The Kelsey Group and ConStat recently completed the second wave of our User View research project, in which we ask consumers about a range of issues around the use of local media, including both traditional and digital.

One of the many findings from this research got our attention, and we felt compelled to communicate this information to our clients. We did so in the form of an Advisory issued earlier this week with the intentionally bland title, A Research Advisory: User View II.

Those of you who are TKG clients have already seen the note, and for the rest of the Yellow Pages community, here is the bullet: We asked the question, “In the past year, which of the following sources of information have you used or referred to when shopping for products and services in your local area?� Respondents were given a list of choices that included printed Yellow Pages, newspapers, Internet Yellow Pages, search engines, online shopping sites and direct mail, among other choices.

The results showed a meaningful decline in the number listing printed Yellow Pages from the first wave of User View in October 2003 to the second wave, conducted in February 2005. The decline was from 75 percent to 62 percent listing Yellow Pages among the resources used in the past year to find information on local businesses.

Is this evidence that the business is in a freefall? Of course not. At the very least, it does suggest to us that more research is needed to determine whether printed Yellow Pages is losing some of its stature as a primary resource for information on local businesses, amid a growing list of media choices, including increasingly robust local search.

The Yellow Pages industry can respond to this kind of data in a variety of ways.

It can ask hard questions about the true meaning of the findings. We encourage such questions, and we will engage anyone with standing in this industry in a discussion of the User View research, how it was conducted and how we interpret it.

Another response is to declare the end of Yellow Pages as we know it. This is certainly not the conclusion we have reached. We’ve said it before and we’ll say it again, the Yellow Pages has more competition than ever before, but it also retains tremendous power and continues to make a lot of money for its advertisers.

The industry can discourage “negative� thinking about the business. We certainly welcome comments from anyone who takes this view.

Finally, the industry can see the User View datapoint as one of many bits of evidence, some of them apparently contradictory, that as a whole point to the need for an aggressive effort to promote the core directory product while simultaneously preparing vigorously for the inevitable shift in the revenue mix toward one weighted far more heavily toward digital. This shift is already taking place, and we expect it only to accelerate.

A March 27 article in the Times of London online edition says Yell Group is planning to pursue an acquisition of TransWestern Publishing, which recently disclosed it had retained Goldman Sachs to “explore its strategic options.�

This report comes as no great surprise to us, since Yell has a well-stated ambition to achieve a true national footprint for its Yellow Book division. As it stands, Yellow Book, the largest competitive publisher in the U.S., is in the best position among U.S. operators to declare itself a national publisher. Buying TransWestern would further enlarge Yellow Book’s footprint, as well as its base of revenue. Assuming the Times report is true, the burning question is how much is Yell willing to pay, particularly if multiple bidders drive up the price?

The general consensus has been that TransWestern could fetch upwards of US$1 billion. Yell’s most likely competition will come from private equities, which still hunger for Yellow Pages deals that have generally performed well, and at times spectacularly, for investors.

LookSmart announced the launch of five consumer-facing vertical content sites that will serve up LookSmart advertisers. They are: teenja.com for teens, gradewinner.com for "tweens," 24hourscholar.com for college students, and for parents there are parentsurf.com and gobelle.com.

LookSmart predicts that search is going to get increasingly vertical and personal. In this context, that's something of a self-serving statement. LookSmart needs to do something to grow and improve the quality of its network. So this is a smart move.

But as to the larger question of search “verticalizing,� the answer is yes and no.

Right now, it’s naïve to challenge the established “horizontal� search players. So anybody who wants to launch a “search� site needs to do it in a vertical/niche, where there is still potential opportunity.

There are a handful of verticals that matter, among them travel, shopping and local (if you consider it a vertical). The traditional classifieds space has significant traction too: jobs, cars and real estate.

And there’s always opportunity for new sites that deliver value and functionality to consumers and advertisers to emerge and succeed. But as to the much-discussed trend of “verticalizationâ€� of search — I don’t entirely buy it.

