Earlier this week I went to hear an economist offer his take on the current economy and how soon it would recover. Long story short, I believe the speaker, who had outstanding credentials, was overly optimistic. (I really believe he may have been on vacation on some secluded island for the past year.) In fact, his views were the most positive I have heard or read in the past six months or so. However, he did say a couple of things that I agreed with. One was that television and radio have combined their news and entertainment divisions so that a prime objective of news is now to be entertaining … that is to attract viewers and listeners. Therefore, he said, the media has good reason to say the sky is falling: It brings people in.

Recently, Sharon Begley wrote a column in Newsweek titled “Why Pundits Get Things Wrong.” She quoted a study by a research psychologist at Stanford University who concluded that there was no way to predict the accuracy of anyone’s forecasts. There was no relation to whether the forecaster was a Ph.D., an economist, a political scientist or a journalist or had any other credentials, affiliations or fame. What works for the media, she wrote, are “bold, decisive assertions that make better sound bites; bombast, swagger and certainty make for better TV.”

For more than a dozen years, The Kelsey Group has been predicting the future of the industries we cover. We take the best information we have at the time, talk to industry participants, weigh their views with our own perspectives and make forecasts of the future. We do the best we can to help our clients and the businesses we serve.

The acquisition of The Kelsey Group by BIA resulted in the combination of TKG’s strength in directional media, including all things interactive, with BIA’s strong position in television, radio and newspapers. The benefit of the merger became clear yesterday when the newly formed BIA Advisory Services released a forecast that my colleague Neal Polachek described as “an expanded and more comprehensive view of the U.S. local media sector (by widening our unique understanding) of local media by adding six categories to our forecast.”

It is a little bit unnerving to be offering a new forecast in this difficult economy. Some of the headlines about our forecast said “local ad markets shrinking,” or used terms like “declining” or “downward spiral.” Unfortunately, BIA and TKG analysts do envision local advertising revenues declining from $155.3 billion in 2008 to $144.4 billion in 2013, a negative 1.4 percent CAGR. What is notable, at least to me, is that most of that decline comes from the primarily directional media of newspaper classified advertising and print Yellow Pages. The growth is all in the equally directional Internet Yellow Pages, local search and other interactive digital advertising. There’s just not much share change in traditional direct mail, television, radio, out of home, cable or magazine advertising.

As Harry A. Jessell put it so well in today’s TVNewsday, “the newfangled competition will come, but nobody is in a better position to rule the local online world than TV stations. They have the content, the business contacts and an unmatched ability to promote.” Broadcasters should know that that was the mantra of newspapers 15 years ago. Recognition is the easy part; the hard part is following through and actually making the changes that will help you to compete.

My colleague Neal Polachek and I just got off the phone with the leadership team at the Australian publisher Sensis, who walked us through its half-year results ended Dec. 31. We continue to marvel at how successful Sensis has been at growing revenue across all  its channels, while most publishers around the world struggle to maintain equilibrium as the print business suffers steep declines.

Here are the key figures:

• Total revenues up 8.5 percent, compared with 7.2 percent for the year-ago period. This includes results from the company’s fast growing Chinese operation (a story unto itself for another time).
• Total White Pages and Yellow Pages print and online growth of 5.9 percent.
• White Pages print growth of 11.6 percent.
• White Pages online growth of 87.5 percent.
• Total Yellow Pages (print and online) growth of 3 percent.
• Online Yellow Pages and search growth of 21 percent.
• Print Yellow Pages growth of 0.4 percent.

The weak link here of course is print Yellow Pages, but Sensis points out that the first half of its financial year is weighted to big markets while the second half is weighted to regional markets. Without giving any specific guidance, this seems to suggest a better second half and full year for print YP in Australia.

It’s hard to argue with these results, particularly in light of the bloodletting we are seeing in print in most regions. Sensis has been working for about two years on raising the level of execution across all aspects of the business — sales, marketing, production, customer support, distribution and so on. They have not left a stone unturned and they continue to invest in an effort to sustain these results. For example, the company increased its print distribution by 5 percent during the first half.

