The Praized Blog

A deluge of important news in the local social space this morning, all very relevant from a local strategy point of view.

1. Yesterday afternoon, PaidContent detailed AOL’s, Yahoo’s and MSN’s aggressive plans for local. All three are attracted by potential local advertising revenues. The article says “Microsoft could integrate content from local bloggers”. As for Yahoo!, they recently ”rolled out a new service called “Neighbors,” which lets users ask others in their neighborhood questions”.
2. In this interview with Stephan Uhrenbacher, Qype’s founder, he reveals the site now has 17.7m monthly unique visitors. He also says that in Germany, Qype is ” larger than the yellow pages in terms of traffic”. From reading between the lines, Qype is thinking about implementing a game mechanism (or reward system) and a check-in system à la Foursquare, two features I recommended in my “perfect local media company in 2014” presentation.
3. Google just shipped QR code stickers to the 190,000 most popular Google local US businesses. A QR code can be scanned/photographed by a camera phone and links to the Google profile page in Google Maps when activated. The Techcrunch article adds “Local businesses can also set up coupon offers through their Google directory page, which would turn the QR code into a mobile coupon”. Mobile + QR code + coupons = monetization strategy for the real-time Web. Another important data point: “There are now over a million local businesses which have claimed their Google local listing”. Does Google need the Yellow Pages sales forces anymore?
4. Citysearch partners with Twitter to offer tools to small businesses. Citysearch will display “tweets” on merchant pages, offer the opportunity to merchants to create their Twitter account and offer a reputation management service. A Gigaom article says “Citysearch says it has direct relationships with some 200,000 local merchants”. These things will all be required features of any local search site within a few months.
5. Techcrunch reveals this morning that Aardvark, the social Question & Answer service, is considering an $30M+ acquisition offer from Google. The service allows people to ask questions to their friends and to the network using instant messenging and social networks.

What it means: expect these kind of partnerships, acquisitions and features deployment to speed up as industry players try to capture market share of the real-time local/social Web. Expect Facebook to make a lot of noise as well in the next few weeks (the aforementioned Gigaom article asks “who wants to take bets on how many hours till Facebook Local launches?”). They are the 900-pound gorilla. In 12 months, we will already have a good idea who will win and who will lose in that space.

I don’t want to sound like an informercial but my company Praized Media foresaw the rise of social Q&A services like Aardvark and that’s why we introduced our Answers module (currently used by Yellow Pages Group) which enables consumers to ask local questions to their network of friends. Based on market evolution, we’re also developing a white-label reputation management service that will enable social media monitoring and small merchant Twitter sign-ups (like what Citysearch is doing) because we believe it’s going to be needed in every local media company in the future. Our real-time search module also allows any media publisher to display related ”tweets” on merchant profile pages. And we’re also preparing an eCouponing module to monetize all that real-time activity. We’re basically building the whole social media toolkit for local media publishers. End of infomercial.

Saturday’s Globe & Mail’s business section has an in-depth article about Yellow Pages Group (YPG). The article clearly has a negative tone talking about revenue erosion, the rise of social media and the company’s debt-load. They quote Marc Tellier, YPG’s CEO, extensively but they don’t seem to believe him.

Highlights:

Talking about the positive reputation YPG has in the market, the article says “But that halo has now gone the way of carbon paper”

Talking about revenues, the Globe adds: “Yellow Pages’ 2.3-per-cent drop in the first half of this year seems minor by comparison – except for the fact that the company is carrying $2.5-billion in long-term debt, much of it added during the glory years to make acquisitions. While some paper boats are sinking, Mr. Tellier is trying to keep a heavy vessel afloat, managing a century-old company whose main product is a clunky paper directory…”

Talking about the cut in dividend distribution, “There were a lot of people who felt management said one thing and did something else. Investors hate that.”

About online competition, “The Googles of the world, the Yahoos of the world, local search engines, bigger brands branching out, I don’t believe Yellow Pages can sustain itself”

About online revenues, “The online side of Yellow Pages still accounts for less than one-fifth of the business. It could reach 20 per cent by year’s end if management’s guidance is correct. But the question isn’t whether Yellow Pages’ Internet presence is growing; it’s whether it’s growing fast enough to make real money. On the Web, no one holds a monopoly. As is the case with newspapers and magazines, it’s far from certain whether the Web will be enough to compensate for Yellow Pages’ print losses.”

