Two real success stories in the home services category shared the stage this afternoon on the “Home Services Visionaries” panel, offering two different perspectives on how to make money from creating a local home services marketplace, built on a foundation of credible consumer reviews.

Angie Hicks, CMO and co-founder of Angie’s List, described how she has built a successful business based on charging consumers for access to small businesses that have been rigorously peer reviews. Angie’s List also generated revenue from the sale of advertising on its site and in print magazines.

Rodney Rice, co-chairman and co-founder of Service Magic, built a business based on charging home services businesses for leads, while offering consumers access to small businesses that are highly rated by their peers. As Rice pointed out, Service Magic (now an IAC company) is one of the survivors from a wave of home services marketplaces sites that emerged before the 2000 Internet bubble. Other sites raised tens or hundreds of millions in funding, only to go under or be sold for peanuts, in all likelihood to Service Magic.

Rice colorfully described his company’s base of operations in Denver, rather than Silicon Valley, as one reason for its survival amid so much carnage nearly a decade ago. “We were not sucking the Internet exhaust.” In other words, Service Magic focused on delivering a solution that didn’t kill SMBs with technology but put “technologies that made sense at the time” into the market. Today, Service Magic today has a $120 million revenue run rate, and has about 500,000 verified ratings posted.

Angie’s List currently has 450,000 reports on local businesses in the top 125 US cities. Angie’s list pulls in about 40,000 reports a month, and runs regular campaigns to gin up higher volumes of reports, or reviews. Recently Angie’s list had a report drive that produced 80,000 new reports, giving out flip cameras to those who produced a given number of new entries. Angie has expanded beyond its core home services categories, most recently adding health care.

One key issue overhanging the prospects for both businesses is how the economic downturn will impact their businesses. Moderator Matt Booth shared his hypothesis that as consumers stop tapping home equity to fund home improvements, home trade service businesses will find themselves needed to generate new lead sources, where before, most businesses in this category had more jobs than they could handle.

The two panelists suggested they are beginning to see evidence supporting this hypothesis.

“We are seeing more demand on our services side, in an economy where ad prices are going down,” Hicks said. “Companies that were [highly] rated, who used to say they were too busy, now need to invest to shore up leads.”

“We are seeing slight pickup,” Rice said. “They are getting slightly hungrier. Next year, we expect them to be significantly hungrier.”

Attendees at The Kelsey Group’s ILM:08 conference received a multi-national view on what is working in the “new” business directory space. The panel included iLocal’s CEO Peter Grasdjik (Netherlands), Sensis’ General Manager of Online Search and Directories Chris Smith (Australia), InsiderPages’ Eric Peacock (United States), and Virtual Paper’s Manoj Verma (Canada).

Here’s a  glimpse at what is working for some of these providers:

iLocal credits its success to an ROI-based guaranteed leads offering that is sold through its own quickly growing field sales force (currently at 75 FTEs and will likely double in the next year.) The company, which has expanded from the Netherlands to Belgium in June 2008) will scheduled to hit breakeven by the middle of 2009.

InsiderPages believes there are two factors that have helped it to evolve from a cash flow negative business in March 2007 with 2.5 million uniques and 550,000 reviews to an IAC-owned business that in October 2008 claims 5.5 million uniques and 1 million reviews with positive cash flow. Those factors are InsiderPages’s pay for performance value proposition and CitySearch’s sales force to which Peacock indicates have helped move the firm from one that was burning cash to one that is throwing off cash.

Virtual Paper, who just today announced an agreement with Yellow Pages Group Canada, has found that they need to “digitize to monetize.” What CEO Manoj Verma talked about is Virtual Paper’s focus on taking print-ready materials and digitizing those materials to make them searchable online. Those print materials include menus, brochures and catalogs to give SMBs are richer online experience.

Sensis has been incredibly successful in its last fiscal year not only growing online revenue, but also growing print revenue. Part of their success is tied to their pitch to SMBs in which they tell them to provide the content and Sensis will do the hard work. That hard work (done by a 2,000 person salesforce) includes providing a multi-channel approach - IYP, print, GPS, classifieds, mobile, and other platforms.

This just in. Canada’s Yellow Pages Group has announced a deal with My Virtual Paper, a start-up that has developed a process for extracting and indexing deep content from SMBs’ offline business papers — brochures, fliers and so on.

CEO Manoj Verma is speaking on a panel this afternoon at Interactive Local Media 2008 in Santa Clara, California.

The ‘New’ Business Directories: Reaching (and Satisfying) Small Businesses
Everyone is jumping into the business directory and listings space, once dominated exclusively by Yellow Pages. We’ll see what is going to work, and get a glimpse of where things are going – in the U.S., and around the world.
Pieter Grasdijk, CEO, iLocal (Netherlands)
Eric Peacock, GM, Insider Pages (a Citysearch Company) (United States)
Chris Smith, GM, Online Search and Directories, Sensis (Australia)
Manoj Verma, CEO, MyVirtual Paper (Canada)

This morning’s session at ILM:08 on Leveraging Traditional Media Online was an eye-opener in many respects. It was striking, for example, how aggressively NBC is embracing the idea of following the audience wherever it can get its attention — at the gas pump, at the gym, as well as on the couch with a soda and a bag of potato chips.

