Last week we previewed local product and inventory search provider NearbyNow. The company has since announced a key partnership that will form the basis of its local search model going forward. Its partner is the Eastridge mall in San Jose, California. The company's "white-labeled" software platform will integrate inventory and product data within Eastridge's existing Web site. It will also power the search features of the touch-screen directory kiosks found throughout the mall, which will include comprehensive product and inventory data as well as contextual advertising. This represents the first of many mall partnerships the company hopes to form.

NearbyNow's angle here is interesting because one of the challenges of local online advertising is that a majority of commerce takes place offline in physical store locations. TKG research indicates that among purchases of more than US$500 in which the Internet is the starting point, more than 90 percent of transactions finish offline. Likewise, e-commerce represents only 2.5 percent of total U.S. retail spending, according to the U.S. Census Bureau (although there are signs of a shift toward more e-commerce spending, as noted earlier).

NearbyNow's model takes these important statistics to heart. Its software platform allows shopping mall retailers to put all their store and product information online in a searchable, interactive format in order to drive offline purchases. This includes store information, coupons and inventory data — the latter being an area of local search that will be increasingly influential in driving offline conversions, as noted yesterday.

"The intent to buy is very high at a mall, but we noticed that consumers weren't getting the information they were looking for," Scott Dunlap, chief executive officer of NearbyNow, told The Kelsey Group. "Who has Nike shoes? Who has jeans on sale? Who has new women's apparel?" This data previously was not aggregated for individual shopping malls, so NearbyNow began to take point-of-sale inventory feeds from shopping mall retailers — something those merchants have been enthusiastic to share, according to Dunlap.

The company offers a mapping tool to find stores and products, Internet coupons and a purchasing engine that allows consumers to reserve items online for in-store pickup. It also sells contextual advertising alongside product information, which has proved to be valuable advertising inventory because of the spatial relevance and intention to buy of consumers searching within a mall environment.

"What I'm noticing is that the rates that people are willing to pay for the clickthrough and the banner ads are really high because they know that this person is going to be at the mall," Dunlap said. "When a consumer creates a customized map or reserves a product, we know that the possibility of that person coming to the mall is very high. So as an advertiser, you know a person is specifically going to a store that might be next to you or carry something that is complementary to your product."

What About Mobile?
Mobile search applications are a hot topic right now, and NearbyNow realizes it can really unleash the potential of its search platform on mobile devices. Its next step, according to Dunlap, is in fact to develop mobile applications that will allow mall shoppers to more effectively search products, stores and specific inventory data. Anticipated GPS ubiquity in mobile devices will bring this a step further, offering the ability to serve targeted opt-in advertising to mall shoppers based on their precise locations.

There are hardware and privacy restrictions surrounding such location-based services, so it is unclear what these models will look like over the coming years for NearbyNow and many other companies in the local search space. But there will be powerful opportunities to reach mall shoppers with mobile search and advertising using GPS-enabled location-based services, and SMS messaging in the shorter term.

"For retailers it is an attractive medium because you are reaching people that are literally 100 feet from your store. So even though location-based services haven't really come around in the U.S., the numbers are building and it could be very exciting," Dunlap said. "There are also many ways to use text messaging to start a discourse with customers that isn't perceived as spam. It's all based on things they've requested, so by way of short code you can begin to do location-based advertising."

Local search engine TrueLocal, which provides enhanced listing info for franchisees and brands, is trying out direct sales via a five-person call center. According to Founder Jake Bailes, the call center will target specific verticals, market-by-market (i.e., tire stores in Tampa).

Bailes concedes that setting up a local sales channel has turned out to be a real challenge but thinks the new approach will bear some fruit. Advertisers already using TrueLocal via third-party sales number in the "thousands." The average advertiser brings in $12 per month.

In addition to extending U.S. sales, TrueLocal, which is based in Toronto, is launching Canadian operations. "The competitive landscape is much narrower than in the U.S.," he says, "but there is also a clear leader YPG." A complete LocalOnliner profile on TrueLocal from April 2006 is available here.

