At the BIA/Kelsey conference yesterday, I had the opportunity to sit down with the two co-founders of SeniorChecked, Chris Spanos and Scott Knowles. Both ex-AOLers with solid experience in the local space, they’ve built this vertical local directory site targeting Seniors and their family.
Their mission is to help reduce the risk and incidence of fraud against Seniors by connecting them to trusted local businesses. Local service providers pay them $700 a year for a detailed review which eventually gets them a seal of approval from SeniorChecked. This is the list of things they investigate before approving a merchant.
Obviously a great vertical with the aging baby boomers population (Yellow Pages Group had published a print directory on the topic a few years ago) and an important life event that involves many business categories, Scott and Chris have stumbled upon a better business model than I had expected before sitting down with them. This is not a business directory play, this is a “seal of approval” play.
Why is this an important distinction? If you’re building a vertical business directory, you need to sell advertising AND convince users to come to your site. A very difficult challenge for any startup. But if you’re selling a trusted seal, advertisers will “sell” consumers to your brand. They will promote the seal in-store and in their brochures (SeniorChecked provides advertisers with a promotion package that includes stickers, logo, etc.). Consumers might eventually come back to the SeniorChecked.com site searching in the directory to make sure that the company is legit but this is not the core business. Because a seal is a simple content “atom”, it also enables SeniorChecked to distribute their approved merchants in other directory sites.
The long term picture for SeniorChecked is also very interesting. They’ve basically built a platform which enables them to launch other verticals where trust plays a big role. They want to build these verticals themselves or partner with other people, as a technology provider, to launch them.
This is not the first company to try a “seal of approval” (ValueStar comes to mind) but by verticalizing, SeniorChecked might be taking the right road to success. I’ll be following them.
On the second day of the Kelsey Drilling Down 2008 Conference, we heard from Rich Barton, Chairman and CEO, Zillow. He exposed us to his thesis that lead to the various projects he’s been involved in in the last 10 years. Before founding Zillow, Barton founded Expedia when he was at Microsoft. His basic thesis is that transparency of information is power. This leads to a consumer revolution in various verticals, releasing things that were locked-up, especially around big financial decisions. He mentioned stockbroking, travel and real estate as three verticals that were forever altered by the arrival of the Web. He also mentioned three other companies he’s involved with in the following verticals: Legal (Avvo.com), Healthcare (Realself.com), and Employment (Glassdoor.com).
He finished his presentation with a “Power to the people” manifesto that’s very telling in this user-generated content age:
- Consumer crave information and power
- If it can be known, it will be known by all (the web causes transparency)
- If it can be rated, it will be rated
- If it can be free, it will be free
- Professionals who are active players in the new vertical marketplaces win
- There can be no vertical marketplace without community
- The digital media model rules (local is giant)
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.
The Kelsey Group just issued a new forecast on online classifieds and verticals advertising:
While online advertising has been propelled primarily by search, banners, e-mail and lead generation, The Kelsey Group expects verticals to emerge as a key driver of online advertising by 2012. Based on trend analysis, the firm forecasts the U.S. interactive classified and vertical share of online advertising will grow from 18 percent in 2007 to 24 percent by 2012. Revenues for interactive classifieds and verticals will grow from US$3.9 billion to US$14.7 billion during the same forecast period, representing a 30.5 percent compound annual growth rate (CAGR).
During the forecast period, U.S. online classifieds will grow from US$3.9 billion to US$9.1 billion (18.6 percent CAGR) and online verticals (such as home services, home and garden, health care, legal and auto repair) will grow from US$100 million to US$5.6 billion (461.4 percent CAGR).
What it means: I’m a strong believer in the verticalization of the Web. So, directionally, I agree with those numbers. The first indication for me that this would be a big business was this article about Meganiches in Wired’s November 2006 issue. I forecast that the next big trend will be the “localization” (i.e. the addition of local content/business listings) of all those vertical sites.