Strategy

Today’s Strategic Imperatives For Directory Publishers

~ Sebastien Provencher ~ 6 Comments

Flick picture by disoculated

Yesterday, I gave an interview to the Globe & Mail about Canada’s Yellow Media / Yellow Pages Group, the incumbent directory publisher and my former employer (I worked there from 1999 to 2007). Even with the challenges they’re facing, I’m still a fan of the company (and of the industry in general) but the interview gave me the opportunity to put in writing what I think are the core strategic imperatives today for any directory publisher, not just Yellow Media. The list won’t surprise anyone in the industry but it’s always good to remind ourselves what they are.

  1. Change the culture. “Internet culture” must truly permeate every aspect of the organization. Concepts like speed of execution, innovation, quick iterations, coopetition, risk-taking, failing fast must become second nature (other people on Twitter & Google+ suggested “internet culture” also meant constant learning, openness, willingness to help each other out, adaptability to constant change, sharing, crowdsourcing, diversity, immediacy, learning, and expectation of access)
  2. The sales force. I believe the sales force is now the major asset of all directory publishers and this sales force needs to be able to sell print directory products as well as a variety of online products including third-party ones like Google AdWords or Facebook advertising. This means recruiting and training are critical success factors. I use to believe the brand was a major asset but not anymore.
  3. Reinvent the Print. I still believe print business directories have legs and they won’t die tomorrow (and by the way, stop it with “Yellow Pages are dead” please, nothing ever dies, it just becomes niche). Even I still use the neighborhood book once in a while. But the book needs to be reinvented to become more locally relevant, more about the consumer. As Francis Barker (SVP at Dex Media at the time) said in 2004 at a BIA/Kelsey conference, print books design should be influenced by online local search patterns/usage. I’ll add that they now should be influenced by mobile local search/discovery apps. On a related note, book distribution in apartment and office building should be improved to avoid the PR disaster pictures like this.
  4. Continue investing in the Web. Beef up your dev and product management team, invest in R&D, try things. Facebook has shown that you can continue innovating even when you have huge consumer usage and ad revenues.
  5. Focus on mobile.  The Web is extremely fragmented and some players like Google and Facebook have managed to capture gigantic market shares. There’s probably a bigger opportunity to support the franchise by focusing on mobile and launching various vertical apps. Directory publishers need to invest and build up their mobile team and technology.
  6. Get serious about social media. I’m obviously biased because of the work I’m doing on Needium, but the time for experiments in social media is over. This is serious business now both from a consumer and an advertiser point of view.

Am I forgetting anything?

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A Manifesto for Sustainable Web Development

~ Sebastien Provencher ~ 12 Comments

As a startup entrepreneur for the last three years, I’ve had the chance to observe the online scene both locally (Montreal), nationally (Canada) and internationally (US and Europe mostly). I’ve organized and participated in many unconferences and camps (most recently last week at WebCamp Montreal) and I’ve spoken at conferences in Europe, the US and Canada. I’ve met many entrepreneurs all over the world and I’ve coached aspiring ones. I’ve traveled to Silicon Valley countless times and had the opportunity to breathe the air there, trying to identify the various cogs of that ecosystem. I’ve realized that, if the right conditions are present, tremendous value can be created by building Web products.

My perception of the local online industry (Montreal specifically) is that we’re really good at online marketing / communications / advertising and we use this as the main method to generate value. We do build many online products but they end up being used in specific time-sensitive ad campaigns, ephemeral things, and when these ends, these products become orphans. This perception is obviously influenced by my product management background. I’ve been building Web products for more than 10 years and some of the things I’ve created have influenced whole industries and are generating millions of dollars in revenues.

Montreal has all the ingredients to become a hotbed of Web development and startups (I wrote about that a few months ago). After all, we already did it for the videogame industry. There is a lot of money for interactive projects, especially in large organizations, but we’re trying to replicate the old broadcast/advertising model online. There must be a better way to do things.

To re-think the way we work as an industry, I’d like to inspire myself from ecological terms coined in the last few decades: sustainable development and the waste hierarchy (known commonly as the 3Rs, reduce, reuse and recycle). Environmental science learnings can teach us to create more value with less “material”. Based on my personal experience, here is my manifesto for sustainable Web development, to create a better, more innovative, more valuable Web ecosystem.