We’ve written extensively about the Sensis story in the past. What is clear is that so far at least, the company’s success is not a fluke.

If we see a potential weakness, it might be in the explosive growth of White Pages, which may not be sustainable over the long haul. Sensis has devoted a lot of attention to marketing White Pages, and to articulating its unique value proposition. it is also significant that White Pages is sold through a dedicated sales channel.

You have to tip your hat to Sensis. Time will tell how sustainable it all is, but for now at least, Sensis is the beacon of the global Yellow Pages industry.

Cablevision bet big on synergy (and ignored the CW about the newspaper industry) when it bought Newsday from Tribune Co. last summer for $650 million. Today, less than eight months later, it concedes that it has written off $402 million of that investment (a significantly worse investment than Stephen Marbury of Cablevision’s Knicks).

Whether the economics of the deal ever makes sense, here’s the rub: Cablevision remains extremely bullish on the possible synergies between the newspaper, the newspaper Web site, and the on-demand video capabilities of its Optimum broadband service. On Jan. 1, it launched the Optimum Autos brand across both Newsday and Cablevision on Channel 605. Looking forward, Optimum Homes, a real estate channel, has been slated for Channel 606.

During an analyst call today, COO Tom Rutledge said Cablevision continues to believe it can better manage the transition of Newsday, which counts 1 million users a week for its newspaper and Web site. News is one aspect — Cablevision has been an industry leader with local 24/7 news. Classifieds are the other.

“Optimum Autos has great content related to Long Island, it’s a respected bran, and it will continue to attract the same advertisers and consumers that we want to reach,” said Rutledge. “That’s ultimately the value that Newsday offers to us.”

Optimum Autos itself is poised to leverage the combined dealer base of Newsday, Newsday.com and Cablevision. A quick count looks like they may have around 300 dealers between them.

The rebranded site, which switched from Cars.com to Adicio Motors on Jan. 1, provides “the best of all worlds,” per company press release. It has “maximum coverage across print, interactive and cable TV platforms, easy to use technology for uploading, searching and reporting, and a customizable local environment.”

The release went on to note that Optimum Autos includes “multiple color photos for each listing and one-click dealer contact. It also includes hundreds of promotional video clips from leading auto manufacturers.”

Adicio Motors GM Deep Menon told us that after 11 weeks, the implementation has been going very well. By using Adicio’s reporting tools, Optimum Autos can show dealers their ROI based on the number of qualified leads they are getting. They can also get exclusive leads.

“Dealers have many ways to maximize their visibility, especially with video reviews, says Menon. At the same time, “the site can also sell pre-roll and video sponsorships by car make.” More advanced technology is in the works.

Last fall, a report from Sequoia Capital was widely circulated, strongly suggesting that companies sit on their capital and wait out what was sure to be a very slow and painful period. Now it’s gotten worse.

For the past several weeks, other analyst reports have been circulating. They suggest that we’ve entered a period of “deleveraging,” when debt ratios are eating parasitically into capital. This has led to deflation, and has made it all but impossible to spend, and to achieve growth.

For our BIA/Kelsey community of local media companies, the implications could be very significant. But what do the trends really mean? Is the government’s stimulus program, which is attempting to “jump-start” the economy by flooding in new dollars, going to make a difference? Should we bother going to work between the years 2009 and 2016?

We asked BIA Financial Analyst Omar Wardak to give his view on what is really important in the current environment. First, we can’t run away from the tide of bad news, says Wardak. “Bank lending has decreased dramatically, which has led to widespread deflation, decreases in investment and spending. Banks are simply not putting enough money into the economy.”

Media companies have definitely felt this in every aspect of their operations, notes Wardak — especially those that have recently acquired other properties at relatively high values. Their advertising revenues are falling short, and their debt ratio is beyond what they can sustain. That’s why we’ve seen a wave of newspaper and broadcast companies go bankrupt in the past several months, while several others are teetering. Yellow Pages companies are almost there as well.

