Zillow.com’s founder Rich Barton used the analogy of the explosion of verticals to the storming of the Bastille and the strong desire for consumers to take control of the decisions in their lives, especially those with big financial implications.

The visionary talked about his three pitches to Bill Gates and Steve Ballmer in the 1990s when he was a Windows product manager at Microsoft. He went 1 for 3 on his pitches, including a grand slam with his travel vertical idea, Expedia, which was spun off from Microsoft in 1999. Within a year of being spun out, Expedia surpassed Travelocity as the largest seller of travel online or offline and today maintains that position. Expedia is now responsible for US$20 billion in travel bookings.

The other two pitches that Microsoft passed on were Barton’s idea for a stock tracking/trading service and, conveniently, a real estate vertical idea, which obviously now is his focus at Zillow. Barton joked that Gates’ response to the online vertical concepts in the early 1990s was that they were the “dumbest three ideas” he’d ever heard.

So, Barton knows a little bit about the vertical space and as an investor in a variety of up and coming verticals talked about the need for improvement in other core verticals including mortgages, legal and employment. Mortgages is an area that Barton describes as simply not working right now and consumers want a new way.

Within the past few weeks Zillow launched a Mortgage area on its site and thus far it has generated roughly 19,500 anonymous loan requests, which have prompted 59,500 loan quotes. Unlike other models that require mortgage providers to pay for those mortgage leads and that identify the person requesting a quote, Zillow provides the platform for free to meet the needs of both consumers and businesses. 

A strong believer in the power of “free,” Barton, who claims Zillow spends no money on advertising, provided these takeaways on the vertical/digital media space:

• Consumers crave information and power.
• If it can be known it will be known — by all.
• If it can be rated it will be rated.
• If it can be free it will be free.
• There can be no vertical market without community.
• The digital media business model will rule.

A firm believer in the media business model, of which local is a strong component, Barton believes the age of verticals is just beginning and foresees a huge opportunity for both those Bastille storming-like consumers and businesses alike to benefit.

In an executive interview today with the “Father of IYP,” Pat Marshall, Yellow Book’s chief new media officer talked about his re-entrance to the IYP space and what Yellow Book is looking for new business partners.

In all fairness, Marshall, who was previously head of Idearc’s (the former Verizon) Superpages.com, said he didn’t want to return to the IYP space, but rather wanted to get back into local search. Marshall characterized Yellowbook.com’s current position as more in the IYP business but said the trajectory is gradually moving toward local search.

Yellowbook.com is looking for partners right now primarily in three categories: infrastructure, traffic and inventory. Marshall gave some pretty specific direction on what Yellowbook.com will and will not consider in terms of potential partners and literally offered his e-mail address for the attendees looking to work with one of the fastest growing IYPs in the U.S. today.

More specifically, this is what he said:

1) Infrastructure - A potential partner must bring Yellowbook.com a business plan and provide a compelling argument as to how it can increase revenue, lower costs or provide a more competitive offering in the market.

2) Inventory - Marshall very directly said a potential partner must be willing to “put some skin in the game.” Why will the inventory be good for Yellowbook.com’s customers?

3) Traffic - A potential partner must bring a qualified audience to provide meaningful users to Yellow Book’s customers.

Marshall joined Yellow Book in July 2007 and while he can’t be given full credit for helping the Yellow Book Network grow its unique visitors (per comScore data) 137 percent from Q4 2006 to Q4 2007 and increase its share of IYP searches from 4 percent to 8.6 percent for the same period, he certainly can share in some of the credit. Going forward new advertising campaigns that will debut in the coming weeks will focus specifically on the various digital components of the Yellow Book business and future online growth will be credited to Marshall and his team.

Today we debuted a new polling feature on our Local Media Blog in an effort to provide another interactive way for our blog readers to comment on issues in the local media space. Our first poll asks about your take on SMB videos in 2008.  

The new poll feature ties with the launch of our Chief Executive Outlook brief. Each month The Kelsey Group’s CEO, Neal Polachek, will present a topic and provide TKG’s point of view on it along with relevant data and a related poll question. We hope to generate dialogue with and among you — the members of The Kelsey Group community – on the subjects that are most important to the global local media business. Subscribe to the Chief Executive Outlook and you’ll receive an e-mail notification the last week of each month that a new issue is available. 

With regards to the poll on the blog, we will be changing the topic frequently to get your take on various industry issues – or maybe just to find out who you think will win the Super Bowl. (Go Patriots!) 

It takes just a second to participate and you will receive immediate results on where your opinion fits with our other readers. No registration required! We chose Vizu as our provider for its slick graphical appearance and immediate results. 

Check back often for new poll topics!      

