The final day of The Kelsey Group’s Drilling Down on Local conference featured a keynote by Merrill Brown of MMB Media. Brown is an industry guru with a history of developing groundbreaking media strategies and operations. Among other things, he has been editor-in-chief then SVP of MSNBC.com. He also created Court TV along the way.

Brown’s comments served as a fitting capstone for much of the conference – or given his morning time slot, perhaps I should say a prequel to the conclusion.

Brown thinks the various “revolutions” that are shaking up online market-making and marketplaces are in their early stages. Specifically, he believes:

• The newspaper industry is just beginning a period of wrenching restructuring (of its content strategy and business model).
• Verticals will continue to grow apace, to the point where online vertical markets will play a vital part of our quotidian online experience.
• Web 2.0 capabilities (e.g., social networking, video) will become closely woven into online markets.

What was most interesting about his remarks, however, was his overall tone. Brown spoke with the urgency of someone (a guru) who senses we’re in the early stages of a real revolution, and we need to be aware of the magnitude of the changes to come.

AOL may have trouble on several fronts, but it still gets millions of users and it intends to fully leverage them at the local level, per Chris Spanos, Director of Search Verticals, who was speaking at Kelsey Seattle. “Given its scale, local just hasn’t been getting fair share.”

Spanos says the local products will be receiving people, money and time. There will also be vertical investment in autos, travel and health. Previous regimes didn’t see rich opportunities in local and under-invested in the local products, he notes. They also didn’t leverage the relationship between the local sites and Mapquest, which remains the #1 mapping site. But that will change, especially as the city guides and Yellow Pages get relaunched.

AOL is also going to transform its sales effort. While dedicated local sales won’t be brought back, circa late 1990s, new self-serve and partnership efforts will be introduced.

Fox Interactive Media will launch a self service video ad tool, according to the company’s stations group GM Ron Berryman. He announced the product, known as FIM AdStore, from the stage at DDL on Friday.

This will be geared towards local and national advertisers that wish to create video ads and then bid on CMP inventory on FIM properties. It will initially be available to advertisers through Fox TV station websites, and will essentially connect advertisers to video producers and writers through an online community.

This joins the quickly growing segment of companies that offer easier ways for companies of all sizes to produce and distribute video online. Many of these companies were in full force at DDL, including Mixpo, PixelFish, BuzzSpot, VideoBloom and SpotMixer.

These each have different models, explored at the links above, and are experimenting with different price points and channel strategies to reach SMBs. At this early stage of local merchant video, experimentation is expected as are lots of company launches, before we see a shakeout in the space.

The challenge will be finding the right channel relationships to reach a very fragmented SMB market. Yellow Pages are one route that many vendors are vying for (TurnHere has been the most successful here), as are newspapers, and national or regional companies with localized constituents like real estate agencies and auto dealer groups. Spot Runner has been creative in signing such deals with Coldwell Banker and Lexis Nexis.

Fox could have some success signing up companies on its own, given it’s name brand and online reach. Meanwhile its television assets offer the saleability of cross channel video distribution, which could be attractive to some advertisers if bundled in.

More coverage from ClickZ’s Kate Kaye who was also in full force at DDL last week, and interviewed Berryman.

Google is a collaborative partner with all verticals, and generally speaking, has no interest in competing with them, per Adrian Madland, Google’s head of automotive strategic partnerships, who was speaking at Drilling Down on Local ‘08 (a session also covered by TKG here and here).“We love all the vertical people in the room,” said Madland. “We don’t do verticals. We try to make them better. We want to focus on search”

Certain verticals, however, have been singled out by Google as unique business units, which no doubt gives pause to competitors, however innocent Google’s efforts may be. “Automotive has been so successful for us that we have broken it out for a special focus,” noted Madland, a former exec at Ford Direct.

Madland also volunteered that there have been some misunderstandings about Google efforts such as GoogleBase, Google’s giant aggregation site. It is “not about taking over classifieds,” he emphasized. “It is about driving people to classifieds. Our goal is to partner.”

Cars.com President Mitch Golub, speaking on the same session, noted that his company, part of newspaper-owned Classified Ventures Inc., was one of those that are partnering with GoogleBase. “We participate because we want to see what Google is up to,” he said.

Golub didn’t specifically challenge Madland’s claim of disinterest in entering the vertical marketplace. But he complained that different parts of Google seem to be unaware of what the other parts are doing. “There is a complete disconnect between the people working on verticals and (those working with) business partners, like us,” he said.

Whether or not companies like Google ultimately intend to compete, Golub doesn’t believe they constitute a real threat because they aren’t really positioned to do much selling at the local level. The challenge for Google is the sales component. They can do back-end reporting but won’t get far without local sales staff. “We don’t have 700 sales people because we want to have 700 people,” said Golub.

True, Google has done well having third parties sell AdWords for it –including some newspapers. But Golub believes there is also little prospect of collaborative selling between Google and Cars.com (and newspaper sales staff dedicated to auto). “If you think newspaper people going to go out and try to sell your products, they are smoking something,” he joked.

Generally speaking, Golub added that vertical sites have a major advantage over other publishers: “Consumers love our advertising.” He added that newspapers are beginning to finally bet big on vertical sites such as his. But it might have been better if all along, traditional media had been investing three to four percent of their revenue in R&D. “The LA Times didn’t do this three years ago. They didn’t have to.”