Consumers fundamentally want ease of use, simplicity and efficiency. They don’t want to have to go to 100 sites to get the best travel deal or the best price on home electronics. They really want fewer (but better) choices, not more. This is the value proposition behind such recent launches as AOL’s Pinpoint Travel, Oodle.com, Indeed.com and SimplyHired.com.

And the Yahoo! 360 beta product, which formally launched yesterday, is partly an effort to integrate and make more coherent the otherwise fragmented Yahoo! network. It’s also about convenience and efficiency for consumer-users.

Yahoo!, as well as Google, AOL, MSN are trying to be comprehensive — partly because of competition and partly because they recognize consumers want fewer, more reliable sources of information. Consumers’ lives are already fragmented and frustrating enough. They’re looking for trust and simplicity, not complexity and fragmentation.

In The Kelsey Group’s most recent consumer research, we actually found that local consumers are using fewer sites, including verticals, not more.

There will always be specialized sites and online communities that do a better job than search engines or portals of delivering content in specific areas. Hence “vertical� sites will continue to pop up and make a bid for consumer traffic and advertisers. Yet those sites need to rely on SEO and SEM to gain exposure.

It’s on the advertiser side that the verticalization discussion has more significance. Where is the click/conversion going to happen? What’s the quality of the lead that the site/engine delivers to the advertiser?

Advertiser behavior is tied to consumer behavior, of course. But rising prices for PPC and questions about the quality of leads (i.e., where is the consumer in the buying cycle?) may send some advertisers to vertical sites over time. In addition, verticals may constitute the “onramp� for some advertisers to the Internet (e.g., HomeGain, Lawyers.com).

All this goes to questions of emerging segmentation in the search marketplace, which will become clearer and be answered over time.

But for now there appear to be two competing phenomena in search — almost like two opposing principles of physics — a movement toward “metaâ€� and aggregation on the consumer side and fragmentation on the advertiser side.

Both are being driven by the complex logic of the search marketplace.

You've probably never heard of DiscoverOurTown.com. I hadn't until Howell R. Jones, VP of Marketing for the Mississippi-based directory, contacted me about their mobile offering.

At first blush it's another city guide-type site that prompts the question: How do these guys think they're going to compete with Google, Yahoo!, Citysearch and the IYP publishers?

But in discussing it with Jones, it's clear there's a lot going on below the surface.

Discover Our Town is selling/licensing its local data to both Google and Yahoo!, which appears in local and travel results, respectively.They're also working with companies like Sabre and Marriott (powering concierge kiosks in local hotels). That's one of four revenue streams for the company. Another, of course, is selling activated links directly to local businesses (for $175 per year).

Their core business is the hospitality industry. But there are 130,000 local listings in the company's database, covering 2,000 U.S. cities.

The company is developing a local blogging strategy to get key local advertisers to provide additional content to enrich the directory (generally similar to what BackFence is attempting).

"We get three million hits a month from search engines," says Jones.

This is based largely on Discover Our Town doing optimization for the various categories and geographies it covers. And in certain categories, they show up on the front page of Google results (scroll).

Jones says that while "every one of them" is a local newspaper advertiser, he and his team are still engaged in a fairly labor-intensive education process about the value of Internet marketing to most of the local businesses he services.

"In two years, this will be another conversation," says Jones. "But right now, I'm walking in mud."

More on Discover Our Town in an upcoming Local Media Journal.

ClickZ offers coverage of Google's statement at SES that "local" was bigger than the more established Froogle:

"[Marissa] Mayer said the demand for Google's local search product was surprisingly high. In fact, it drew more traffic in December than Google's shopping search product, Froogle, during the holiday shopping season, and without local search being linked from Google's home page."

Most of the action is offline">
Most of the action is offline near me or where I'm going. The Internet is a bigger and bigger influence on offline/local. Why should anyone be surprised?