2007 U.S. advertising spending is expected to grow just 0.7 percent over 2006 to US$283.8 billion, according to McCann Erickson’s well-respected advertising forecaster, Robert Coen. In his biannual Insider’s Report, Coen downgraded his 2007 forecast for the second time in a year. In his June 2007 Insider’s Report, Coen forecasted a 3.1 percent increase over 2006, and in December 2006 he estimated a 4.8 percent increase. The report was presented at the annual UBS Media Conference in New York. Companies on the agenda to present today, Dec. 4, include R.H. Donnelley, Yellow Pages Income Fund, Idearc Media, Google and eBay, among many others.

The slower U.S. growth is mainly attributed to negative growth on the local level as businesses have pulled back on traditional advertising such as newspapers, radio and TV. Coen estimates that local newspaper spend is down 8 percent, local radio is down 6 percent, and local TV spend is down 3 percent over 2006. In total, Coen reports total local media will be down 3.5 percent in 2007 over the prior year to US$95.6 billion. Meanwhile, national advertising is estimated to be up 3.1 percent to US$188.1 billion.

In 2008, Coen believes the U.S. ad market will grow 3.7 percent to US$294.3 billion behind events that drive heavy advertising including the presidential election, Super Bowl and the Summer Olympics. However, he does not anticipate that growth to continue in 2009.

Globally, Coen anticipates better growth than in the United States driven by countries that are experiencing overall strong economic growth such as China and India. His worldwide estimate for 2008 ad spending is US$653.9 billion, up 4.6 percent over 2007. The global figure is driven downward by the slowed U.S. growth noted above. In looking only at “overseas” markets (all markets except the United States), growth is anticipated at 5.3 percent over 2007.

“This year is about social media, video and partnerships,” said Jay Herratti, president of Citysearch, during his keynote address today at the ILM:07 conference here in Los Angeles. In his first major presentation/interview since taking the helm at Citysearch eight months ago, Herratti shared with the roughly 600 attendees how his division of IAC has approached each of these areas in 2007 via acquisitions, launch of new product offerings and investments. In the past few months, Citysearch launched a video product in conjunction with TurnHere, acquired Insider Pages and just today announced an investment with MerchantCircle.

In particular, Herratti spoke about the newly announced Citysearch investment in MerchantCircle. It appears this is a way that Citysearch can test the waters with a self-service or “low-touch” model via a partner property. Herratti maintains that for the foreseeable future Citysearch’s sales force will continue to visit, call on and “touch” advertisers. The deal also enables Citysearch to extend its reach, exchange content between the two properties, and have MerchantCircle offer Citysearch’s advertising products.

With regard to social media, MerchantCircle is, as Herratti describes it, the largest social networking site for businesses with an estimated 300,000 merchants. The idea behind MerchantCircle is to essentially create a supportive peer-to-peer network through which businesses can post blogs, reviews and the like and encourage other businesses to sign up for the network, and, naturally purchase an advertising product or SEM/SEO services.

Interestingly, Herratti indicated that the biggest complaint, by far, that Citysearch receives from businesses is in regard to negative reviews posted about their businesses and the request to have those reviews removed from their profiles. With some of the negative comments that MerchantCircle has received over the past year regarding its merchant-acquisition methods, it will be interesting to see how the relationship with Citysearch will boost MerchantCircle’s reputation.

Tomorrow I will be moderating a panel on localized e-commerce here at ILM:07 and MerchantCircle’s head of business development, Doug Kilponen, will be speaking. We look forward to his input on this partnership and what the recent investment by Citysearch and others means for the future of these two companies.

No surprise that a takeaway from the “Building a Better Database” panel at DDC2007 was that it is getting harder and harder to acquire good listing data — fragmentation, latency issues and disparate data are just the tip of the iceberg.

Building a Better Database Panelists

Jeff Beard, President and General Manager, Localeze
Matthew Berk, Lead Search Architect, Marchex
Jon Cohn, Product Leader, Acxiom
Erron Silverstein, CEO and Founder, YellowBot

Erron Silverstein asserted that “the sales force is the real hero,” referring to the notion that local salespeople are key to collecting up-to-date content that can be passed on to consumers through various directory and database solutions.

However, as Jeff Beard, president of Localeze, pointed out, there is still no national industry clearinghouse to help standardize listing data and the task of correcting data, updating data, organizing data and finding new sources of data. This is still left up to individual aggregators like his company and others like Acxiom, which was represented on the panel by Jon Cohn.

Some of the most interesting discussion from the panel resulted in the friendly disagreement over the use of a strict taxonomy for organizing listing data versus the much newer philosophy of tagging content as a user sees fit. YellowBot, which has been in beta for the past few months, is embracing a tagging method, similar to a del.icio.us or YouTube approach, where a user who comes to its site to log a review of a local business or correct a business listing can tag the listing he is reviewing or updating with the tags he sees appropriate, not having to limit himself to predetermined bucket of keywords or categories.

Of course, while user-generated content gathered either directly by a business or through the use of reviews is a great addition to updating a listing database, the fact remains that a very small percentage of both of these groups will ever go online to one (or many) sources to update their listing or post a business review.

