1. Maps are the height of the data pyramid. Once they’re populated, everything else (i.e. local search) gets easier.

2. 3D CityScapes are a big part of the future, and will drive new types of ecommerce. This is the expensive battlefield that Microsoft and Google are playing on. The end game isn’t to be the destination site, but the platform for thousands of developers.

3. It doesn’t happen overnight. The Cityscapes are likely to be siloed products, with relatively small market share to start. Smaller, pocket-sized versions of them will appear on other parts of the Web. Indeed, bigger isn’t generally better. On many sites, maps should get smaller before they get bigger. It is the other content that will drive repeat usage.

4. 3D Maps are eye-grabbers that will steal attention from everything else. There’s no going back to simple maps. Expect Yahoo,Ask, MapQuest and others to get into the 3D game too, despite a current focus on social integration of their simpler maps with strong tools.

5. Anybody who focuses on maps needs to also focus on the other parts of The Mashup. Look for more of an emphasis on integrated data, local search, User Generated Content and video in coming months (i.e. enhanced Yellow Pages, articles, reviews and promotional clips).

6. Virtual gaming, simulated worlds (I.e. Second Life) and maps also need to be talked about in the same breath, since they draw on the same data sets. Expect to see simulated “trips,” “shopping excursions” and other apps in the next generation. The Knight Foundation’s funding of several simulated environments (i.e. Paul Grabowicz’s re-simulation of the 1950s Oakland Jazz scene) is likely to prove prescient as a harbinger of the new news. Ditto for Microsoft’s funding for XBox.

7. The next generation of ecommerce mapping is squarely focused on store layouts and other inside apps. People buy more when they know where they’re going. They’ll back up the store locater/storefront images being developed by Google, InfoUSA, TeleAtlas etc. New camera mounted vehicles and immersive technology will drive this environment, which is going to be 100 percent improved from what we saw with A9’s street view just a couple of years ago.

8. Maps for mobile devices are as important to this environment as anything else (as amply demonstrated by Google Map Chief Mike Jones, demoing a mapping app on Apple’s iPhone to the “oohs” and “ahhs” of the audience. (Sure, I want one, too).

9. As Google and other sites start to place maps and images at the top of the page, they need to make sure they don’t devalue paid advertisers that are used to “owning” the position. Look for new types of contextual placement.

10. O’Reilly’s Where 2.0 conference has been “Mapping Central” for four years now. This year, it got 800 people. It is a great, unique event. But expect its focus to get increasingly broader as it tries to stay ahead of industry trends. For sure, the developers that have been its mainstay audience are sad to see it becoming more “corporate.” Even “the suits” say it isn’t as much fun (although time well-spent).

The success of American Idol’s TXT messaging voting has gotten women shoppers thinking of it as a major media guide, or so claims NearByNow Founder Scott Dunlap, who is pushing hard to provide TXT promotions to malls around the U.S. NearbyNow is currently in 50 malls in 45 cities, and expects to be in 110 malls by December. It mostly competes with Slifter, which is more retailer- oriented and claims to service 20,000 stores.

In comments at the Where 2.0 conference May-29-30 in San Jose, Dunlap says that the immediacy of TXT promotions, and the malls’ dense aggregation of stores create a critical mass for the product. With NearbyNow, The Gap can “promote jeans to 400 people who are not even 400 feet away. Who needs GPS?” he asks, rhetorically. And they can do it on the fly, while a newspaper promotion can take several months.

“Retailers have been wondering how Google impacts them,” but it hasn’t been at all tangible, says Dunlap. “This is really a more relevant kind of search. We have taken over a geographic location. It is a nice clean search that is instinctively understood” by both retailers and users.

And the malls, who drum up usage with well-placed signs touting prizes, etc., like the branding. “A lot of people don’t even know that the malls have a URL. But they do,” Dunlap says. Every mall is given a unique code (i.e. “VF” for Valley Fair).

There has been some concern that consumers would think the service crosses the line into spam. But actually, they see it as ”a helpful concierge service,” Dunlap suggests. The key is to limit the promotions to two per hour. “I don’t know why, but three messages seem like spam. He adds that sweepstakes offers are especially powerful. “They can double usage.”

If there is a problem, it is that the service can drive too much traffic. “We’ve learned that you can’t blast it out to 2,000 people searching all at once” for a hot item, like a WII system from Nintendo. But demand, of course, is all based on the context of the store and the prize. Dunlap notes that just “one hour after we had hundreds stampede” for another special, a shoe special got just eight people.”