  1. Think “product”, not “ad campaign”. Use budgets to create things that will last. Think how you can achieve your communication goals by building stuff instead of buying media placement.
  2. Do not re-invent the wheel, Focus on building value on top of existing material. Re-use existing standards. This is how we’re going to accelerate the pace of innovation.
  3. Use open source software. You’d be amazed to see how many technology components are now available in open source. You get access to whole communities when you use those technologies and you speed up innovation.
  4. Leverage existing APIs. You’d be amazed to see how many content and technology components are now available via public APIs. Use them, again, to speed up your development.
  5. Less talk, more build. We love our social time, drinking beers with industry colleagues and imagining a better world. If you want the world to change, go in action mode. Just do it!
  6. Give back. At the end of a project, if you’re not going to reuse the code, open source it. If it’s not going to be used at all, give it back to the community.
  7. Do not focus on “competitors”. The online market is huge and will be so for the next 20 years. Think about disruptive ideas, think about incremental ideas but focus on your business and the opportunities.
  8. Work with other companies. This is the corollary of the last bullet. Can you participate in common projects that will benefit multiple organizations?
  9. Use locally-produced technologies in your projects (when possible). This rewards risk-taking in the local ecosystem.
  10. Share your best practices with others. Blog, speak, be open, You win on execution, not on ideas.
  11. Mentor others. Make sure other people benefit from your experience. Be generous with your time even though that’s probably the most precious resource you have.
  12. Participate in the ecosystem. Attend events, write blog posts, take position on important topics.
  13. Learn from failure and respect those that failed. Silicon Valley folks believe you can learn from failures. Do the same.
  14. Think out of the box. Don’t be afraid of pathways less traveled. Challenge people.
  15. Launch your own company. If you really believe in your ideas and your current professional environment doesn’t allow you to execute them, start your own company.
  16. Listen to builders, innovators and “crazy” people in the industry. They sometimes sound crazy but listen to them. They see things you don’t see.
  17. Create long-lasting value, not short-term results. ‘Nuff said.

Do you agree or disagree with what I wrote down? Have I missed anything? Feel free to leave a comment. This is the beginning of the conversation…

The Age of Cheap Content and Content Arbitrage

~ Sebastien Provencher ~ 1 Comment

Ken Doctor from the Newsonomics blog covers the acquisition of Associated Content by Yahoo! for a rumored $90 million. He writes an in-depth analysis and offers a sobering conclusion:

Overall, today’s deal is further evidence we’re into the age of cheap content and of content arbitrage. The stream’s being reversed all around the news business, with advertising driving content creation in ways that those of us who fought print advertorials couldn’t once imagine. Content arbitrage is a feature of the landscape as I recently wrote (“The Newsonomics of Content Arbitrage“) and one that modern media companies must learn. How they use its principles will make all the difference in what they and their brands stand for, but the need to understand the principles is reinforced by today’s deal.

What it means: I think these are two key trends to understand if you’re in the business of content production. Companies like DemandMedia or initiatives like Patch (at AOL) are creating scalable platforms to create low-cost content. Content arbitrage, creating specific content that can be easily monetized, is logical from a business point of view (i.e. go where the money is) but it begs the question from a democracy point of view. Who or what will fund important news reporting that doesn’t monetize well?

Another consequence is that it puts pressure on the price paid for articles.  I had the opportunity to hear Luke Beatty, Associated Content’s founder, at the last BIA/Kelsey conference. One of the things that struck me was the “what’s in it for me” for network writers. Beatty told attendees that you couldn’t really make a living with what they pay but writers were getting exposure, were becoming experts through their use of their platform. This has tremendous impact on journalism. At the same conference, Rick Blair, Examiner’s CEO, described the various contributor levels we find on the Web today: pro, pro-am, amateur, user-generated content (Blair mentioned that Examiner is at the pro-am level).

It’s also forcing news organization to think about content production segmentation. Am I in the business of producing all the content I offer to readers? Am I outsourcing a portion of the content production? Do I want to control the technology platform behind that content production?

In a related article about the Huffington Post’s 5-year anniversary, Henry Blodget talks about disruptive technologies. He says “Disruptive technologies, meanwhile, are emphatically NOT better than incumbent technologies–at least not at the beginning. Disruptive technologies are often worse than incumbent technologies.  Their advantage–the reason people begin to adopt them–is that they’re also simpler, cheaper, and more convenient.”

