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.
Dave Swanson: "Facebook and Twitter are Both an Opportunity and a Threat to Directory Publishers"
October 2, 2009
This is a post about the Kelsey Group’s DMS ’09 conference which happened last week in Orlando.
Day two of the DMS ’09 conference saw a brilliant keynote from Dave Swanson, Chairman and CEO of R.H. Donnelley (RHD). After hearing sobering thoughts from European Yellow Pages leaders at the EADP conference in May (see The Wake-Up Call: “Unless We Change, on the Long Run, We Are Doomed to Disappear” (EADP 2009)), I was really looking forward Swanson’s keynote given the situation RHD found itself in (they filed for Chapter 11 protection in May) after having an amazing stock market ride in the last few years. the Kelsey Group “wanted someone who has had his butt kicked” for this keynote, someone who could explain what happened and what’s ahead for the industry and he didn’t disappoint.
Here’s what happened according to Dave Swanson:
- The economy
- “It changed everything for everybody. If you look at the timing of ad sale declines, it compares exactly with the economic contraction. If you index Google’s financial results with RHD’s, you realize they have suffered as well. We’ve seen broad-based sales compression. We had enjoyed the longest growth period in history, but it created unsustainable bubbles: housing bubble, advertising bubble, credit bubble (with mergers & acquisitions and leverage buyouts). It was an unsustainable situation because we needed to refinance regularly. There was no money left after the financial bubble burst. When I’m asked “Dave, do you regret this strategy?” I answer, “no, absolutely not. RHD might not exist today.” “
- Secular changes
- “Print competition is intense. We keep pointing out the shortcomings of each other’s products. Other local media companies (i.e. newspapers) pitch “against” Yellow Pages also. Media Fragmentation didn’t help as well. Finally, the media trumpeted “no one uses the Yellow Pages anymore” and we became an “environmental hazard” for a segment of the population. We have been very good at shooting ourselves in the foot.”
- Execution
- New products did not deliver and had a high rate of churn.
Where are we?
- “I hope the freefall from the economy has stopped but I think that we’re a long way to go before “main street” joins the current Wall street rally”
- ” We need multi-platform solutions, more creative pricing, more transparency”
- “Competitive environment is intense. We could see a shake-out. For RHD, the worst is behind us. Financial house must be in order.”
- “We need to challenge the premise of our business”. He gave as example: “do we need separate Internet Yellow Pages platforms and ventured to answer ”I don’t think so”.
- “We will never dominate consumer usage as we did in the past.”
- “We need to become have a service-centric model vs. product-centric model.” RHD’s objective is to be the number one provider of directional services in the eyes of the SMBs in the market they serve. Yellow Pages publishers are provisioning more keywords on search engines with small businesses than anyone else. Because of the channel, this has been a natural extension of their existing product.
- “Execution hasn’t been very good, but we’re getting better and we’ll dominate”
- “Publishers have to look at micro-strategy, geo-vertical opportunities. It’s not one large homogeneous search business.”
Swanson observed it would be very easy to be pessimistic but his philosophy is that when things are going very good, something very bad is about to happen and vice-versa. The next several years will be all about climbing out of the hole but ”it’s going to be a hell of lot more fun than the last two years”.
Following his keynote, I sat down with Dave Swanson for an exclusive interview.
On print innovation
I asked Swanson if he thought there was innovation left in the print product, what he thought a print product would look like in 5 years. He said he thought the print book really works in smaller markets and that he didn’t see much change needed there. But he confirmed he thought the format wasn’t right for urban centers. He suggested limiting geography (smaller scopes), having more relevant information in the books (possibly a subset of headings instead of all of them) and more specialty products. But he also added Yellow Pages were not supposed to be glamorous. They have to be efficient.
On online innovation: verticalization & micro-strategy
I then asked RHD’s CEO where he thought DexKnows.com, their main online property, was going. He said he was extremely happy to have Sean Greene heading their RHD Interactive division (I interviewed Sean a few months ago), bridging print and online culture. He mentioned DexKnows’ future lies in two directions: verticalization and Micro (which I would call hyperlocal)
Verticalization is the improvement of high-potential verticals within Dexknows.com. It means depth of content, aggregate categories/headings and a combination of expert and user content. He gave the example of “wedding” as a meta-category, an interesting vertical.
Micro is recreating a community, a subdivision, a neighborhood within Dexknows.com (or maybe more “local” brands. He wasnt’ allergic to trying other online brands for this initiative). User recommendations would play a big role there. When asked about aggregating hyperlocal information that’s not directly merchant-related (classifieds, neighborhood information, municipal government info, etc.), he remarked that a lot of community information already appears in the print Yellow Pages and said there’s no reason why it shouldn’t appear online.
On social media
Swanson acknowledged that social media has the potential to be a big disruptor in local search (which made me very happy as I’ve been saying that for a couple of years). He called social media “word of mouth on steroid”. He confirmed that Facebook and Twitter are both an opportunity and a threat to directory publishers.