But things are rosier than they might appear. What hasn’t been really appreciated, says Wardak, is that the money supply (as measured by M1) is now equal to the deposit base in banks. “This may imply that deleveraging is fundamentally over from a banking perspective, which would be great news. This might be the first signs of a bottom. Essentially the current debt in the market is the amount of debt that should be out in the market.”

So now the rest is all about psychology. People and companies have got to be convinced that they can safely spend. “The only way to address the issue is to jump-start the cycle,” says Wardak, “and the government has been very active in resuscitating the economy.”

Looking forward, Wardak notes that major challenges remain. If lending gets back to normal, “we might face high levels of inflation. But luckily, inflation has always been a friend to media companies. Inflation helps to induce ad spending and allows media companies to repay their debt with cheaper dollars.”

To be sure, media companies — essentially any company that gathers users for the sale of advertising — have their work cut out for them. And we say that without even taking into account the technologically oriented shifts in usage and spending that are occurring. Major sectors, such as finance, automotive, real estate and retail, are not in a position to spend on marketing.

But when the market begins to recover, and new markets emerge, media companies across every channel — Internet, broadcast, broadband, news and directional — will benefit while helping local businesses reach new customers.

European local business review site Qype has undergone the redesign we alluded to in the yesterday’s post (note the new logo).

Head of marketing Andrew Hunter told us last week in London that the new design has usability and functional improvements that are in step with the site’s growth strategy in its top markets (U.K., Germany and France), as well as recently entered markets (Brazil and Poland). This includes improved navigation, a tabbed interface and new featured content such as “best of” city attractions.

The company also reports today that it has received its 1 millionth review.

Last week, while touring London and Paris, Charles Laughlin and I had the chance to meet with Qype, a local business review site whose popularity in Europe has matched that of Yelp in some U.S. markets. Our first order of business was to finally get confirmation on the site’s proper pronunciation. The argument was settled: There is a silent U (pronounced “Kwipe”).

Drilling deeper, the company is moving in some interesting directions. After receiving 8 million euros in September from Advent and others, the Hamburg-founded site has been growing in a number of markets. This includes, interestingly, Brazil, which has shown a clear hunger for social media through the runaway success of Google’s stateside failure, Orkut.

The site is live in nine markets total and it receives 8 million monthly unique visitors between them. It’s also currently on the cusp of its 1 millionth review. Its most popular markets are the U.K., France and Germany, according to head of marketing Andrew Hunter (former head of marketing at Gumtree). In the U.K. market some additional exposure has resulted from Yelp’s recent jump across the pond.

“In the press activity around Yelp’s expansion, we are always mentioned in the same breath,” says Hunter.

Scoping the Coopetition

Like its U.S. expansion, Qype’s new competitor Yelp will likely grow in Europe using a stepping stone approach from city to nearby city. It’s done this by taking advantage of the cross-pollination of people and culture between cities like San Francisco and Los Angeles. This gets the ball rolling with respect to awareness and reviews generation.

Europe is a bit easier in this respect because a greater portion of the population is consolidated in cities. But there are also considerable challenges, says Hunter. In a city like London, it’s tough to capture the “flavor” of the myriad neighborhoods that make up the city. Yelp’s coverage as a result has mostly skewed toward certain parts of the city — as it happens, the more touristy parts where U.S. visitors have written reviews.

Qype has better coverage with a bigger head start in the region and a home base in London. It also has an interesting SEO-based strategy for gaining users. This mostly involves engaging SMBs to claim and populate their profile, which creates SEO muscle, and in turn leads to users finding and reviewing them.

“SEO is vital in local,” says Hunter. “Anyone who tells you otherwise is wrong.”

Playing Both Sides

This can also have the side effect of getting advertisers more engaged and excited about using Qype as an advertising channel. This is one area where Yelp has received criticism, and has begun to launch features that are decidedly more advertiser-centric (SMB tools to manage profiles, etc.).

Qype’s pricing for premium profiles and featured placement starts at 365 British pounds per year and can go up to a few thousand pounds for different performance-based packages. About 80 percent of its revenues come from these internal products, and the remaining 20 percent is a mix of outside advertising on the site.

Hunter claims (anecdotally) that the site has seen lots of recent interest and engagement from advertisers.