BIA’s Rick Ducey, one of the moderators of this panel, teed off the discussion when he said, “the future is what you make of it.” The three panelists responded to this challenge by showing what future they are creating, and what their companies are doing to integrate traditional media with various forms of new media.

Larry Olevitch of NBC Local Media listed the many venues where his company is reaching people — taxis, supermarkets, online gaming, fuel pumps and soon commuter trains — enabling them to offer a multiplatform campaign for their advertisers. Additionally, working with other companies in this traditional media space, even direct competitors, has led to very interesting and successful campaigns. NBC along with CBS Radio along with Comcast put together a successful Great Used Car Sale Campaign in Chicago utilizing the different forums these competitive firms offer. Olevitch noted the 10-day event generated 26 million impressions. He didn’t say how many cars were sold.

Comcast is also constructing its future with different media acquisitions. Comcast has purchased Fandango, Vehix, Plaxo and other companies, all with the intent of allowing its customers (advertisers) to more easily plan and execute campaigns. And, of course, the company is partnering with other media companies such as NBC to further this goal.

Meredith Papp from Google talked about how the search giant is making its future by providing many more analytical tools to make it easier for advertisers to buy multimedia. Through some experiments, Google has been able to increase the revenues of advertisers with these analytics and planning.

One specific innovation Papp discussed was the idea of using a “consumer response tag” to develop a standard location on print ads for call to action data (800 numbers and so on) based on the notion that if consumers are trained to look in a set location for response information, response rates will grow.

What will the future of these companies be? Clearly, they are acting and making very serious acquisitions and partnering with many companies to try to make their futures their own.

Thanks and credit to my colleague Mark Fratrik of BIA Advisory Services for contributing to this post.

In-game placement is getting to the point where it’s more than just early adopter advertisers that can target gamers, according to Larry Olevitch, NBC Local Media Group’s senior vice president of local media sales. The benefit, as we’ve mentioned, is that it’s targeted marketing in front of key demographics that in some cases get repeated exposure with the media (read: hours a day).

Combine that with the fact that more gaming consoles are online and more gamers are playing online, and you can drop in ads on a dynamic basis that is targeted down to the DMA level, says Olevitch. An example he gave was a big Obama sign placed in the background of the stage in Guitar Hero during the month of September.

An even cooler example: During a game of NBALive, taking place at Denver’s Pepsi Center, Coca-Cola can launch a guerrilla marketing campaign to drop in ads throughout the virtual stadium. Pricing wasn’t mentioned but I bet it’s a heck of a lot less than Pepsi paid for the real life stadium sponsorship.

We’ve often pointed out that despite the iPhone excitement throughout the market, the device only makes up 1 percent of the mobile devices out there. This is still true, according to comScore VP of Marketing Solutions Brian Jurutka, who just spoke at ILM:08, but the device made up 3 percent of devices sold last month.

“As those sales continue it will make up a greater portion of the cellphone market,” Jurutka said, contending that iPhone-like interfaces will become more of a mass market phenomenon — whether that be the iPhone itself, Google Android-based devices or the inevitable copycats that will flood the market.

This will be an inevitable shift, driven by market competition and dropping prices. As that happens, we’ll see more mobile data consumption, which bodes well for mobile local search, whose day has perpetually been on the horizon.

As one example, Jurutka presented another data point that showed 29 percent of iPhone users look for product shopping information per month, compared with 14 percent for smartphone users and 3 percent for all other mobile devices.

We’ll hold a session at 11:30 today that will demo a sample of local iPhone apps. Should be fun.

Citysearch has just completed a full revamp of its product and strategy that it hopes will position it in the long-term battle for local. Elements of the revamp include a more intuitive interface, an embrace of social media, a major focus on video, some new twists in mobile, and the development of a full-fledged local ad and content network that offers an alternative to Google’s dominant position.

The IAC company’s current ambitions are to be “more local, more social and slicker,” says President Jay Herratti. “We are defensible with our breadth and depth of content. But we can’t grow unless we grow search at the local level.” All the efforts in online and mobile are geared toward achieving such growth.

Open APIs are especially emphasized as a key way to open the service to anybody who wants to tap into Citysearch’s deep editorial content, reviews and small-business information. Sites like Urbanspoon aren’t pure competitors, says Herratti. “We always try to power them. If their success is great, we’ll make money from that.”

A related piece of the puzzle is the launch of Open IDs, as well as dedicated MySpace and Facebook Connect apps. The Facebook Connect app, in particular, will enable users to develop a friends circle, based on their Facebook profile information. “It gives them a portable identity,” says Herratti. The problem with user-generated content is that people intend to publish their reviews, but in the end, eight of 10 reviews don’t get up there,” he says. The open IDs replace earlier efforts to register users, which typically resulted in 95 percent drop-off of users.