Summary

After completing a free DA call this week using Google’s newly launched 800-GOOG411, we were asked if a text message was desired in addition to the free voice and “connect me” features (the multimodal functionality that is standard in a growing number of free DA offerings). But what we also received, interestingly, was a link to a Google map of the location we were looking for. The map provided was part of the WAP-based mobile mapping product that Google has had for a while, but it’s an interesting push of an existing product, and one that brings yet another modality to the rising standards in the FreeDA space.

Analysis

As we’ve said in the past, Google’s and Microsoft’s entrance to the Free DA space will push overall adoption forward (benefiting smaller players in the meantime). The exposure that G & M have shed on the space should push the idea further into the mainstream that there are free and easy alternatives to paying a few bucks for a carrier delivered 411 call.

Through this, Google sees an opportunity to raise adoption and awareness of its mobile products, including in this case, mapping. This is part of an overall push that includes search email and calendars.

This will raise the already fast-moving bar in the free DA space to integrate more features such as mapping. Indeed Free DA could prove to be a powerful venue for Google to push all of these services that have erstwhile lingered in early adoption stages. As usage rises, advertising won’t be far behind. This could take the form of text messages being sent with DA search results for complimentary and same-category products(similar to the UK partnership of MIVA and 118 118).

Look for Tellme/Microsoft to be equally, if not more, innovative with product integrations and monetization. The effect this will have on the product road maps of incumbents of the free DA world - such as Jingle - will also be interesting. Either way, text and voice will continue to be the most prevalent forms of mobile local search in the near term, given low smart phone penetration and the low WAP capability of mobile phones in the U.S. (see chart to the right).

More feature rollouts tied to free DA (and mobile local search in general) is also a natural and expected progression. Although, keep in mind providers will continue to be careful not to stray too far ahead of consumer comfort levels in what is largely an early adopter mobile search medium (again, see WAP penetration levels above).

There are also obvious hardware constraints (i.e. small keypad, screen) that make feature deployment difficult. Add to this, the perennial carrier control issue that pushes 99 percent of mobile search applications off the carrier deck, to rely instead on being found on WAP browsers — a sizable marketing challenge, even for Google

Challenges aside, data presented by Nokia’s Ralph Kunz at TKG’s Drilling Down on Local conference indicate that users are interested in mapping and directions, chief among mobile features. Google’s mapping push through its newly launched DA product indicates it knows this well.

Of course what consumers say they want and what they actually want are two different stories, as astutely pointed out by James Surowiecki in his Financial Page in this week’s New Yorker. This is central to the “feature creep” challenge that plagues all tech product manufacturers and is especially emblematic of mobile search application development.

But we’re slowly getting there, and expect a great deal more experimentation at all levels of the mobile market.

Summary

CBS announced today that it has acquired London-based social networking site Last.fm for $280 million. The site claims about 15 million monthly users (4 million in the U.S.) and hangs its hat on music video distribution – thought to be a good fit with the traditional broadcast giant. The site also has video distribution in development, in line with the YouTube-esque marriage of social networking and viral video distribution. The price tag for Last.fm is well below Google’s $1.65 billion acquisition of YouTube and competitor News Corp’s $580 million acquisition of social network market leader MySpace. In many ways this is in fact a move for CBS to build off its radio, music and television assets to etch out an online presence similar to the way that News Corp has done it with Fox Interactive Media and its darling MySpace.

Analysis

It’s interesting to see television networks go about online establishment and growth in a way that is similar to the growth strategy they know best; television. In this way they are assembling assets like building TV schedules and looking at how to best aggregate audiences around specific interests, using demographic targeting. MySpace has done this with premium rates for display and video advertising, as well as integration of Google ads throughout the site.

CBS will employ a similar strategy with ad units demographically targeted to Last.fm’s musically oriented set of users. MySpace started out with a similar profile but has since grown into many other things, while it remains a place for bands to promote themselves with songs and videos.

In short, Last.FM works by allowing allows users to connect with other listeners with similar music tastes, to custom-build their own radio stations and to watch music video-clips. This happens through streaming radio based on the playlists of songs users have been listening to on their own computers, as well as what’s on playlists of peers. It is leading a new breed of online companies – also including Pandora and Finetune – known as music discovery engines.