Call it a search engine for classifieds.

Started by a couple of the original folks at Excite, Oodle aims to be a comprehensive search engine for classifieds. That's right: Craigslist, eBay, CareerBuilder, Cars.com, newspaper sites — everything.

Right now, they're launching (in beta of course) with three cities: Chicago, Dallas and Philadelphia. But relatively soon, they'll roll out nationally. With the exception of eBay, Oodle currently doesn't take any feeds from anyone. But it hopes to do so over time.

Currently, Oodle is crawling sites and indexing classifieds content from hundreds of sources — about 80,000 to 90,000 listings per week — cleaning and de-duping ads along the way.

According to CEO Craig Donato, Oodle is trying to solve a fragmentation problem with local classifieds — no single player has a dominant share of listings, not even Craigslist. By creating a search engine for classifieds, Oodle is aiming to provide consumers with critical mass, a single place to get comprehensive listings coverage for a particular area.

The site allows consumers, depending on the category, to sort by price and location, among other relevant criteria. Oodle looks to be a very useful site, which should become very popular with consumers as it adds new cities. Whether or not it will be equally popular with the listings providers (e.g., Craigslist and CareerBuilder) remains to be seen.

"We aren’t in the listings business," says Donato, who sees Oodle driving traffic back to local newspaper sites, verticals and others. Donato says that Oodle won't be selling directly to advertisers and thus sees no conflict with the various listings providers. (Oodle intends to work with third party sites to sell enhanced ads/placement on oodle.)

He and I disagree a bit whether or not everyone will welcome Oodle. Consumers clearly will. And those trying to drive more traffic to their advertisers — in particular newspaper sites — will also be pleased (and should start delivering feeds). But it does potentially mean that consumers will go to Oodle and not the respective local/vertical sources of the listings it serves.

In other words, if I can go to Oodle and get everything I need in one place, why would I go back to HotJobs or Craigslist or the Chicago Tribune? Those individual providers/sites will have to offer a great deal more functionality, features and other information to remain viable destinations if oodle catches on. (And some of them already do.)

But how all that plays out remains to be seen.

For now, Oodle appears to be a very consumer-friendly addition to the rapidly evolving world of local online classifieds.

Donato will be part of a panel on the future of online classifieds on Day 2 of Drilling Down on Local.

Indeed.com formally launches on the same day as Oodle, offering meta-search for Jobs. Here's the announcement.

Indeed is one of several new meta-search job sites.

Indeed and Oodle represent efforts to consolidate and integrate the consumer experience and away from silos or "verticalization." In another context, it's identical to what AOL has attempted to do with Pinpoint Travel.

Indeed.com is one of the "open search" feeds available as a button on A9.

The battle is on to see who will own the user/consumer. It's being waged across the Web — even, somewhat paradoxically, as more and more sites are sharing their data and information with distribution partners.

The question is: are you simply looking for distribution for your advertisers or are you trying to drive consumer traffic and be a destination site? (They're not identical strategies.)

Even though distribution is critical, it's important for newspapers and IYP sites to remain viable destinations.

eBay, which bought 25 percent of Craigslist from a former employee in the third quarter of last year, has been busy expanding into classifieds, buying up classifieds sites outside the U.S. as part of a strategy to boost growth.

eBay quickly took its learnings from the Craigslist investment and has set up free classifieds sites in Canada, China, France, Germany, Italy and Japan under the brand "Kijiji," which apparently means "village" in Swahili.

eBay has been under pressure lately to maintain high double-digit growth and has alienated some of its sellers by trying to raise fees in an effort to grow revenues. Currently in about 50 cities in the six countries, Kijiji's model is identical to Craigslist — classifieds/community sites that enable buyers and sellers to connect free of charge. According to wire stories, eBay has said it has no immediate plans to "monetize" Kijiji.

eBay also said that it will not enter the U.S. market with Kijiji (how many "i's" was that?), largely because Cragislist already owns the space. (Craigslist charges for employment listings in all its markets and real estate listings in New York.) Craigslist does have international sites in Canada, Europe and Asia, so eBay's Kijiji will be competing with it in those markets.