The recent personnel changes at European Directories — the addition of Peter Darpo in the Netherlands, Kimberli Lewis in the Czech Republic, the exit of Lex Cohen and the addition of Cornel Riklin as CEO — signal a significant change in the organization.

The former Yellow Brick Road organization, now known as European Directories, was a loose collection of directory properties joined only in name. With each organization having its own structure, selling and publishing systems, and operational practices, joining these properties together in an efficient manner meant a major investment in a single platform and a dedicated effort by the executive management team to migrate each country into a core operating structure and process.

Print product revenues remain strong driven by the strongest unit, Telefoongids. Beyond the print products, the idea of a combined Internet platform covering all the countries remains an attractive goal for the organization and could be the focus of future acquisitions.

The addition of Cornel Riklin may also signal a strong appetite on behalf of the investment group for additional acquisitions to strengthen its position in both print and online, fill in the gaps in Europe and compete with World Directories. Considering Riklin's investment and business development background, he appears the right leader to expand the organization and provide guidance on more structural alignment. This should be an interesting story to watch as it unfolds over the next 12 to 18 months.

The Yellow Pages Association just released the industry’s annual usage numbers. The good news is overall usage continues to grow for the industry and Internet Yellow Pages usage is increasing … the not so good news is continued decline in usage for the print product.

While usage for the print product has been declining since 2002, the number of references is still extremely large — 14.5 billion compared with 14.6 billion in 2004. The decline in print references is offset by the increase in IYP — 1.8 billion references compared with 1.5 billion in 2004. For those of you who know me, I always say, "if you don’t cannibalize your own product, someone else will" … and it looks like the industry is following that philosophy by stemming usage decline for print by offering the growing IYP.

Unlike most other media, the people who are using Yellow Pages are proactively going to the products to seek out information. For more than 70 percent of the references, people are shopping and indicate they can be influenced by the ads. For the past 20 years, the number of people who purchased or plan to purchase a product or service after referring to Yellow Pages products has been more than 85 percent.

Another interesting finding is that IYP usage is greater in A counties (those with the largest populations), where broadband penetration tends to be highest. Print usage is indexed higher in B and C counties. While Yellow Pages usage tends to be highest for consumers with life events, we see that the format of product used may be influenced by where the consumer lives … and access to broadband. Perhaps the industry should start tracking broadband penetration as an indicator of IYP growth.

In looking at other media, the results for Yellow Pages are much more positive than those for the newspaper industry, which continues to lose readers. The decline in readership of print newspapers continues, and while readership of the Internet versions of newspapers continues to increase, this does not offset the decrease from print. Circulation of print newspapers also continues to decline, with forecasts indicating a 19.5 percent decrease from 2005 to 2010.

So while some in the Yellow Pages industry may grumble about the usage numbers, realize that other media are suffering more and have a harder time proving value.

Yahoo! Local now relies on more than a dozen resellers, in addition to its own self-service center, says Yahoo! Local GM Paul Levine, who was speaking on a Small Business Commando Tele-Seminar with Dick Larkin and Kelsey's Matt Booth. "They help us reach advertisers that Yahoo! couldn't ordinarily reach," said Levine.

Among the resellers are AT&T and BellSouth, which have been selling Yahoo! for five years. Since then, 10 other resellers have hopped on board, including Dex (RHD), Website Pros, Cornerstone and Profit Fuel.

In other comments, Levine estimates that just 200,000 of the 12-16 million U.S. SMEs that advertise are currently using some form of Web Search — lower than many estimates. "It is only a handful." In terms of usage and product innovation, we are only in the second or third inning. But "it is a great new canvass for more merchants to participate directly."

While Levine emphasized that Yahoo! is committed to serving the advanced advertisers that want to manage their own keyword search buys and other services, the real key to Yahoo! Local's success going forward is "to make it easier to use," he says. "The one thing that unlocks Internet opportunity is to make a simple product."