For CBS this brings new reach and online targeting capability and represents a change in direction for one of the countries largest radio networks. This direction was also recently indicated by the company’s majority investment in, and partnership with, TargetSpot (the Spot Runner of radio) which we wrote about here; and the deal to bring video content from its television stations to Yahoo! News.

CBS is also trying to expand an advertising portfolio that includes terrestrial and online radio, broadcast and cable TV, and outdoor advertising. But instead of focusing solely on creating programming, the company is turning a corner to reach broadcast audiences through a variety of mediums. Online is the latest and mobile could be next.

The Last.FM acquisition for one could bring CBS the foundation for a pay per action model around songs. The product comes with a recommendation engine that provides links to buy music, based on what users and their friends are listening to. This could have nice synergies with its existing music properties, and for music it doesn’t have licenses to play, it offers 30-second samples. Bottom line, it extends CBS’s reach, and brings many possibilities for new ad formats and distribution to new online audiences.

“Their demographics also play perfectly to CBS’ goal to attract younger viewers and listeners, said CBS Chief Executive Leslie Moonves in a statement. “Last.fm adds a terrific interactive extension to all of our properties and also is a huge step in CBS Corporation’s overall strategy of expanding our reach online to transition from a content company into an audience company.”

Spot Runner announced a deal today with LexisNexis Martindale-Hubbell to distribute spot cable ad creation and buying capability to affiliated law firms. This can be compared to Spot Runner’s deal with Coldwell Banker in the real estate vertical that gives the firm’s far flung agents immediate access to customize 30 second ads, and use Spot Runner’s cable spot buying dashboard to determine geographic and demographic targeting for where the ads will run.

These deals for spot runner are the best way for the business to scale. Otherwise it is addressing a very wide and fragmented segment of small businesses. This becomes even harder if you look at the fact that it employs a self service model without a sales force. One single deal with a large business with many decentralized constituents effectively gives it a single point of entrance to many local businesses.

But the significance of today’s deal is that it’s Spot Runner’s first move into the legal vertical. In TKG’s white paper released last week “Online Video: A New Local Advertising Paradigm,” Real estate and autos are examined for their early adoption and reletively heavy use of video advertising so far, when compared to other verticals. This is partially because of the high consideration items, pressure for leads, and high margins have made early adoption a necessity, and advertising spends somewhat inelastic.

The message to Internet Yellow Pages is that there are Yellow Pages traditional sweet spots that have some of these same characteristics such as some professional services (read: lawyers). So these could represent the biggest areas of opportunity to integrate video advertising with onlilne listings - similar to what Citysearch recently launched for local businesses (mostly restaurants) in partnership with TurnHere.

Spot Runner has beaten IYPs to the punch, but should be considered more a potential partner for its inroads to the legal vertical. In combination with Yellow Pages sales forces and existing relationships in this vertical, this could amount to a powerful ad bundle that serves to push online video advertising forward for IYPs.

Because of the elasticity of ad spending in this vertical (for the same reasons mentioned above for autos and real estate) and the affinity for video, this could be a great place for IYPs to dive into the game of local video advertising. Not to mention; video has the same vanity factor that we’ve seen drive lots of Yellow Pages ad spends. And let’s face it, lawyers can be a vain bunch.

Here at O’Reilly’s Where 2.0 conference in San Jose, an annual event for 800+ mashup developers, there’s no perspective yet on the importance of maps to the local ecosphere. But a picture is developing of a “3D Data arms race,” in which Google, Microsoft, Yahoo and others are spending fortunes vying to have developers use their platforms for cityscapes, which could be as important as a Windows operating system has been for PCs.

“We don’t just want 1,000 people who use” Google’s API for maps, said Google map head Michael Jones. “We want 100,000. We want to be the glue that makes it work. Geo is something that is integral to everything moving forward.”

Jones noted that Google already has 2 million activations of Google Earth, which it hopes to be “the most inclusive map on Earth. Now the company is adding to its Geo product line by introducing Google Street View, which it sees as a major help navigating dense urban areas. “StreetView will let people see information that is not published anywhere” (such as parking lot availability and pricing). It also serves as an excellent insertion point for local ads,” said Jones. “Location targeted ads are a very large opportunity.”

Not to be outdone, Microsoft mapping head Erik Jorgensen asserted that Microsoft has taken a significant lead in 3D imaging of cities, with “one million buildings done,” including 50,000 in New York City alone. “It takes three weeks to build a city,” he said.