Marchex’s Matthew Berk is not convinced that a “loose” taxonomy works for local search and that a more defined or predetermined taxonomy is the ticket to organizing this growing listing mess — which continues to mushroom as companies such as those on the panel find new vertical sources to acquire content, and as Marchex and others look to wrangle unstructured data sources on the Web.

Looks like the listing mess will continue to get worse before it gets better …

Telecom New Zealand has confirmed reports that it is considering selling its directory business, Telecom Directories Ltd. According to The Dominion Post, Telecom New Zealand's CFO has acknowledged the possibility of a directories sale and that the telecom would use the proceeds for a share buy-back. The sale has the potential to yield over 10 times earnings or more than NZ$1 billion (US$642 million).

TDL is the dominant directory publisher in New Zealand and holds roughly 100 percent market share. As the owner of the term Yellow Pages and the official publisher for Telecom New Zealand, it does not have strong direct competitors, but it has been feeling the heat of other intra-media competitors such as local television, direct mail, newspapers and the Internet. Nevertheless, TDL has experienced low to mid single-digit increases in revenues and maintains one of the world's highest advertiser penetration rates among directory publishers.

Potential buyers could include private equities, media companies like Fairfax or even its Australian neighbor, Sensis, which in recent years has been shopping around for acquisitions. If Telecom New Zealand decides to sell this profitable line of business, the buyer will need to continue TDL's investment into online as well as follow the publisher's lead in making innovations in its print product. In addition to adding color, new ad sizes and the like in recent years, the publisher has also recently begun to focus on vertical markets. That movement can be seen in its decision to buy a tourism directory, which was also announced in recent days.

Today Vonage, a Voice over Internet Protocol (VoIP) provider, which serves both residential and small business customers, announced it would begin offering Wi-Fi service through an agreement with UTStarcom beginning this Spring.

While UTStarcom will provide the portable handset, Vonage will provide the broadband service so that users can have a portable phone service they can use at home, at the office or in a mobile capacity at Wi-Fi hotspots. This service would be a free add-on feature to current subscribers. Instead of plugging in a phone to their broadband line, subscribers can make the same calls on the mobile phone. (Subscribers would be required to purchase the handset, which is estimated to cost in the $100 range.)

While this move impacts traditional telcos and now wireless carriers, it also continues to throw a wrench into directory players business plans. With super low prices (unlimited local and long distance calling plans for small businesses at $49.99 month and unlimited calling plans for consumers under $25), both small businesses and consumers are increasingly signing on to services such as Vonage, which allows users to have virtual phone numbers. Currently, Vonage claims to have 400,000 subscribers. This causes a problem for directory players in a) obtaining listings, and b) seeking out advertising dollars from those small businesses. Moreover, it exacerbates the declining usage issue that print players are encountering.

While it seems like almost a non-issue at present due to fairly low penetration of VoIP, this will be an issue that will plague the directory industry over the next few years. How can it not be? With rock bottom prices for unlimited calling in the U.S. and Canada, small businesses have to look at this as an alternative.

In the first half of 2005, eBayers sold approximately US$10.6 billion worth of goods through the online auction service.

Check out the eBay press release here.

Some things to consider:
- The average sales per eBayer (all 1.5 million) in the first half of 2005 was US$7,067.
- Over half of eBay members use the online auction as a primary or secondary source of income.
- Less than 1 percent of U.S. Internet users are eBay members.
- eBay members outnumber Wal-Mart employees in the U.S. by 200,000 people.

Interesting things to ponder… How many of these eBay members are not using traditional local media (newspaper classifieds, for instance) to advertise their products because they heavily depend on eBay? How many new businesses have formed to support eBay members or wannabees â€" such as drop-off auction houses, shipping product distributors, eBay educators, etc.?

Canadian publisher Advertising Directory Solutions (ADS) announced it has discontinued its Go Pages directories. The mobile directories for Calgary, Edmonton and the “Lower Mainland� of British Columbia have all been discontinued effective immediately. The publisher’s Vancouver Island Go Pages book will publish as scheduled in June 2005.

The Go Pages were mobile directories, meaning a smaller-size directory meant to be stored in one’s vehicle, that offered select headings, guides, maps and coupons. The magazine-style book offered no White Pages.

BAPCO, SBC and Dex have all dabbled with “on-the-go"-type mobile directories for a few years, and BAPCO and Dex have recently implemented changes to re-brand and re-position these types of directories. Meanwhile, other publishers, including independents Hagadone and MacGregor, are claiming success with their mobile directories. DataNational has tested a “visor-sized� mobile directory in Northern Virginia. Europeans such as Findexa and PagesJaunes also offer mobile or mini-directories in select markets.

It is probable that with the pending YPG purchase of ADS that ADS is discontinuing its non-performing products. However, it is an interesting product to be discontinuing as mini-directories, also known as midis, have been “all the rage� in the U.S. and in select European countries in recent years. An increasing number of publishers are looking at midis as one of their biggest opportunities for growth in the core product moving forward.