Peter Zollman's classified intelligence reported that Craigslist was responsible for lost revenues of “between US$50 and US$65 million� to traditional newspapers, in the employment category alone in the San Francisco Bay Area. Assuming that's accurate, if one crudely extrapolates to the largest markets where Craigslist operates, we're talking billions of dollars in lost annual print classified revenues.

The Newspaper Association of America projected that U.S. print classified revenues will be approximately US$17 billion this year, up a little over 5 percent from 2004.

One question is: Will Kijiji (in addition to Craigslist) do to newspaper advertising internationally what the two sites have done in the U.S.?

According to Morgan Stanley, eBay contains more listings than all U.S. daily newspapers combined.

Not surprisingly, Kennard says that private equity is good for the industry because it allows publishers to focus on their core business and expand horizontally. He makes a distinction between the core business of selling advertising and "our franchise of local search." His view is that the industry's most important challenge is to figure out how to deliver our product over multiple platforms.

If that sounds familiar, how about his central theme: "The Yellow Pages' value story hasn't been told as effectively as it should be." Well, that is easier said than done, sir. He said that publishers must figure out how to compete "fanatically." Finally, he commented that "the culture of the industry needs to change," but he didn't provide any solutions to this daunting challenge either.

Of course Mr. Kennard is right, even though he sounded a little bit like he was scolding the audience. But he really didn't say anything that the 600 attendees don't already know. Sure Yellow Pages management needs to do a better job with the tools at their disposal and they need to be better prepared for the future. But what industry, or what company for that matter, doesn’t that apply to?

Topix.net, a news search/aggregation site, has announced a majority investment from The Tribune Co., Knight Ridder Digital and Gannett Co. These are the major companies behind Classified Ventures and sites like CareerBuilder and ShopLocal, among other online verticals.

Under the terms of the deal — the money was not disclosed — each newspaper will own a 25 percent stake in the company. Collectively the three publishers will own 75 percent of Topix, with the existing management and shareholders retaining 25 percent. Topix will remain an independently run entity.

Mike Markson, VP of business development, says that everyone at Topix is very pleased with the investment for several reasons. “First it gives us working capital and the ability to add resources and some folks.� He also said it opens up many new opportunities for Topix to work collaboratively with local newspapers.

Markson said that it has always been Topix’s intention to work with traditional newspaper publishers and speculated about several ways in which the newspapers might work with Topix. Topix already has syndication deals with AskJeeves, Citysearch and AOL, among others, with more on the way.

What differentiates Topix from other news aggregators is the availability of local news, which has made it an attractive partner for destination sites and advertisers trying to reach local consumers. (Yahoo! news also has local feeds.)

Markson added that “Topix will be able to integrate [the partners'] vertical site listings into contextually relevant pages� on Topix. He also suggested several ways that the newspapers could be featured on the Topix site. The New York Times has a “featured placement� deal with Topix.

And like Google news, Topix drives considerable traffic to local newspaper sites.

At a time when newspapers are trying to figure out their online strategies and how to compete with an increasingly crowded field of players in the local online arena, Topix may represent a very strategic investment.

In the latest round of Kelsey Group-ConStat consumer research â€" a telephone survey of 500 consumers â€" the Internet had caught up with local newspapers (each at 70 percent) as a medium used to find information about local products and services.

On a panel at the recent NAA conference, I spoke about the possibility of newspapers coming together in a kind of mega-news portal (a la SBC and BellSouth with YellowPages.com) to drive traffic and create a new, Internet-friendly brand. While this is not exactly that strategy, it's quite close.

“This will help take us to the next level,� said Markson. “These guys have smart money and whole bunch of marketing power.�

More coverage and analysis.