Jorgensen’s view is that the company’s Virtual Earth platform is being developed for “access, realism and scale,” and that 3D itself is perhaps a couple of years away from becoming the de facto standard. There will be a “tipping point” when Virtual Earth won’t just be a single destination site, but could be embedded in any Web site, he said.

While Microsoft and Google have their aspiration in mapping, of course, they do not exactly own the space. Nor do they need to. But Tele- Atlas has 100 3D cities built up and will have 500 cities next year. Ray Gun has 70 3 D cities, each capable of supporting GPS and cellphone tracking.

Futurist Mike Liebhold, moderating a panel, forecast where it is all going. “There is a fundamental difference in cartography, where we are thinking about volumes,” he said. It has gone beyond points, vectors and polygons to include tiles. “We’re going from terrain to buildings. We’re rendering smaller objects of buildings. We’re moving beyond (mapping) storefronts to providing inside GIS.” In fact, the desire to map out the insides of buildings would have major implications for retail. It was a major point of discussion at the conference.

While everyone agrees that maps are important no-matter-what, there were some calls for perspective outside of the Google-Microsoft aura. “You guys are all about technology push. But you need to effectively balance market pull,” noted MapQuest GM James Greiner.

Outside.in co-founder Steven Johnson reminded the audience that “It is not always about the map. We don’t need maps all the time to show us what’s going on.” For Outside.in, a placeblogging site, he said, “we decided to make the map as small as possible” in order to focus on the thoughts of the community. Users can blow up the map, zoom in etc., when they want to.

Amidst all the whiz bang mapping apps showed off at Where 2.0, MapQuest Gm James Greiner brought everything back to Earth with a survey showing that just 42 percent of Internet users use mapping sites, and relatively light penetration of advanced mapping services. That’s good (if self-serving) news for MapQuest, which has been adding new features at a steady pace but is considered less advanced than Google, Microsoft et al. The survey also found that just 22 percent want to post a map publicly (i.e. on a blog or Website).

Greiner’s survey, conducted with 732 Internet users, showed that MapQuest remains the most used brand, with 2/3 of online map users at least occasionally going on the site. The survey found that while advanced imagery (i.e. 3D maps) is considered interesting, with 47 percent planning to use it, just 18 percent currently do.

The demand for personalized features may be hotter than advanced imagery, with interest jumping from 49 percent to 68 percent when examples of usage were provided. The survey also found that 75 percent want to save addresses; 55 percent want to share with family and friends; 59 percent want Points of Interest on maps’ 50 percent want to increase the presence of storefronts on maps; and 50 percent want the ability to search select vendors and/or services.

Summary             

BizReport.com reports that Google will begin to axe websites from its AdSense publisher network that have an unfavorable “ad/edit” ratio (to use a magazine term). Though this seems detrimental to Google’s strategy to extend its reach for brokering ads online (as explored last week), it puts quality ahead of quantity in cutting out the clutter and improving contextual ad relevance by improving the overall content to which those ads are matched.

Analysis

Starting Friday, AdSense partner sites that are heavy on ads and light on content will be dropped from Google’s text ad distribution, and thus cut out of a revenue share for those contextually placed pay-per-click ads.

This move will work toward improving quality in two ways. It will have a positive effect on the ad placements for sites themselves; more ads will be available to the remaining sites that make Google’s cut. More importantly, those likely to be at the top of this list are vertical search sites, rich in not only content but specificity of content, and quality of traffic (higher intent to transact) - all of which will have a positive impact on more and better AdSense placements, and will improve click through rates. Google, web publishers, advertisers, users, (everybody) wins.

The other effect this will have - also worth losing AdSense reach in the short term for Google - is to entice websites with little content to beef up, as they’re forced to choose between building content and losing monetization. If this has the desired effect, these sites will chase the carrot and end up with deeper and more meaningful content which will have SEO benefits as well as better contextual ad matching from Google and, again, hopefully higher click through rates for text ads.

This could mean a great deal to the overall development of high consideration categories that have been traditionally strong for Yellow Pages publishers, but lacking deep and comprehensive content online (think roofers). This paradoxically is the case for many high consideration areas while many low consideration areas (think restaurants) have a wealth of content online.

The chart to the right shows the sources used for trade services over three waves of Kelsey Group User View Surveys. It’s interesting to note the 21 percent increase in the most recent wave (IV) in the net Internet usage to find trade services. Most of this increase is attributable to search as a method of finding providers. Looking to a provider’s website has conversely dropped in frequency, possibly due to a lack of developed and comprehensive experiences within this notoriously non-tech oriented category. There are some exceptions of course.

