Jon Brod: "Local is Not a One-Ton Gorilla, It is 2,000 One-Pound Monkeys”

Jon Brod, executive VP, AOL Ventures, was keynote speaker today at the BIA/Kelsey Marketplaces 2010 conference. He gave us a good update on AOL’s local strategy centered around Patch, the hyperlocal/citizen journalism initiative at AOL.

Highlights from his keynote:

  • Local is the largest opportunity YET to be won online
  • AOL’s five pillars: content, advertising, communications, ventures, local
  • Patch’s mission: to improve communities and the lives of their residents through information.
  • Patch consists of i) a scalable technology platform, ii) structured data, iii) professional journalists in every community
  • Monetization: i) self-serve ads 2) Ad sales reps
  • Operating Patch is 4.1% of the cost of a like-size daily newspaper
  • AOL will soon to relaunch City’s Best brand (was dormant)
  • AOL will soon relaunch MapQuest as well

Additional notes from Local SEO Guide:

  • Patch has grown from 3 markets one year ago to 41 communities on four different states.
  • They have a LocalFund to invest in local startups.
  • AOL on the record as investing $50MM in Patch and City’s Best this year.

Brod mentioned they had this quote about local: “local is not a one-ton gorilla, It is 2,000 one-pound monkeys”.

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Dave Swanson: "Facebook and Twitter are Both an Opportunity and a Threat to Directory Publishers"

This is a post about the Kelsey Group’s DMS ’09 conference which happened last week in Orlando.

Dave Swanson Photo

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.

The New DexKnows Site: Simpler User Experience and Improved Results

Had the opportunity this week to sit down (virtually) with Jeff Porter (VP / General Manager DexKnows.com at RH Donnelley) and some of his team members to go through the various features/functionalities of the new DexKnows.com site. The new site was designed and built by the Business.com team (which was acquired by RHD in 2007). It’s using Lucene open source search technology. The site is currently in beta and offers multiple improvements over the last few versions.

Dex Yellow Pages- Online Phone Book Directory for Local Business Listings

Main areas of improvements include

  1. A simplified user interface (more search engine-like)
  2. A clear focus on breadth, depth and quality of local data
  3. Better drill-down results both from a hyperlocal and hypervertical point of view

I jotted down the following random notes on what struck me as interesting with the new site:

  • Introduction of geo-taxonomy (love that word!). The site offers users different levels of geographic drill-down including metro, city, neighborhood and landmarks.  One of the challenges of local search sites is “guessing” the user geo-intent. Is the user searching for the specific city or for the metro area? In this case, the team decided that they would return multi-city metro results in a refine page showing users additional geo-refining options. For example, a search for Pizza in Seattle assumes by default that you’re doing a metro-area search. It leads you to a metro page showing you very basic listing information and all the metro city options. Those simplified basic listings remind of Google local search results. Depending on headings (think restaurants or lawyers), you can also drill down on “specialties” (think “family-friendly” for restaurants or the types of lawyers). If you select individual cities within a metro area, you get to a city page with more detailed business listings. You can then drill down to specific neighborhoods.
  • Category suggestions based on keyword entered (not the same as keyword suggestions!). It allows for a better mapping between unstructured keyword search and structured results.
  • As usual, each business has a profile page. I really like the integration of Google Street View in there.  Makes me think this business profile would be tremendously valuable in mobile situations (think Dexknows iPhone app).
  • If you search for service categories where work is usually accomplished in your home (plumbers, electrician, etc.), you get a service area map instead of the specific location of the merchant. The scope of the merchant service area is determined by the print directories in which they advertise.
  • You can do brand search (try “Nintendo in Denver“) but you can’t combine keywords (try “Nintendo used games in Denver”, it should return you this merchant but results in a failed search). It’s really the only place we’re I was truly disappointed with results.
  • I have to mention they have a very nice admin section for their advertisers where they can manage their listings and profiles, view their different products and get an estimate of the traffic they should be getting.

What it means: I really like what the RHD team has done with their new site. In the online directories arms war, the game seems to be focused on two main elements: simplified usage and quality of data. And the RHD online team is definitely focused on those elements, the same way we were at Yellow Pages Group when I was there. But it also made me realize that the industry is still very much looking at Google (or Yahoo or MSN) as the local search benchmark.  Instead of doing incremental innovation, how do you leapfrog search engines? In other words, what is keeping Google up at night? The answer to that question leads to a possible new strategic direction.  Community, humans, social interactions, marketplaces are what’s keeping Google up at night. Facebook and Linkedin (for example) have built up amazing identity and social graph connection systems, which they can (and will) leverage as much as they can. And we will get to ask ourselves the age-old question: who do we trust most? Man or Machine?

Update: the official announcement.

The Local Wide Web

A couple of somewhat conflicting articles today.  I love those!