Levine also notes that cross-platform services, such as mobile search, will play an increasingly important role in local advertising. In fact, Yahoo! has formed a special "Connected Life" division to leverage some of those cross-platform opportunities. "There is an amazing future for accessing content on the phone."

The Tele-Seminar was a redo from a newsmaking Aug. 2 event that had technical difficulties. Krasilovsky Consulting is providing strategic assistance to Small Business Commando in developing the series.

Last week, we wrote about local product and inventory search provider NearbyNow (an extended write-up of the company is in this week’s Local Media Journal and coming tomorrow on the blog). A key part of NearbyNow’s model will be to provide coupons along with inventory data for local retailers. A week before that, Google partnered with ValPak to integrate coupons into local search (a feature article on this is also included in this week’s Local Media Journal, which published today). These join the growing field of coupon providers that have erstwhile included ShopLocal and ZiXXo.

Now a week after its biggest competitor jumped into the coupon pool, Yahoo! has begun to aggregate coupons. Search Engine Watch has the scoop.

As the majority of shopping happens offline (e-commerce represents only 2.5 percent of total U.S. retail spending), expect more online players to leverage their assets to drive offline purchases. Coupons also serve well as tracking tools to determine search activities that effectively influence offline conversions — traditionally a large challenge in local search. Coupons will increasingly have a strong influence on offline shopping behavior, driven in part by the integration of coupons and local search that are exemplified by these recent partnerships. Expect many more.

About 50 percent of small businesses in the U.S. now have "Web sites" — or pages, microsites, listings, pages or even e-mail addresses that they might call Web sites when asked in phone surveys. The number of real Web sites is probably much smaller.

In Germany, the number is apparently much higher — 72 percent — according to a report commissioned by Germany's Federal Ministry of Economics and Technology (which I read about via Joachim Bartels' report for EPS). The report also notes that 58 percent of Germans are now online and that there are 10.7 million broadband connections.

Granted, Germany is home to SAP, Silicon Bavaria, etc., and it is an advanced tech center. But I still have a dated stereotype of the country as having many regions that have major infotech gaps (i.e., most of the "ost"). Here is an open question: Do 72 percent of businesses really have Web sites? Or are most of these just landing pages or other lesser media that T-Online and other companies have set up in hopes of upselling them later?

In the online video space, video-sharing site YouTube has launched an advertising model that appears to be its first effort to monetize its explosive popularity (the site received 16 million unique U.S. visitors in July, according to comScore Media Metrix).

Known as participatory video ads, they will run on YouTube’s home page based on viral popularity among its users (much like all its video content). YouTube declined to say how it will charge for these placements, but it is clear based on traffic levels that this ad inventory will be valuable and highly sought after. It is likely that it will be sold on a CPM basis, as the company has confirmed it won’t be pay-per-click.

This seems to be a clever way to intermingle "ads as entertainment" to its current site content. YouTube’s primary demographics have proved to be averse to pre-roll or banner ads that accompany video content, so this is a creative way to bring advertising into the picture that won’t drive away traffic. MySpace faces a similar dilemma, which it recently sought to alleviate by bringing in text ads from Google.

Sony Pictures Entertainment, meanwhile, announced today that it has acquired video-sharing and user-generated content site Grouper for $65 million. The deal is a vote of confidence by the studio giant that user-generated content will continue to be a significant online traffic driver and the basis for sustainable business models.

Sony’s chairman and chief exec, Michael Lynton, said as much:

"My sense is that user-based content is a form of content that's going to last," he told The New York Times. "It's a bet, no question, but it's a bet worth making."

Nielsen/NetRatings counted 430,000 visitors for Grouper in July, compared with YouTube’s 30 million, but Grouper claims this is a miscount due to survey extrapolation. The real monthly figure, according to the company, is 8 million visitors a month, up from 1 million in March.

