The latest show of climbing video game sales came in April’s 47 percent year over year increase. The $1.23 billion in game & console sales was buoyed by continued success of the Nintendo Wii, as well as the release of the hotly anticipated Grand Theft Auto IV.

As this usage continues to climb there are also developments from marketers looking to capitalize on the high engagement and repetitive use of video games. With lots of talk of product placement and contextualized ads on television, it’s natural that this discussion should continue on to video games where thematic content lends to contextual relevance.

We haven’t seen much action yet, but things are pointing in that direction. Microsoft bought in game advertising company Massive in 2005 which indicates the possibility of more interactive advertising in xBox games. Backing this, Microsoft Cheif Advertising Strategist Mike Galgon recently told us in game advertising will be an area Microsoft will diversify and differentiate itself beyond search, where Google has established dominance.

We also heard earlier in the week from Marc Adreessen who contended that while nearly all forms of offline media revenues are declining, the only ad markets that are growing are online and video games. This will mostly open up to brand advertising and placement, at least in the short term. Meanwhile, gaming’s popularity has molded other product development, including local. 3-D mapping and metaverses, most notably Microsoft’s Virtual Earth 3-D have a gaming feel to them (VE3D can be navigated with an xbox controller).

You can picture future local search products involving more immersive mapping, including the street side views demod by Microsoft’s Head of Local Erik Jorgensen at Drilling Down on Local. Once you go from 2 dimensions to 3, there are new forms of advertising that open up, including transactional revenue from booking hotels, vacation destinations or restaurants. Everyscape is building its model around this concept, while popular games like Grand Theft Auto have gamescapes that are based on real U.S. cities (i.e. Vice City, San Adreas, Liberty City).

We’re not seeing much use of these local search metaverses yet. Indeed, Microsoft’s 3-D mapping product is a bit ahead of its time. But with Telcom high speed fiber network rollouts for IPTV, a by-product will be capability for other bandwidth hungry applications like this. And most of all, these local search products are intuitive for a generation of gamers.

In other gaming news, Georgia is pushing hard to attract gaming companies and for games to take place there. CNET put it best: Maybe next we’ll see Grand Theft Auto: Atlanta.

In its bid to establish itself as a meaningful online company, CBS Interactive has downplayed its traditional strength in local vis-a-vis TV stations, radio stations and outdoor. The company’s just announced acquisition of CNET for $1.8 billion doesn’t necessarily change things. But company officials acknowledge that CNET’s local brands — Urban Baby, a moms site, and Chow, a foodie site – are leveragable assets.

CNET “gives us a platform to add things to … what we can do with integration [of] the local things Urban Baby and Chow, where we have a great deal of local presence on the CBS side,” noted CEO Leslie Moonves, in an interview with paidContent.

Shopper publications attending the International Classified Media Association meeting in Brussels this week — the vast majority from outside the U.S. – are showing resilience against the challenges of the Internet, and looking at new models to sustain their existing businesses. I was presenting a keynote on the transition to Marketplaces.

Shoppers, of course, are often considered the least protected of local media against the inroads of Internet services. But the companies at ICMA, mostly started by entrepreneurs and retaining an entrepreneurial edge, are carefully assessing next steps that would incorporate new media.

One big takeaway is that their print publications are seen as a major advantage over Internet pure plays because that’s where advertisers still place the value. Few companies are considering strategies that don’t include a print component. Jan-Pieter Oosting, managing director, WorldYacht BV/Yachtfocus of the Netherlands, summed it up best: “The Internet is where content is. Print is where the money is.”

Everything else seems to be fair game. Indeed, perhaps to a greater degree than other local media, the shoppers are especially zeroing in on the development of vertical publications, the deployment of self-service advertising using online, mobile tie-ins to print ads, and even mobile classified video in Second World markets that don’t have high Internet penetration. Mobile experimentation seems particularly popular among many ICMA attendees, especially as fast 3G network penetration increases.

Google and Office Depot announced a partnership where Office Depot will offer advice and teach small businesses how to use Google AdWords. Any small business that registers and makes an AdWords purchase on the Office Depot site will receive a $50 advertising bonus. Office Depot will also likely receive a portion of all sales made through its Web site. The partnership also promotes Google Apps and Maps as additional tools small businesses can use.

This is an interesting partnership for Google, which has been innovative in its approach to attracting small-business owners. Tapping into a retailer that has a close relationship with small-business owners is a new move for Google and if successful could become part of a wider strategy.  
  

Since the social networking phenomenon began, I have been an advocate of the Yellow Pages developing a platform for niche social networks. Directories cover such a broad array of content that can be related to highly conversational topics, such as travel, music, legal, weddings, new mothers, retirement, interior design and home improvement.

Social networking is certainly a topic The Kelsey Group has covered extensively over the years, and there are a host of experiments and partnerships under way. In fact, eMarketer is forecasting that social media marketing will top $1.5 billion in 2008, which explains why this segment is receiving a tremendous amount of focus and innovation. 