About social media, “And Yellow Pages faces a threat from another dot-com behemoth: Facebook. Social media is chipping away at the directory’s credibility, click by click. (…) That wasn’t bad for Yellow Pages as long as people were just talking to their neighbours over the backyard fence. But now, social media has made it easy for consumers to swap stories and recommendations on public forums. Word of mouth spreads faster than ever before.”

Tellier’s answer on the social media threat, “Marc Tellier argues that’s not enough. “You can’t run a business on word-of-mouth alone,” he says. “In some categories [the shift to online] is going to happen in two or three years. In others it’s going to take 30 years … I would have lost all my hair at the ripe old age of 41 if I believed a lot of what we’d been reading in terms of the pundits – you know, print is dead and so forth. It’s not true.” Many observers disagree. Much as he would like to, Mr. Tellier can’t separate himself from declines in the rest of the print industry.” YPG’s CEO adds later when talking about the last time he used the print directory: “Could I have solved that problem on Facebook? I don’t think so,” he says. “This is a growth industry … The business is remarkably healthy.”

The article concludes by saying: “Now he’ll just have to convince investors of that fact, make them believe his book isn’t a dinosaur on the brink of extinction. That could be the toughest sale of all.”

What it means: Ouch. I think it’s the first time an important Canadian media writes a very negative article on Yellow Pages Group. To be fair to YPG, I believe the Globe’s business section has always been bearish on the company. So, I’m not really surprised the first article of this kind comes from that news source. I also don’t like the comparison to newspapers. We’re definitely not talking about the same business dynamics. I do have to give kudos to the Globe & Mail for mentioning social media as a credible threat to directory publishers. I obviously don’t agree with Tellier when he says he could not have found the business he was looking for using his Facebook friends. Thousands of business references are being shared on social media sites every day and those contribute to market fragmentation in an already very fragmented world. I do agree with Tellier when he says word-of-mouth is not a strategy in itself but directory publishers need to be able to corral all sorts of leads for small merchants including word-of-mouth (social) ones.

AT&T released their second quarter 2009 results yesterday morning. Like Greg Sterling did, I had to dig down in the Statements of Segment Income (excel) document to find detailed information about their directory business. No information was directly provided in the press release.

Directory operating revenues were down 12.5% in Q2 2009 (vs. the quarter one year ago) at $1,231 million and segment income was down 27.5% (also vs. Q2 2008) at $314 million. No online advertising data was provided.

In related news this week,

• Yahoo! announced a partnership with AT&T Interactive (read YellowPages.com) to start selling Yahoo! local display ads to Yellow Pages advertisers. As the release says, “The agreement between AT&T Interactive and Yahoo! is the latest addition to the longstanding strategic relationship between AT&T and Yahoo!, which runs across many Yahoo! products and services, including portal and mobile services, as well as powering Yahoo! Local with advertiser content from YellowPages.com.”
• YellowPages.com introduced a new version of YP.com, the URL they acquired from Livedeal late last year. They’re experimenting with a more user-focused online directory site there, but nothing ground-breaking yet.
• Finally, in a strange and ironic twist of editorial fate, the Yahoo! Small Business blog was explaining to its readers yesterday ”When to Pull the Plug on Yellow Pages Advertising“. Bad timing guys!

(…) discussed what’s emerging as one of Schneider’s top priorities to help jump start the company: more local content and more local ads.

Rather than confine news and other local content to a separate product, Yahoo wanted to extend the “lens of local” across all its programming. That includes everything from being able to show a user news about their hometown on the Yahoo homepage to being able to show them an ad with an offer for their local Costco in Yahoo Mail.

via Yahoo’s Schneider Sees Light Around Local – Digits – WSJ.