On combating the negative industry press
RHD’s CEO wasn’t too optimistic about industry-wide efforts to combat negative press. He suggested we change the way directory publishers market themselves and start talking to SMBs more to improve their image (instead of doing consumer advertising to garner usage).
What it means: perfect tone for the Swanson’s keynote. Things are not going as well as they used to in the Yellow Pages industry and it doesn’t serve any purpose to hide it. “We will never dominate consumer usage as we did in the past” is most realistic statement I’ve heard in industry recently. At the same time, the industry has tremendous assets it can leverage starting with the direct relationship publishers have with small advertisers. Very happy that RHD is looking at improving the print product in large urban areas. I believe there’s a lot of leg left in a print product that’s tailored to an urban consumer. Ecstatic that Swanson is talking seriously about social media. I sometimes felt like I was preaching in the desert in the last two years… We’ll have to follow RHD closely as they come out of Chapter 11 in the next few months.
In light of the latest Kelsey Conference in Seattle last week whose theme was “vertical marketplaces”, I read with great interest this eMarketer article about online communities. Analyzing a portion of the “2008 Digital Future Project“(.pdf) report produced by the USC Annenberg School Center for the Digital Future, eMarketer reports that “nearly half of US Internet users (…) said they belonged to a hobby-oriented online community, a full 41% of respondents belonged to an online social community, and one-third belonged to an online professional community.”
The following graph shows the types of communities users belong to:
eMarketer also quotes a recent The Economist article that said “… that the future of social networking will not be one big social graph but instead myriad small communities on the internet to replicate the millions that exist offline. No single company, therefore, can capture the social graph. Ning, a fast-growing company with offices directly across the street from Facebook in Palo Alto, is built around this idea. It lets users build their own social networks for each circle of friends.”
What it means: I’ve often mentioned how much I like this Wired article about meganiches. I’ve often said that I’m a strong proponent of media “verticalization”. I therefore believe Ning is onto something really big as the social Web becomes more distributed.
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).
(picture: zillow.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.
Highlights from Kelsey’s Drilling Down 2008: The Kelsey Team Intro and the Latimes.com Strategy
May 1, 2008
Very interesting first half-day yesterday at the Kelsey Group’s Drilling Down on Local ’08. The theme of the conference is “Marketplaces”. It regroups products such as classifieds, auctions and vertical sites. Here are highlights from the first two sessions:
As an introduction, the Kelsey Group’s team provided us with some background information on “Marketplaces”. Neal Polachek first described the local end game as “better search, discovery, and engagement”. He even quoted the Cluetrain Manifesto’s “Markets are conversation”. He also talked about their latest global ad revenue forecast for 2007-2012, stating that the biggest category winner would be Internet and the biggest loser would be newspapers. As I wrote last week, the Kelsey group believes that Verticals will capture a large chunk of online advertising by 2012. Matt Booth then talked about three specific verticals (travel, automotive, home services) that have had a tremendous impact on offline/online business and media spending. For example, Matt showed two juxtaposed graphs showing the decline of newspapers’ automotive revenues vs. Autotrader.com’s revenue increase. Peter Krasilovsky finished the intro by stating that it’s now time to “uncouple” print and online media bundles. As print revenues decline, you need to have online-only ad products to compensate. Peter added that you also want to “verticalize” your offer to expand your revenues.
The second session “Remaking the Los Angeles Times (Online)” starred Rob Barrett, Senior VP of Interactive Media, GM, LATimes.com. He started by mentioning that most of what he’s currently working on is not very visible online now. He spent the first couple of years at the LA Times refocusing the online business. His main focus has been to build the display ad business (as opposed to classifieds). It’s going to generate $25M in revenues this year. Barrett says it’s now “time to finally break the newspaper paradigm online”. The LA Times’ online strategy needs to be local as opposed to national as it will allow them to differentiate their offer versus other “national” newspapers like the New York Times. They’ve realized that local users are key to online revenues as they generate more monthly page views and twice the display revenue per page views. Their product approach is “we want to own Los Angeles”, i.e. be integral to life of Angelinos, be the source of news and information about Los Angeles to the world and be an information retailer by creating, aggregating and curating LA content.
The Latimes.com web site is slowly transforming itself into a hyperlocal social network. All content pieces are going to be tagged and indexed by category and geography. By targeting on demographics and on geo, the LA Times is hoping to raise their average CPMs and improve ad effectiveness. They are creating the best targeting machine for the LA DNA. Barrett then showed us pilots of various new vertical sections that are very promising:
- The Travel section: http://travel.latimes.com
- A hyperlocal arts & entertainment guide: http://theguide.latimes.com
- Hollywood backlot to show pictures of movies shooting: launching next week
- User-generated photo and video content: photos & videos, http://yourscene.latimes.com
- The Homicide map: http://www.latimes.com/news/local/crime/homicidemap/
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.
