local commerce and are in need of help. (…)

“On this day I want to make it crystal clear that SuperMedia is stepping up,” Klein said. “We are standing shoulder to shoulder with these good guys – these American entrepreneurs in the fight for their success, becoming their champion and an engine for their growth.” (…)

“We will not rest until every dry cleaner, roofer, auto repair shop and every other local business across America is given the opportunity to grow and thrive,” Klein said. “We are more than marketing. We are more than media. We are over, above and beyond media. We are SuperMedia.”

What it means: I absolutely love the “local merchant” positioning for a directory publisher. In the eyes of consumers, I think “local shopping” is currently perceived to be good for the economy, good for the environment and it’s a powerful communication angle. But it also made me think how much the directory industry has neglected the buyer side of the equation when building products and communicating in the last 10 years. In the 1990’s, print directories were dearly loved by consumers who saw them as very useful and friendly. There was an emotional connection. Unfortunately for the industry, it’s not as true today.

I understand the need for SuperMedia to talk about advertisers in the context of this press release because that’s what Wall Street is mostly interested in (i.e. revenues) but Yellow Pages publishers need to regain the heart of consumers as well. The old habits of focusing on sales and advertisers is not easy to break. Make no mistake. I’m not specifically picking on SuperMedia as they’ve been very active on this front with the Superguarantee program but I think the industry needs to step-up. I ask publishers: what are you doing for consumers today?. How are you helping them make better choices? Are you reducing the time it takes them to find the right merchant? Are you connecting them to the right options? Are they stretching their dollars because of you? If you can make people’s life easier, you have a good story to tell.

This is a post about the Kelsey Group’s DMS ‘09 conference which happened two weeks ago in Orlando.

In a presentation titled “Idearc Mobile Growing Revenue”, Peter Schwab, Director of Mobile Product Development at Idearc Media (Superpages), offered 10 things developers should focus on when building a great mobile local application.

10- Focus on growing your user base (build a great product which offers a simple utility plus a “Wow” factor)

9- Embrace location ( location makes mobile its own medium)

8- Give users a voice (through reviews/ratings and real-time input)

7- Remove barriers (build features and pursue channels that get you closer to the user. “On Deck” model still makes money but has too many barriers. Focus on app stores.)

6- Embrace the hardware (camera, compass, video, voice)

5- Explore alternative distribution channels (take your content where the users are today. He gave the example of Sp411 on Twitter. )

4- Measure everything (measure for mobile, not online)

3- Drive non-Yellow Pages revenues (CPM ads, coupons, sponsorships)

2- Are you a “painkiller” or a “vitamin”? (become an ally of your user, users respond to deals. For example, Idearc ranks superguarantee merchants on top of the search results on mobile)

1- Experiment and grow as mobile grows (no silver bullet yet, don’t be afraid to move beyond Yellow Pages. Land lines are dying and mobile is becoming the primary Internet access. Social brings a new engagement model)

As an interesting note, when asked “how much does it cost to build a mobile application?”, Schwab replied ”if you’re spending more than $25,000 to build an iPhone application, you’re over-paying”

What it means: reading between the lines, Schwab teaches us two important lessons: 1) adapt to the mobile experience (i.e. don’t simply put your web site on mobile). Hardware is different, usage is different, business models are different; 2) the “perfect” mobile local application has not been invented yet. Iterate quickly, try things and go social.

“Idearc seeks to repair directory business” via the Financial Times.

Labelling the sector’s problems as “a cyclical decline”, Mr Klein’s response has been to reposition Idearc as “the ad agency for small businesses”.

Its 3,000 sales people have been relabelled as “media consultants”, with changed compensation plans and simplified rate cards designed to drive clients to online and direct marketing services as well as directories.

Mr Klein has cut more than a fifth of Idearc’s staff to shave 10 per cent from costs. Now he is attempting to find growth through initiatives he equates with federal stimulus efforts.

(…)

That done, Mr Klein is looking for growth, predicting consolidation in the crowded directories market.

What it means: this Financial Times article mentions some of the strategic initiatives Idearc has taken to improve its corporate health. I also like the prediction from Scott Klein that the market will consolidate after these difficult times. I agree with this forecast.

Online business highlights from ’s Q3 results conference call (from Seeking Alpha)

Revenues:

We reported year-to-date Internet revenue of 223 million, a 6.2% increase compared to the same period in 2007. we reported Internet revenue of 75 million in the third quarter, which is an 8.7% increase compared to the same period in 2007. With respect to Internet revenue, we indicated on our last call that we anticipated getting to double digit growth in the third quarter. With growth of about 9%, we didn’t quite get to that level as the transition from fixed-fee advertising to performance-based advertising products continued.

On the sales reorganization:

The new sales organization consists of 15 geographic regions plus a dedicated internet team.

On their online exec team:

Briggs Ferguson, a former City Search Inc executive, who joined Idearc in April, continues as President of our Internet Business. Briggs’ focus is on executing Idearc’s complete digital strategy as rapidly as possible.

On product penetration:

In addition of the 800,000 clients we have, over 90% of the existing clients are print clients, less than one-fourth are Internet clients

On SEO successes:

In the search engine optimization arena we have seen a 32% increase in SEO traffic to Superpages.com translating to 11 million new page views. We have optimized business profiles for search engines an increase unique visitors by 213%

What it means: reading the whole transcript from Idearc’s Q3 results, I’m struck by the low growth percentage in their online business. According to the latest  Internet Advertising Revenue Report, online ad revenues in the first half of 2008 were up 15.2% versus the same period last year and search revenues were up 24%. If I remember correctly, Superpages had a price skimming strategy 5-7 years ago.  This means that they quickly grew their online revenues with high-priced online products (web sites, priority placement, etc.) but on a lower amount of customers (smaller penetration). I think that this strategy might have made them vulnerable to the increasing use of online advertising by SMEs. They now need to convince their online non-ads to take the plunge with them.  I think performance-based products serves that purpose but growth might not come as quickly as with fixed-fee products.

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.

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).