What it means: in an interview with the Wall Street Journal, Hilary Schneider, Yahoo’s executive vice president for North America, thinks that the portal will embrace “local” more in the future. Expect Yahoo! to try to push local ads to newspapers and directory publishers’ sales forces.

Like I did with the Google Q4 call, I just reviewed the transcript from Yahoo!’s Q4 results conference call on Seeking Alpha.  A couple of interesting insights:

Blake Jorgensen, Yahoo!’s CFO discussed directional impressions regarding the advertising market.  He mentioned the following on advertising budgets:

“While some advertisers are cutting budgets, we believe we’ve been the beneficiary of major advertisers and agencies consolidating their ad buys with fewer players as they seek to improve returns on their ad spending.” He added later in the call: “I think most of the members of our team here believe that the premium class one advertising is seeing pressure primarily due to what you would typically see in a recessionary economy, where branded advertising is often the first thing that goes.”

On search queries, he said:

“We are tending to see PPC growth, but click yields and fewer commercial queries starting to impact overall revenue for search in general, and clearly search, both here in the US, as well as internationally.”

On a different note, it was disclosed that Kelkoo, the European shopping engine Yahoo! sold back in 2008, contributed $80 million of revenue last year.

What it means: some interesting directional information on search and display ad revenues: advertiser budget consolidation, branded advertising softness even in premium ad space and fewer commercial search queries means no segment of online advertising can avoid the impact of the economic slowdown. The big question still remains.  Is Yellow Pages revenue better at countering recessions (i.e. ad revenues decrease less than the rest of the ad industry) vs. search engine revenue?

I was re-thinking about my recent blog post about the importance of Hulu for the TV industry.  A strong “national” brand unifying various media players under the same umbrella while allowing individual players to have their own unique “brands”. For example, you can find The Colbert Report on Hulu but you can also find it on the Comedy Central site.  You can find it on CBS’ TV.com also (powered by Hulu) and on DailyMotion (via an agreement with Comedy Central). You can possibly find illegal versions on other video sites and illegal copies on torrent sites as well. In Canada, you’ll find Colbert on the CTV site.

So, having a “national” hub that aggregates content from, what common sense would call, ”competing” players doesn’t prevent other “national” and ”regional” brands to co-exist with the same content and it allows TV networks to compete on an equal footing with “national” video portals like YouTube. That works as long as industry players have a stake and a say in the evolution of the “national” hub, and that’s the case with Hulu.

Seemingly unrelated, Google just announced that they were pulling the plug on their Print Ads initiative (where Google was reselling newspaper advertising to their network of advertisers). Many people were watching and hoping this might help support print newspaper ad revenues. It was clearly not going anywhere.  Google said in their announcement ”We believe fair and accurate journalism and timely news are critical ingredients to a healthy democracy. We remain dedicated to working with publishers to develop new ways for them to earn money, distribute and aggregate content and attract new readers online.” Yahoo! also has agreements with newspapers to help them monetize their online traffic via a unified ad platform called APT. This seems to be going well but again, newspapers don’t necessarily control their destiny in that agreement.

Now, this got me thinking about the newspaper industry ecosystem in general. Players in this space usually compete with other “regional” players offline (New York Times, New York Post, etc.) but are also competing against “national” brands online, usually aggregators (for example, Google News). I just realized that…

TV industry challenges = Newspaper industry challenges!

I believe it might be time to build a new national brand and platform in the newspaper industry. A “Hulu for news” that integrates national and local news from all major newspaper outlets in the US, citizen journalism content and social media tools. A startup that’s staffed with the most web-savvy new media people, that understand where traditional media comes from and where it’s going but that are not locked in old paradigms. Other interesting technologies for that venture would be the Topix.com platform and content and the Oodle national classifieds platform. This initiative would allow syndicating of news and ad content through widgets and APIs. Content could be displayed on “local” newspaper sites and re-syndicated to smaller sites. I’ve read somewhere about similar past initiatives that failed (can’t find the source now) as offline competition was creating too much of a hurdle for anyone to align. But I think the industry might be at that critical juncture point where they absolutely need to agree to cooperate online while competing offline. Who will take the leadership of this initiative?