On one hand, Amy Gahran over at Poynter.org challenges the Knight Foundation for their “strong focus on geographically defined local communities” in the context of a Silicon Valley community forum event.  She says: “It seems to me that with the way the media landscape has been evolving, geographically defined local communities are becoming steadily less crucial from an information perspective.”

On the other hand, in an article called “The web’s future is a ‘village'”, the BBC reports on a study from HP Labs that talks about what happens “when information becomes more available, cheap and valueless”

“Mr Huberman said the overwhelming amount of information online was also starting to affect relationships.  “With Facebook many people boast of having 100, 200 friends but in reality only keep up or track a very few of them.” On this basis Mr Huberman concludes that we are returning to a time where we maintain close contact with a small number of people – enough people to fill a village.  “Things are starting to become intimate again,” he said. “We went through this explosion, this illusion that the world is at my fingertips and I can reach anyone and everybody. But at the end of the day we notice that we actually interact with very few.”

What it means: when faced with information overload, we go back to known quantity.  That’s one of the reasons why I believe local represents the future of the Web. Most of us live our offline life locally (we say in the directory industry everything happens within 50 miles of our home or office). With more and more local merchants going online and more and more hyperlocal initatives like Metroblogging, Outside.in, Citysquares and newcomers like Neighborsville or Yipit, we’ll be able to drill down on the local information that matters to us.  I’ll definitely welcome this new Local Wide Web (LWW?)…

Update: Howard Owens chimes in on the Pointer.org article with a great analysis.

More Thoughts on the Latimes.com’s Hyperlocal Strategy

I was doing more thinking about Rob Barrett’s Latimes.com presentation I heard at the Kelsey conference last week. The decision to re-center their online strategy around hyperlocal is one of the sanest, most courageous and possibly most difficult strategic decisions I’ve heard come out of a traditional media group in a long long time.

Why? I was re-reading this blog post conclusion I wrote 15 months ago, “In a few years, you might find only authoritative international newspaper brands (New York Times, Le Monde, The Guardian, La Stampa, The Globe & Mail, etc.) and strong hyperlocal newspapers. All the ones in the middle will either have evolved or died.”

I suspect that building one of those big international newspaper brands is perceived as the holy grail of the newspaper industry and you can easily imagine that, for many years, the Los Angeles Times management team believed they would be one of those. Moving their online strategy to hyperlocal wasn’t a very sexy and exciting decision but it’s exactly what is needed to make the LA Times brand succeed online.

Highlights from Kelsey’s Drilling Down 2008: The Kelsey Team Intro and the Latimes.com Strategy

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.

Kelsey Drilling Down 08 Neal Polachek

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.

Los Angeles Times - News from Los Angeles, California and the World

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:

Sam Zell and the Re-Engineering of Newspaper Culture

I was reading this weekend in the Globe & Mail a long article about billionaire Sam Zell and his purchase and subsequent re-engineering of the Tribune Company, one of the large US newspaper groups. The article as a whole is very informative but I was especially intrigued by this excerpt:

Since taking over, Mr. Zell has attempted to raze the culture by replenishing the senior management team with trusted lieutenants and giving his properties more autonomy: Local papers will decide what they do in a particular market and they will also be responsible for creating and meeting their own budgets. Most importantly, though, in some people’s minds, he’s showed up. “I’d say when he came to visit our shop, what a lot of my managers came away with was we didn’t often get visits from executives before. And when they did, they couldn’t pronounce the names of the local cities,” said Digby Solomon, publisher of the Daily Press in Newport News, Va. “It’s not as though the people who have been running newspaper companies are stupid, but I think in any sort of business, you get trapped in a particular way of thinking, and it’s just very difficult to shake loose from that.”

Sam Zell

Flickr picture by William Couch.

The Daily Press fits the mould of what Mr. Zell has described as his “petri dish” model – using smaller papers as testing grounds, or incubators, for new ideas that could be rolled out to the chain’s larger papers. The paper has already taken one gamble, replacing its front page with virtually all local news, rather than the conventional format of national news being afforded the prime placement. It may not sound like much, but this is the kind of change that gives newsrooms pause: There were serious concerns about people cancelling their subscriptions. In the end, none did. “Everyone was afraid to test it,” Mr. Solomon conceded. “But this isn’t a heart transplant – if we screw it up, we can change it tomorrow.”

What it means: very interesting to look at the various strategic imperatives Zell is implementing inside Tribune Company. He’s obviously starting with a clean slate (and a now private Tribune Company) which gives him more freedom but the idea of having decentralized decisions centers, the whole local/hyperlocal angle, and the creation of a culture that rewards risk-taking are all steps in the right direction. Using smaller newspapers as a testing ground is also smart if you can iterate and migrate successes quickly to larger newspapers.