So far the opportunity to provide more content online (gain SEO benefits etc), alone hasn’t enticed some of these service providers - some representing high consideration services including contractors, landscapers, etc. - to build better and deeper online content. So perhaps penalizing publishers by cutting them off from AdSense will help. In other words, the carrot hasn’t worked, so it’s time for the stick.

Then again, the lack of propensity to have deep content could for some advertisers or publishers represent an indifferent attitude towards the internet in the first place (or perhaps no web presence at all) meaning such penalties mean little. Getting more small businesses online with free or simplified hosting, website development, and advertising bundles (the webification of SMBs) will be important to this issue and to the overall growth of local online advertising. This will be explored in a TKG report currently in the works.

Microsoft announced this morning from the Where 2.0 conference that it will add New York City to the list of cities available in 3-D in Live Local Maps. We wrote about 3-D mapping and its possibilities for Local in a previous post. This also follows closely behind other enhancements to Microsoft’s mapping products including 14 other 3-D cities and personalized maps.

Virtual Earth 3-D is very robust and almost too robust for most users’ processing power and broadband speeds to handle, but it offers a glimpse of what the future could hold in online search and mapping. This has lots of ties to local online search as it is done today, and lots of interesting possibilities in light of the growing popularity of immersive virtual worlds such as Second Life (more on Second Life and local here). Most of the opportunity here is in a futuristic sense, but is nonetheless interesting.

In the shorter term, Microsoft will continue to bolster its mapping products. The opportunity is to continue to bring utility to 3-D Maps such as more integration of local data, real time traffic data (currently available in Windows Live Local) as well as other Microsoft products such as Spaces (blogging) and Messenger (IM). These could bring social dimensions to the product and create geographically relevant indexing of user generated content and blogging (see placeblogger) as well as community interactions meant to generally feed into the stickiness of the mapping and local search experience. It already does this to a certain degree with its “collections” feature.

The Where 2.0 show itself mostly takes a very technical angle at many of these issues with reletively little business model analysis, though last year there were certainly good presentations with important local search implications given by Mapquest’s Jim Greiner (speaking again this year) and Yahoo!’s Paul Levine (see last year’s writeup). I am unable to make it to the show, but will be paying close attention to announcements, including the unveiling of stealth mode startup Fatdoor. My colleague Peter Krasilovsky is in attendance and could have more to say later.

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Related: TKG report “Microsoft Virtual Earth 3-D: A New Dimension for Local” can be viewed by subscribers. The summary is publicly available here.

The Vecosys blog is reporting the rumor (take it only as that) that Google has its crosshairs set on Feedburner for its next acquisition. This would make sense for Google, given its ongoing expansion of venues in which to broker ads. Paid search growth is slowing, which partly explains its aggressive march towards other mediums including radio, newspapers, video games and most recently, video.

Feedburner has been on a roll over the past year as a tool to manage the RSS feeds of blogs and news sites big and small. RSS meanwhile continues to slowly gain adoption, though it hasn’t quite reached mainstream. Many users still get scared away by acronyms (SEO, SEM, SERPs, SME, etc.) which is one reason RSS hasn’t reached mainstream audiences to the degree that it should, and that it will. In other words, it’s mainly a branding issue which is supported by the fact that MyYahoo! holds the lion’s share of RSS users, while never mentioning the term RSS.

Google could likewise serve to push RSS overall adoption forward by acquiring a company like Feedburner. More importantly, it gives the company another venue against which to match contextual advertising, akin to AdSense. If this rumor is true, it could very well lead to an RSS extension of AdSense. As the Vecosys blog points out, this will gain importance as more and more people use RSS feeds as a back door to stories and blog posts (permalinks) - thereby skipping the front door (main page) where they would otherwise see lots of ads — AdSense ads in some cases.

Because a majority of RSS feeds are used for blogs, and because mostly tech savvy individuals have feeds set up, this also enables better ad targeting. As RSS approaches mainstream however, user profiles will vary more. Nonetheless, this would be a strategic investment for Google, well in line with the many points drawn over the past 18 months to gain greater ad serving capability across formats and mediums. Given the audience aggregation capabilities of RSS, it could be equally valuable as Google’s next ad delivery vehicle.

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Related: Here is a Business Week article from Last June that goes further into Feedburner’s history and model. It even projects forward to a possible intersection with a certain Mountain View based search giant.