Update: Jemima Kiss from the Guardian says “if newspapers start thinking like startups, they might just have a chance.” I agree.

Om Malik surprised me today by suggesting Yahoo should buy Hulu, the joint venture video portal of NBC Universal and News Corp.  The company was founded in 2007 to create a destination site to present content from TV networks and was a response to the meteoric rise of YouTube.

Malik comes to that conclusion while thinking about the need for a solid number 2 exec at Yahoo! now that they’ve named Carol Bartz as their new CEO. He thinks Jason Kilar, Hulu’s young CEO, is a natural for that role and he suggests Yahoo! buys them.

He says: “With his service growing by leaps and bounds, and advertisers lining up to get on board, Kilar’s only problem is that he doesn’t have enough traffic –- like, say, YouTube. That will change over a period of time; and as we all know, time is an elastic concept. Perhaps this is where Yahoo can help. Or rather, where the two can help each other. Clearly search and search advertising isn’t quite working out for Yahoo; what Yahoo knows best is media and content. Which is why buying Hulu would be a strategically relevant acquisition for the company — it would play to Yahoo’s media strengths.”

He adds to explain why NBC and News Corp. would sell: “You’re probably thinking, why would Fox and GE sell their pet project to Yahoo? Well, why not? After all, they took a $100 million investment from Providence Equity Partners, which means they have an interest in making some sort of a return on this company.”

Wrong. Wrong. Wrong. Hulu is one of the core elements of NBCu and News Corp online video strategy.  They were ridiculed when it was first announced (Techcrunch called it Clown Co., they’ve changed their minds since then) but they proved everybody wrong.  Most people thought a joint venture between traditional media companies would fail, that the user experience would be bad, that no one would use it. According to this article, in September 2008, they streamed 142 million videos, a 42% month over month increase. It’s growing fast and on the verge of becoming a major player online. Selling Hulu to Yahoo! would be like AT&T selling YellowPages.com to Google. Won’t happen, nope. Don’t even think about it. As for return on investment, expect an IPO in a couple of years, not a sale.

And Hulu!  We want access in Canada!

As the year ends, here are, in my humble opinion, the most important news and trends of the year in local search and social media (in no specific order):

• The major challenges of the newspaper industry. Declining print readership, challenges with monetizing the Web, user fragmentation, lay-offs, stock value decline, etc. 2008 was a very difficult year for the newspaper industry and I don’t think 2009 will be easier with the slowdown in ad spending.
• Mobile, iPhone & the app store. The launch of the iPhone 3G and the arrival of new “iPhone-killers” devices signaled the beginning of a real tipping point in mobile local search and social media usage. The launch of the iPhone app store also created a new ecosystem leveraging the iPhone’s installed base. At the end of 2008, building an iPhone application is as “hot” as building a Facebook app was a year ago.
• Social Media (Facebook, Twitter, Friendfeed, LinkedIn). Continued usage/buzz growth in social media especially around these four Web properties. Social and user-centric functionalities are a must-have today. Some difficulties around monetization of social media inventory though.
• Identity (Facebook Connect, OpenID, Google Friend Connect). With the rise of social media come major challenges around personal identity on the Web. Large social properties want to become that official provider of identity. Will explode in 2009.
• Local video. This was the hottest new ad product at directory publishers everywhere. I’m convinced that the technology is now a commodity but I’m wondering if the product itself will also become a commodity in the near future (i.e. you need videos in your local search site like you need maps, URLs and click-to-talk buttons)
• Sobering presentations from directory publisher executives at each Kelsey conference in 2008. More realistic, a clearer view of opportunities and challenges in the industry (great assets, local search industry is booming but erosion in major metro areas, etc.). What used to be said behind closed doors is now mentioned openly.
• Drastic drop in directory publishers stock prices. Deadly combo of credit crunch, slowdown of the economy, too much debt and market perception. Idearc is delisted after losing 99% of its value. RHD also loses 99% of its value. Similar (although less drastic) situations in Europe and Canada.
• Microsoft’s failed Yahoo takeover (a proposed buy-out at $31 a share) occupied a good portion of tech news early in the year. This would have a created a very interesting company to compete against Google (desktop technology + social media + search). Jerry Yang, Yahoo!’s co-founder, made sure the deal wouldn’t go through. Yahoo!’s share is now hovering around $12.00.
• AOL buys into the social-networking game with Bebo. A cool $850 million…
• Geolocation in browser (geode, loki, Google Gears). We’ve seen the first elements of this in 2008 but this is a potential game changer, transforming every web site into a local destionation
• Facebook replaces their own classifieds with the Oodle platform. In a move I found very surprising, Facebook outsourced local classifieds clearly showing that they don’t realize they’re in the local search space.