Providing a forum and platform on Yellow Pages-owned sites for niche social networks has the upside of creating ongoing site traffic by offering a multitude of topics to cover given the more than 5,000 headings and subtopics that could be created from them.

Social site owners could also take advantage of both the rich local Yellow Pages advertising content and its online advertising network agreements to monetize each niche social site in a broader network. Because they have such a large base of local advertisers and enhanced local content, Yellow Pages companies could reasonably deliver customized, highly relevant ad content within each niche social network site. 

Catharine Taylor, in her MediaPost article “What’s the Business Model for Niche Social Nets?”, points out that individually niche social nets don’t generate high revenue amounts, but in aggregation there is tremendous potential.

Social network site Ning clearly understands this business model and has even gone a step further by allowing niche sites to opt-out of carrying ads on their site for a fee, meaning they earn revenue whether or not ads run.

Jack Fairhall from Kwiqq, a social Web site builder, added this comment to Catharine’s post: “Niche social networks often won’t make revenue directly for their owners, but assuming their owners are businesses who have other revenue streams from the sale of their products/services, niche social networks can act as great traffic builders/reputation enhancers and lower customer acquisition costs.” 

This is yet another new business venture where forward-thinking Yellow Pages publishers could lead rather than follow or act as sub-agents for the larger portals and major social network providers. The huge number of people who interact with Yellow Pages and the broad base of local advertiser content available to niche social site creators are major advantages.

The real benefit to Yellow Pages owners would come in the form of increased traffic, narrow targeting opportunities for advertisers, additional revenue opportunities and leadership in the fast emerging social marketing space. Ning is certainly proving if you offer the platform for free and provide the necessary help to niche social network creators, they will find new ways to build traffic, create loyalty and ultimately generate revenues. 

Social media and particularly niche social networks are ideally suited for the local environment where Yellow Pages could play a major role. I’d love to hear what the rest of the local media community thinks of how they can own and leverage local social media and what business models might be the most effective.   

Two separate but related news items caught my eye today. First, Comcast has acquired social networking technology provider Plaxo in order to integrate social network-like features that let viewers share programming, among other things. Second, Turner Entertainment Networks announced a new plan to index content within television shows so contextually relevant ads can be served during subsequent commercial breaks.

Beyond holes in Turner’s plan that I’ll get into in a minute, these are moves that signal an interest among television providers to learn from what is working on the Internet. As Marc Andreessen asserted yesterday (see past post), television and other established media have to look to software to benefit from the innovation cycles that aren’t possible with their relatively fixed formats.

What Plaxo could do for Comcast involves more potential for growth than what will be possible at the onset. The idea is to integrate a system that taps the social and viral qualities of social networking to drive consumption of television content and ads. Plaxo already works with Comcast in some markets to provide software that ties together its triple-play products.

Future integrations based on this software will include things such as interfacing telephone calls and messages through the television. More value-added integrations are further off, such as greater pull-based content delivery and Web-like interaction with product search and communications. Here IPTV will have an architecture advantage over cable, but Comcast is moving in the right direction.

On to Turner, it’s likewise moving in the right direction, though its plan is to mashup contextual ad placements with traditional push-based 30-second ads, which kind of misses the point. In search, a great deal can be gleaned about intent from an isolated query. Television ads are much more passive. Just because I sat down to watch a particular movie, it doesn’t mean I’m interested in a specific product mentioned halfway through the film that may or may not have any thematic connection.

Contextual placement in other words is much more effective when intent can be determined, which is hardly the case here. This will improve with some of the aforementioned moves toward IPTV and its capability for behavioral targeting, product placement and “telescoping” items of interest for more information or purchase (think cooking shows and home improvement).

It’s good that TV execs are thinking differently, but it will take a few iterations and lots of other moving parts (user behavior, IPTV deployment, etc.) before they get it right.

Internet legend Marc Andreessen waxed positive about social networking and VC opportunities for the next five years during a packed luncheon at the Think Tomorrow — Today conference. Without spending too much time talking about his own social networking venture, Ning, he asserted that the decentralized “many to many” media world we now live in has created 40 million to 50 million early adopters.

The user empowerment that the Internet offers has also inverted adoption cycles to start first with consumers, then enterprises. It has traditionally been the other way around, he said, citing examples like blogging and social networking as consumer driven apps.

In a walk down memory lane, Andreessen further pointed out that we’ve seen about one killer app per year, starting with the Web browser (his brainchild circa ‘94) then moving on to Yahoo!, eBay, Amazon, Google, Flickr, MySpace, Skype, etc.

“If you look at the common thread, these were all easy-to-understand tools that relate to how people live their lives,” he said. “They also had to do with communication and connecting people in new ways.”

Entrepreneurs and VCs should keep this frequency and set of factors in mind, he said, because we can expect about a dozen killer apps over the next 10 years. The iPhone is one place where some of this innovation will be channeled, given the widely anticipated 3G model and subsequent generations that will be smaller, faster and cheaper.

“It’s the first mobile device that software developers can write to and that people can use,” he said.