More questions than answers at this point for news organizations but these trends need to be taken into account when building the next strategic plan.

Are Newspapers Outsourcing Core Features to Foursquare?

~ Sebastien Provencher ~ 5 Comments

Megan Garber from the Nieman Journalism Lab explains in details how the Wall Street Journal uses Foursquare to offer geo-localized news:

[The Wall Street Journal] has also been making regular use of the Tips function of Foursquare, which allows users to send short, location based updates — including links — to their followers. The posts range from the food-recommendation stuff that’s a common component of Tips (“@Tournesol: The distinctively French brunches here feature croques madames and monsieurs and steak frites. After dining, check out the Manhattan skyline in Gantry State Park”) to more serious, newsy fare

via Location, location, etc: What does the WSJ’s Foursquare check-in say about the future of location in news? » Nieman Journalism Lab.

What it means: That’s a very nice implementation of geolocalized content within Foursquare. You can see more examples in the article. After reading it, something was bothering me (the same way the Facebook “Like” button bugged me) and I finally figured it out. I left the following comment in the Nieman blog: “what Foursquare is doing, newspapers could do themselves. It’s all about structured data. Most newspaper organizations have structured their content on topics/keywords/subjects but they forgot to structure it on geographical information (places, businesses, points-of-interest, neighborhoods, etc.). As soon as you have this 3D view of your content (vertical + local), you can syndicate it in a multitude of ways.”

We live in a fragmented/atomized Web now. We have atomized content, business models, functionalities, APIs. The smart internet companies are atomizing both content AND features/functionalities.  They become both media companies and technology providers. Their end goal is becoming a media. They use their technology to reach their end goal. That’s a very smart strategy. As a potential partner of these smart internet startups, you need to ask yourself if these functionalities are core business to you or not. If they are, DO NOT OUTSOURCE THEM to another media company! Do partner for content distribution though.

The Web is becoming more and more local. Newspapers should own the expertise of geo-localizing their content, displaying it that way within their mobile apps (or Web site) and then syndicating it to partners like Foursquare. It’s core business.

Complex Business Models Collapse Because it's the Last Remaining Method of Simplification

~ Sebastien Provencher ~ 1 Comment

When the value of complexity turns negative, a society plagued by an inability to react remains as complex as ever, right up to the moment where it becomes suddenly and dramatically simpler, which is to say right up to the moment of collapse. Collapse is simply the last remaining method of simplification.

via The Collapse of Complex Business Models « Clay Shirky.

What it means: must-read for anyone working in a traditional media company today.

Complex Business Models Collapse Because it's the Last Remaining Method of Simplification

~ Sebastien Provencher ~ Leave a comment

When the value of complexity turns negative, a society plagued by an inability to react remains as complex as ever, right up to the moment where it becomes suddenly and dramatically simpler, which is to say right up to the moment of collapse. Collapse is simply the last remaining method of simplification.

via The Collapse of Complex Business Models « Clay Shirky.

What it means: must-read for anyone working in a traditional media company today.

Craig Smith: We’ll see more change in the next 2 years than in the last 10 years

~ Sebastien Provencher ~ Leave a comment

Craig Smith, CEO of ServiceMagic, just finished his keynote address the BIA/Kelsey Marketplaces 2010 conference. His business is definitely impacted by the rise of social media given the importance of word-of-mouth in service providers recommendations. ServiceMagic has embraced social features early on with merchant reviews but is now getting into Question & Answers and neighborhood group buying. He issued a call-to-arms to the industry saying that we (the industry) need to deliver more value. How? He suggests the following four points:

  1. Take risks
  2. Disrupt our current business models
  3. Invest in long term value creation
  4. Invest in deeper relationships with customers

He concluded by saying we would see more change in the industry in the next two years than in the last ten.

Did Joost Fail Because They Wanted to Work With Traditional Media Companies?

~ Sebastien Provencher ~ 4 Comments

Seeing Niklas Zennstrom’s name on LeWeb’s list of speakers along with the news that Joost’s assets were being acquired by Adconion Media Group got me thinking about the dynamics of that specific startup. Joost was founded in 2006 to build a online video portal with the core idea that legal video streaming would be more efficient if it was built on peer-to-peer technology. The company signed content licensing agreements with major media companies, they had major funding ($45M), 150 software developers and experienced founders/entrepreneurs (Zennstrom and Janus Friis) who had had major successes with Kazaa and Skype. It seemed they would be successful once again.