I’m at Societe Des Arts Technologiques (SAT) this afternoon for the “Les stratégies d’innovation dans le Web 2.0” conference organized by the Association Marketing de Montreal in collaboration with , the SAT and Yahoo! Quebec.

Speakers:

• Stéphane Delbecque, Six Apart
• Robyn Tippins, Yahoo Developer Network
• Austin Hill, Akoha
• Hugh McGuire, Librivox.org

Ping me (seb AT praized.com) if you’d like to meet up.

On Saturday, I realized that my old wireless router had died of old age. Not knowing what model to buy next (I had bought the first one because it was the only one compatible with my old iPAQ Music Center), I turned to my social graph for an answer. I used Twitter to ask my 375 “followers”: “just realized my wireless router at home died. Any advice as to purchase of a new one?”

In a matter of a few hours, I quickly received many valid answers both from Twitter and from Facebook where my “tweets” are broadcasted to my 612 “friends”:

• A Montreal web entrepreneur told me to buy the Linksys WRT160N with a link to the product page
• The partner at the VC firm who funded Praized Media said I should buy an Airport Extreme if I’m using a Mac
• A former Ubisoft colleague told me to make sure I update the firmware before declaring my router dead
• Another former Ubisoft colleague suggested a SonicWall router along with a link
• A high school friend told me to buy Linksys and said I shouldn’t pay more than $80.00

Now, I could have easily queried Google for such a search. I could have looked for “how to buy a wireless router“, found relevant web sites like About.com or eHow, and identify important product criteria that way (and associated brand/models). But you know what? Research takes time. Pinging my social graph took me 1 minute and I got five valid answers in a very short time.

It got me thinking about how the social graph is structured, in terms of ease of access. It’s very easy to access friends & family. You usually have their e-mail address and phone numbers handy. It’s a bit harder to reach the people that have a shared interest with you (community members, neighbors, former colleagues, etc.) and it’s usually very difficult to directly ask experts for their opinion (have you tried pinging a movie critic lately?). What if you could easily reach all these people to ask them anything? And what if everyone had tools to make it easy to answer?

It also got me thinking about the whole Man vs. Machine debate. Who do you trust most for information/recommendations? Man (a real human being answering your query) or Machine (an algorithm that’s surfacing relevant information)? It’s Facebook/Twitter/Friendfeed/Mahalo vs. Google/Yahoo/MSN. Coming from the business directory industry where word-of-mouth is often considered the biggest “competitor” (with social media, it’s becoming the biggest opportunity!), I tend to find human recommendations more relevant and more interesting.

In an article about social media monetization yesterday, eMarketer says that word-of-mouth might be a key way to monetize social media as “62% of marketing professionals told TNS Media Intelligence and Cymfony that creating word-of-mouth or viral campaigns has great potential to impact their business.”

That Man/Machine debate is age-old as you can see from this quote from a 1968 Time magazine article: “With the Depression, the machines that had once seemed so heroic to the prosperous ’20s were suddenly transformed into villains. As production lines slowed to a crawl and millions were thrown out of work, surrealists depicted nightmarish phantom treadmills and airplanes that were trapped like dragonflies.”

As we get closer to the singularity (defined as “a hypothesised point in the future variously characterized by the technological creation of self-improving intelligence, unprecedentedly rapid technological progress, or some combination of the two.”), I think we’ll get into more debates around the value of Man versus Machine (or maybe I’ve been watching too much Battlestar Galactica).

Update: Danny Sullivan talks about “Search 4.0: putting humans back in search“.