“We’ve seen some clever ways businesses have gotten people to review them,” he says. “One hairdresser on our site has people in his chair and when he’s done cutting their hair, he puts a laptop down in front of them and says, ‘there, review me.’ ”

Next up is a site redesign whose hard copy mock-ups looked sharp. It is also thinking in terms of mobile: An iPhone app called Qype Radar has gotten 100,00 downloads in two months and lets users read and write reviews on the go. Yelp has been averse to the latter in order to maintain the quality of long form reviews, but Hunter believes these shorter “twitter versions” of local reviews can have value.

“We can offer a separate section of the site that offers, ‘here’s what people are saying from mobile,’ ” he says.

R.H. Donnelley has flipped the on switch on the new DexKnows.com Internet Yellow Pages platform. We wrote extensively about this new platform while it was in beta, in a blog post as well as an Advisory from The Kelsey Report.

We have commented that the new site (a tangible outcome of the acquisition of Business.com and its team of technologists) represents an ambitions effort to address many of the widely perceived shortcomings of IYPs. Now it is time to find out if consumers and advertisers respond favorably to the effort.

The press release announcing the official launch emphasizes how the new site breaks out of many of the conventions of IYP search to make the experience closer to what consumers have come to expect from local search, such as searching by brands and attributes rather than a structured category-based taxonomy.

One of the more interesting features is the ability to search based on the service area boundaries for local service businesses, rather than the location of the business. The utility of this feature may evolve over time as businesses self-identify service areas boundaries.

From the announcement:

DexKnows.com does not follow a typical listing structure that requires consumers to drill down several levels to find what they want.  Instead, they can simply type in what they’re looking for  — whether in specific or general terms — and DexKnows.com returns relevant results.

DexKnows.com allows consumers to:

– Search by specific neighborhoods or landmarks. The site’s “hyperlocal” search capability enables users to pinpoint their search area. Search by specific neighborhoods or landmarks. The site’s “hyperlocal” search capability enables users to pinpoint their search area.

– Search by descriptive phrase. Consumers simply need to type “clean house” or “fix sink” to yield relevant results that present them with a myriad of options to meet their needs.

– View results that accurately reflect both business location and local service areas.  Sometimes, consumers may seek the physical location of a local business, for example, to find a dry cleaner in close proximity to their homes.  Other times, consumers want to see which local businesses support their area, such as what plumbers provide repair services in their neighborhoods.

The new site provides consumers with more relevant options to choose from. While it may take some time before it is fully formed, all in all, this is a worthy effort at improving the IYP product model.

Sears will try to leverage its identity with home improvement and repair with ServiceLive, a new leads provider for service pros that is being pitted against ServiceMagic, Angie’s List, DoneRight and others. The tagline for the service, which begins a marketing campaign next week,  is “Your price. Your time. Your way.”

Its basic concept is a mix of ServiceMagic and PriceLine. Consumers pay $10 to list jobs, and will provide project specs. They’ll have the option to upload photos of areas to be repaired (if possible). Then they’ll select from pre-screened contractors, while naming their chosen date for service, and their own price, guided by sample labor costs. If no one bids for a job, ServiceLive asks the consumers to up their price.

Under ServiceLive’s system, first respondents “win” the jobs. But then their fees are held in escrow by ServiceLive until jobs are satisfactorily completed. At that point, “ServiceLive Bucks” are deposited into contractor accounts, minus 10 percent for commissions and transaction fees. On paper, at least, the system promises to be much more efficient than other payment systems.

When jobs are completed, consumers are asked to provide comments and ratings on a five point basis. While reviews are expected to become a major part of the screening process, there aren’t many at launch, and it should take several months before any volume is built up. Until then,  consumers can rely on ServiceLive’s guarantee that its contractors have undergone complete background checks and provided insurance information.

Based on various contractor blogs, the service has been recruiting contractors in several markets since November. Nine thousand of the 23,000 that have registered have already gone through the approval process. But not surprisingly, posts on the blogs aren’t especially positive.