The majority of content on Grouper is short form videos and commercials, akin to YouTube’s sweet spot. We’ll see if Sony can bring a level of investment and marketing heft that will give YouTube a run for its money. YouTube has proved that success in this segment is built on viral marketing, so we’ll see if Grouper/Sony can replicate that and, more importantly, if either can successfully monetize traffic.

Yesterday, I wrote about PremierGuide's innovative Microsites, which can act as searchable, full-featured alternative to Web sites. They're highly effective if you want to be found by a search engine, and also put all your expensively produced TV commercials, Yellow Pages display ads, etc., in once place. As I noted, PremierGuide joins EyeBallFarm in offering Microsites.

Today EyeBallFarm Leader Jim Bonfield wrote in to our sister site, The Local Onliner, to offer blunt comments on some of the challenges that EyeBall has encountered with Microsites ( Full Disclosure: I've provided some strategic help to EyeBall, but it has done the Microsites on its own).

The biggest problem is getting the small-business owner's attention. "A local pizza restaurant owner not only doesn't easily warm to the idea of building his own ad message, but he/she may not even understand why they should even care," says Bonfield. "'I already have a Web site, Jim …' They just want to sell more pizza."

This is the case whether the Microsites, aka enhanced listings, are offered at a premium or for free. For instance, when Bonfield worked with Travidia, a tools vendor for local media firms, he offered a full set of free tools to more than 500 merchants in Citrus Heights, California.

"We provided many weeks of training," he says. "But we still had to beg these merchants to log-in to our self-serve Adscripter and post text about sales and special events, etc. to the Microsite we had built for them. Once again, we were reminded that the pizza guy just wants to make pizza."

"Local directories will work. Many are working well now," adds Bonfield. But adding more elements to the sale is definitely confusing. "Hey pizza-maker, Can you FTP your .FLVs, .MP3s and .Wavs so I can stream them via Flash players, YouTube, Google Video, MySpace and Flicker?"

Bonfield's solution is to "build a service in combination WITH the platform. The tech is incredible and DOES allow the pizza guy to do it themselves, but they don't. So, we do it for them. WE aggregate their TV spots, Radio Ads, Print Ads, Direct mail pieces. WE convert them. We post them and buy THE RIGHT keyword ads on the search engines and deliver them a report at the end of the month that says 'You spent $XX and made $YY.' "

Bonfield acknowledges that "It is not easy. It is not a high margin business and finding people to make this work every day is kicking me in the head. BUT this approach works. The ROI is clear, easy to replicate and hard to argue with. The full-service approach ultimately serves to greatly increase client retention because in the end they get what they wanted all along … they sell more pizza!"

As we reported last week, we've learned that eBay Motors is going full speed ahead with local. Now we have more info. Within four to six months, sources tell us that the auction leader will be launching a full-fledged, re-branded local auto site. The site will including a full range of auto-related listings, services (oil changes, detailing, etc.), coupons, a new look and feel, improved search functionality (product vs. listings) and significantly more content.

It gets better. The local vision of eBay apparently goes beyond autos and directly affects newspapers and Yellow Pages. Autos may, in fact, be just the tip of the iceberg for eBay and local. The company, which is looking to regain its growth profile, is said to be cooking up a major local initiative that will "encompass the entire category structure."

If so, it will probably seek to leverage various classified holdings. The company owns 25 percent of Craigslist and has several international classified efforts, including Kijiji, Gumtree.com, LoQUo.com, Intoko, Netherlands-based Marktplaats.nl, and German automotive classified site mobile.de. Our guess is that Craigslist isn’t part of the mix — eBay has been strictly hands off. But expect to see aspects of the other services pop up here.

Our sources additionally tell us that a Wall Street Journal Online feature by Jennifer Saranow and Mylene Mangalindan on eBay's local ambitions from November 2005 is still "pretty close to the mark." The article notes that eBay is expanding beyond its traditional middleman role and will be "aiming to take over the phone book’s customary role as the first place people turn to find local services from housecleaners to accountants."

We asked eBay about all this. A corporate spokesperson only noted that "we cannot comment on speculation about what might happen in the future."