As for the new interface, Citysearch has focused on highlighting its breadth of content and converting shoppers into buyers. In this regard, the new version’s biggest innovation is a compelling breakdown of small-business information into “owner,” “editorial” and “user” comments.

The latter, which have been enhanced by the addition of Insider Pages in 2007, will begin featuring selected reviews to get away from the information overload of 200 to 300 reviews that are common in certain categories. While some sites suffer from review ghost towns, in Citysearch’s case, there has often been too much of a good thing, especially for restaurants and bars.

The breakdown of editorial comments should also help with search. Google already drives 50 percent of all the site’s usage. Citysearch’s extensive network accounts for roughly 25 percent, and its URLs account for the remaining 25 percent.

The site is also moving away from measuring distances from businesses in the maddening “point radius” configuration, which tells users they are “X” miles away from a business (but doesn’t really know where the user actually is). The new system uses Vermont-based Maponics to break neighborhoods into polygonal neighborhoods. The new focus on neighborhood information should also drive additional “long tail” searches that could drive more advertising revenues.

Kicking off the small-business “Super Forum” at Interactive Local Media 2008 here in Santa Clara, California, Jeff Stibel, CEO of Web.com (overachiever alert, he is also a brain scientist), laid out some more ugly facts about the economy — small-business earnings not just down but way down, unemployment climbing, credit frozen, don’t even mention the Dow … So he asks, what shall we do, “curl up and hide … or look for silver linings?”

Obviously no one is going to bother giving the “curl up and hide speech,” so Stibel argued that things are “not that bad.” There is money out there; for example, the Small Business Administration has money to lend. Commodity prices are down.

To the surprise of some, Stibel took issue with some of the conventional wisdom about the demise of traditional media, in particular print Yellow Pages. He called talk of Yellow Pages being dead “hogwash.” A better way of thinking about it is that “the Internet is becoming part of traditional media.” For small businesses, “the best solution is the balanced solution.”

Also interesting from this session was Paul Ryan, CEO of Done Right, discussing his use of a print directory, the Orange Book, as part of his overall approach (remember Insider Pages?). It fit into an emerging theme that it’s not about digital replacing traditional as much as understanding how digital and traditional will coexist and complement each other.

Mark Canon, president of U.K.-based Yell.com (part of Yell Group) kicked off Interactive Local Media 2008 today with an insightful, and at times esoteric, presentation that challenged much of the conventional wisdom that has driven organizations making the transition from traditional to digital.

Canon covered a lot of ground, but the headline was his assertion that companies like his need to “get used to paying taxes.” In other words, do not get hung up on ownership of traffic. His point is simply that in an environment like the U.K., where Google has 86 percent of search traffic, IYPs and others need to “learn to be good ’symbiots’ ” and “focus on engagement rather than ownership.”

Some other choice comments from Canon include:

“Own the context, not the content. You can rent the content.”

“Don’t get hung up on offering an end-to-end solution.”

When asked to amplify on his “symbiot” comment, Canon said that if you sell to SMBs, then you are useful to Google, since its model doesn’t scale to selling directly to small businesses. “Do a better job for Google than they do for themselves.”

Also, understand that Google is “fanatical about relevance,” so it is critical that your SMB content is “good enough so that it rises to the top of the food chain on Google,” Canon said.

Canon acknowledged that ceding ownership of the user requires a shift in thinking: “Ownership is not important, though it helps you talk to your board of directors.”

During Q&A, moderator John Kelsey challenged Canon’s assertion that “voice search and navigation” will soon gain prominence in directories and local search. Kelsey asserted that predictions of the advent of voice recognition have always been too optimistic. Canon’s retort was that “Google doesn’t release software products until they work,” referring to the new Google mobile application.

IAC Vice President Kara Nortman, speaking at Interactive Local Media 2008, provided both a dose of reality and a glimmer of hope about where media companies in the local marketplace are headed. Nortman’s view of what is working well included sites that are building great organic traffic rather than relying on paid traffic, offering a unique distribution strategy at a cost-efficient price point and providing some level of a self-serve model to attract customers who cannot be affordably reached on the local level.

When talking about how best to attract and win local merchants, Nortman pointed out: “While a local field sales force is a significant advantage, it is only an advantage if there is enough of a merchant/advertiser base. So many smaller online companies are pushing for or building a large field sales force, which will likely hinder their growth and ability to break even.”

From a business model standpoint, Nortman views the local media landscape morphing into companies that bring together brands that build great content, own a robust distribution network, and can gain access to and retain local merchants. “These new media organizations may very well bring together several recognized local brands to become effective.”

Citysearch is a good model of this new local media company, offering an appealing advertising platform and bringing together merchants and content development to build sustainable consumer traffic, which helps local merchants to be successful.