It didn’t happen. Why? CNET explains that their technology choice of a downloadable application certainly impaired their chance of success. The arrival of Hulu, a big hit with users, also didn’t help  but I was specifically struck by this other reason: “Some of the big-name content partners seemed to be putting in a halfhearted effort with Joost, offering up reruns and esoteric programs instead of the new programming that people actually wanted to watch”. Hmmm…

Think about Kazaa and Skype. What did Zennstrom and Friis successfully achieve with these new initiatives? They directly attacked major players in large mature markets using industry weak points. Kazaa was an assault on the music industry, Skype took on telcos. They didn’t say “let’s work with these guys”. They just did it and leveraged the fact that these two industries were very profitable and slow to innovate. They foresaw the disruptive impact of technology and created a lot of value for their shareholders. Venture capital firms usually love these startups. When they created Joost, they changed their entrepreneur paradigm and it failed. Zennstrom and Friis’ new startup Rdio is in the online music space and it looks like they’re going to be working with the music industry. Will it impair their chance of success or has the music industry matured enough in the last 10 years to embrace innovation?

It got me thinking about newspapers, directory publishers, the movie industry, radio, magazines, and other traditional media companies. At one point or another, all these industries (who generate or used to generate fat profit margins) fought technology and we’re slow to innovate. I think it’s getting better (still not fast enough in my own opinion) but I was reminded it is still very slow in Canada by this blog post (in French) written by Yannick Manuri. He says that 40% of all online advertising spent in the country benefited foreign media companies and anecdotally he doesn’t see the sense of urgency in Canadian media companies. It’s a reality in other countries as well.

Why do we need industry disruptors to stimulate innovation in media? Couldn’t it happen by itself?

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

~ Sebastien Provencher ~ 2 Comments

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.

Global Yellow Pages: Entering the "Presence, Performance, Permanence" Era

~ Sebastien Provencher ~ 1 Comment

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

In a presentation titled “Global Yellow Pages: A Prescription for Future Success”, Charles Laughlin and Neal Polachek from BIA/Kelsey (the new name of The Kelsey Group) exposed important trends and offered a new way to look at the future for directory publishers.

Current trends:

  • Over time, print Yellow Pages usage (as an advertising vehicle) is down for SMBs
  • Advertiser volume (i.e. the total number of advertisers with a relationship to a directory publisher) is decreasing
  • Average average revenue per advertiser (ARPA) is up (i.e. squeezing more money out of current advertisers) but EBITDA margins are down
  • Share of revenue coming from online products is up (10% of total directory publishers revenue in North America, 25% in Europe)

Future trends:

  • Publishers will sell leads instead of products (i.e. need to move away from print/online nomenclature)
  • The business model will evolve (blends traditional and performance-based advertising + fee-based services)
  • There will certainly be a change in the publishers’ cost structure (when revenues go down, margins go down also)
  • We will see a changing sales force (training, recruitment, smaller channels, outsourcing)
  • We will see a changing core print product (more local, more vertical, smaller, less categories)

Neal then exposed what I think is a revolutionary new way of seeing the world and coined a new era for the Yellow Pages business: ” Presence, Performance, Permanence”

Kelsey BIA Presence Performance Permanence

“Presence” is defined as “Be found”. It’s usually fee-based. It includes product like signage, listings, print, banners, search/SEO, digital outdoor, door hangers, radio, cable TV and mobile TV. I think we could also include things like website building, Facebook & Twitter profile management, etc.

“Performance” is all about driving leads. It’s performance-base and includes clicks, calls, forms submitted, store visits, inquiries, etc. It could also include coupons exchanged.

“Permanence” is to help the advertiser retain customers. This works on a fee for service business model and includes ratings, reviews, online reputation management, online booking, customer reminders, customer updates, retention strategies, telephone training, etc.

The list of business opportunities Neal presented was certainly not exhaustive but I like how this model helps organize product initiatives under large umbrellas. I also like the fact that social media is now part of the overall Yellow Pages strategy via things like ratings, reviews and reputation management. The whole industry seems to be waking up to the disruptive power (opportunity and threat!) of social media I think we’re just seeing the tip of the iceberg there.