The second part speaks to a point we and others have echoed regarding the ease of use and appeal that will finally bring mobile search into the mainstream. The resulting market size of the iPhone and competing devices will feed back into the innovation cycle, creating more incentive to develop products. That plus the development-friendly environment Andreessen referenced, will bode well for innovation.

Other important places this innovation will happen include ad targeting. Stepping back, Andreessen contended that despite online fragmentation, ad revenues are declining in nearly every form of traditional media. The only place where it is rising is the Internet and video games. With this, ad targeting will continue to improve and drive growth — not only because of advertiser interest in following users online, but also because of Moore’s Law.

“The technology for ad serving and targeting is getting better and better because it is software,” he said. “This development cycle is antithetical to what media companies were built to do. Traditional media isn’t based on code, but on fixed standards. The format for delivering most television content today was invented in the ’40s.”

The innovation behind these ad serving technologies will drive the overall online ad pie from 20+ million today to about 100 million in the next five to seven years, he said. And an important piece of this puzzle will be ad networks, which can benefit from a network effect as they grow — seeing exponential returns from incremental traffic and distribution.

“A big battle over the next few years will be around ad networks,” he said. “AdSense has a lead there but there has to be about 200 different ad networks out there that are targeting in different ways.”

Today, I’m at ThinkPanmure’s Think Tomorrow –Today VC summit in Half Moon Bay, California. As Where 2.0 is happening as we speak on the other side of the hill, some attention to location awareness has been paid here as well.

A panel discussion this morning on the convergence of fixed and mobile telecommunications stressed the opportunity for enterprise applications that tap wireless LANs to track people and inventory where GPS signals deteriorate (read: indoors).

Beyond the enterprise, many consumer local search opportunities begin to come into focus where purchase decisions are driven primarily by proximity to categories, stores or SKUs. Call Genie’s Garry Galinsky stressed this point at Drilling Down on Local a few weeks ago.

NearbyNow focuses on mobile shopping search (primarily SMS) based on close proximity to stores (intra shopping mall). These types of searches could gain more traction as location enabling technologies are integrated and generally improve to the point of more mainstream appeal.

Broadly, the importance of location targeting for both SMB and national advertisers seems to be gaining more attention lately. Skyhook (see previous post) is a leading technology enabler, while Placecast is an ad network focusing on location-based targeting. This will be an important area of development.

Skyhook Wireless announced a series of partnerships that bring location awareness to online applications. These include Krillion, Yahoo! Fire Eagle and CitySquares, to name a few. They’ll each use the location awareness of PCs and laptops (via Wi-Fi signal) for different forms of geotargeting and smarter content delivery.

This is a step beyond mobile apps, where the discussion of location awareness usually focuses (Skyhook’s iPhone app profiled here). The saturation and adoption of Wi-Fi has reached the point where there is an opportunity to pinpoint and target nodes on a wide-scale level, with much more accuracy than that afforded by IP address.

This brings capability for opt-in location-based services in a number of use cases (think laptop-equipped business travelers looking for somewhere to eat). Local search already exists in a lot of these use cases, but location awareness enables opt-in and personalized preferences to which users are actively alerted when geographically relevant.

In other words, it makes local search smarter and opens the door for lots of new applications for these partners and more that will likely follow.

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Skyhook Director of Consumer Products Ryan Sarver will speak tomorrow at Where 2.0. Check it out if you’re at the show.

SmallTown, the Bay Area hyperlocal company, is changing its core focus and will concentrate mostly on getting wider distribution of its WebCards microsites for small businesses.

While the nine-person company will continue to maintain its hyperlocal sites, which are now in six Bay Area communities, it sees a bigger opportunity in having third parties such as IYPs and search engines selling WebCards, says CEO Hal Rucker. “WebCards.com has always been our vision. It hasn’t been hyperlocal.”

The WebCards are small-business microsites that may be transported along multiple platforms (i.e., Web sites, e-mail, directory listings, etc.). In this regard, they are similar to other providers such as AgendiZe, Mixpo and Wibiti. A major driver of the WebCards is the ability to “encase” video.

Rucker says the cards will be featured on Google Gadget Ads, where he believes they are the first to focus on small business. Talks are also “very far” along with several major resellers.

As for the SmallTown hyperlocal sites, there are currently 12,000 registered users, and 23,000 WebCards. The bulk of these are on a free tier, but 600 are enhanced customers, paying $50. Most of the enhanced offerings have been sold by premise sales, although some have come in via self-serve.

The vast majority of WebCard users are only using one card, but approximately 15 percent have taken out multiple cards. A real estate agent, for instance, might want to have cards for specific property listings as well as for corporate identity.

The company is also introducing featured listings, which are priced at $4,200 per year for the top listing slot, and $1,200 for the second slot. “With six cities and 300 categories, you can see how it would add up,” says Rucker.

In addition to WebCards and featured listings, Rucker says the company is also bringing in some revenue from white labeling its services. The San Mateo Chamber of Commerce, for instance, is one customer.

Rucker notes that the company has also extended its initial $3 million funding from Formative Ventures and others, and has now raised $4.5 million in total.