“Who in their right business mind would allow the customer to dictate how much a job should cost?,” said Ed The Roofer, on Contractor Talk. Patrick the Door Installer doesn’t like it either. “That just sounds like a disaster waiting to happen. ‘Sorry, they never logged in to OK the job; sorry, we can’t pay you till they do.”

Patrick added: “Sounds like it should be named: ‘Find a hungry, desperate lowballer.com.’” Jason, from “The No Faux Zone,” sees more ominous issues, especially with the involvement of Sears. To date, he contends that contractors have been able to underbid Sears Home Improvement because it isn’t especially aggressive at the grassroots level, and it tends to build in corporate overhead.

But Jason fears that an online leads service will kill contractors’ competitive edge.  “If you’re the type (that)  wants to exceed expectations and brand your  business as something above and beyond, then this is just garbage,” he says.

We asked ServiceMagic CEO Craig Smith, a direct competitor, to weigh in as well. Smith notes that “a reverse auction is a challenging model to execute. It’s difficult for some homeowners to understand the full scope of materials and labor needed. Many homeowners and professionals will prefer to discuss the cost variables of each project in person before writing a detailed estimate.”

(Smith’s complete response is included as a “comment” to this post).

Cazoodle, a new listings-based service, has launched from the incubator at The University of Illinois at Champaign-Urbana (yes, Marc Andreeson’s former territory). The site currently crawls for apartment listings and shopping. Additional vertical categories such as events are anticipated, notes Professor Kevin Chang, who is supervising seven graduate students on the project. “We have the technology and we want to use it,” he says.

The service started in San Francisco with apartments and added shopping afterwards. It now provides listings in those verticals in more than 20 markets.  National coverage of apartments will begin shortly. The key to the service, says Chang, is a comprehensive set of crawled ads, and a better user experience that isn’t dominated by showcased ads.

The landing pages of many vertical sites are “2/3 ads, 1/3 listings,” he says. Cazoodle hopes to reverse the ratio (although it isn’t actively selling ads at this point). The site also has an elegant integration with Google Street View and Maps.

Looking forward, Chang hopes to build direct relationships with major listers, such as managers of apartment communities. Direct relationships provide much better information than what you can get by crawling, he says. Ultimately, be believes that’s a major differentiator.  He also hopes to begin adding community information.

But the site is not without controversy (or maybe, there should be controversy). For instance, the site dives deep into the sites that it crawls. During mouse-overs, it highlights a picture of the product or apartments, and full listing  information.

Chang argues that Cazoodle isn’t actually “deep linking” since the URLs of crawled sites are still highlighted, and only one picture is displayed. But in reality, there may not be much of a reason to visit the site of origination, given the easy “one stop” that his system provides.

Today we’re launching a new formal practice area that will focus on the rapidly evolving mobile media space. As is core to The Kelsey Group’s DNA, the main angle here will be local: how the growth of the mobile Web will specifically hold opportunities for locally targeted content and ad delivery.

Mobile Local Media will launch to subscribers with a handful of reports and a brand-new forecast, which plots out mobile ad revenues for the next five years. It is broken down by display, search and SMS — the shares of which will shift considerably over the forecast period, as devices that can render full HTML pages penetrate further into the mobile mainstream.

This penetration is already fast under way, and the mobile Web is currently 54 million strong in the U.S. (about 25 percent of mobile users). IPhone and smartphone penetration has proved to map to greater data consumption, indicating further and steep mobile Web growth.

As this happens, local will be the big winner. The location awareness and portability of the mobile device is very conducive to local search. Local intent will be much greater on the mobile device than it is in online search (about 20 percent of search volume), and will fetch higher premiums due to the relevance and higher CTRs resulting from precise location targeting.

Indeed, local search is the fastest growing portion of our mobile ad revenues forecast, with a compound annual growth rate of 130.5 percent. This compares with overall mobile search ad revenue growth of 125.6 percent and overall mobile ad revenue growth (including SMS and display) of 81.2 percent.

More data from the forecast will be released over time, and more can be found in the press release that goes out today. We look forward to engaging this new formal coverage area and to hearing from you about what data and analysis you’re most interested in.