If you believe at all in the “marketplace” vision of next generation commerce, it is hard to dispute that Yahoo! remains front –and- center as a verticals factory. This core strength of Yahoo!’s is especially important to note in the wake of Microsoft’s pullback from acquiring the company.

What accounts for Yahoo’s focus on verticals is the critical “engagement of advertisers and publishers” in areas they wish to target, noted VP Michael Yang, who runs autos, real estate and now health for Yahoo! “Yahoo! aspires to be the starting point of the Internet,” he said at The Kelsey Seattle conference. “We want to increase the size of the funnel at the beginning level (awareness).”

Yang argued that the company’s goal with verticals is to be #1 or #2 in each area. In the case of finance, news and sports, it is already there. “In other areas, we aspire to do that.”

Yahoo!’s traditional focus on community also informs the development of every vertical. “It is where automotive is going, and where we are taking health,” said Yang. “We are taking a truly national, centralized experience” and “trying to be holistic.” Yahoo! is also focused on “exposing new data” wherever relevant.

(This post is excerpted from an advisory written for Kelsey Marketplace clients)

Thanks to all who attended and participated in last week’s Drilling Down on Local conference in Seattle. The show was a large success. Here is a recap of coverage from the TKG blog in case you missed any posts.

You Ain’t Seen Nothin’ Yet
The final day of the Drilling Down on Local conference featured a keynote by Merrill Brown, of MMB Media. Brown is an industry guru with a history of developing groundbreaking media strategies and operations. Among other things, he has been Editor-in-Chief then SVP of MSNBC.com. He also created Court TV along the way. (read more…)

Drilling Down on Local ‘08: AOL Reinvests in Local
AOL may have trouble on several fronts, but it still gets millions of users and it intends to fully leverage them at the local level, per Chris Spanos, Director of Search Verticals, who was speaking at Kelsey Seattle. “Given its scale, local just hasn’t been getting fair share.” (read more…)

More Local Video: Fox Enters the Picture
Fox Interactive Media will launch a self service video ad tool, according to the company’s stations group GM Ron Berryman. He announced the product, known as FIM AdStore, from the stage at DDL on Friday. This will be geared towards local and national advertisers that wish to create video ads and then bid on CMP inventory on FIM properties. (read more…)

Drilling Down on Local ‘08: More from Google and Cars.com on Verticals
Google is a collaborative partner with all verticals, and generally speaking, has no interest in competing with them, per Adrian Madland, Google’s head of automotive strategic partnerships, who was speaking at Drilling Down on Local ‘08 (a session also covered by TKG here and here). (read more…)

Drilling Down on Local ‘08: Yahoo!’s Michael Yang on Verticals
If you believe at all in the “marketplace” vision of next generation commerce, it is hard to dispute that Yahoo! remains front –and- center as a verticals factory. This core strength of Yahoo!’s is especially important to note in the wake of Microsoft’s pullback from acquiring the company. What accounts for Yahoo’s focus on verticals is the critical “engagement of advertisers and publishers” in areas they wish to target, noted VP Michael Yang, who runs autos, real estate and now health for Yahoo! (read more…)

Call Genie at DDL: Location Relevance the Key to Mobile Search
Today at DDL, Call Genie Director of Product Evolution Gary Galinsky pegged the lineup of mobile ad formats (SMS, pre-roll audio, post-roll audio, banner, etc.) as “interruption marketing.” The only way to skirt this is relevance, and like real estate, he says, the greatest source of relevance in mobile is “Location, Location, Location.” In mobile search, location comes ahead of primary decision drivers in other media, such as brand and price. (read more…)

On the Leading (Bleeding?) Edge With Verticals
The first day of the Kelsey Drilling Down on Local conference included a somewhat unusual panel with four entrepreneurs in verticals. They talked about the nuts and bolts of building truly local verticals. These vertical pioneers shared their war stories and loads of practical advice. Some of the commonalities to their experiences: (read more…)

Drilling Down on Local ’08: The Opportunity in Geo-Domains
Dan Pulcrano closed out Day 2 of Drilling Down on Local ’08 with a presentation to expose attendees to the wild west of the geo-domain space. Pulcrano, owner of numerous city sites such as Seattle.com and SanJose.com, argued that the geo-domain sites are poised to become a much more powerful factor in the local search ecosystem. (read more…)

Drilling Down on Local ’08: Online Shifts in Auto
During yesterday’s afternoon session focused on Auto at Drilling Down on Local ’08, the panelists nearly universally said U.S. automaker giant General Motors was the furthest along in figuring out how to leverage the Web. Mitch Golub, president of Cars.com, said that has not always been the case — Toyota used to be the leader OEM but has since ceded that post to GM. GM’s leadership on the Web did not do much for driving car sales, as Ward’s Automotive reported that Q1 sales were down more than 16 percent. (read more…)

A Primer for Selling to SMBs
Speaking this afternoon at at The Kelsey Group’s Drilling Down on Local conference in Seattle, Kurt Weinsheimer, GM for Local Marketing Services at Spot Runner, offered a simple set of rules for effectively selling to small businesses. (read more…)

Online Real Estate at DDL: Think Agents and Age
The winners in online real estate will be those that partner with brokers and agents to be part of their businesses, said Jamie Glenn, Trulia VP of product development, during a real estate panel at DDL. Selling clicks and leads won’t be enough.Diversified information sources and tools for home buyers and sellers will also be needed as more entrants appear and compete on features and utility. (read more…)

Driving Relevant Content to Targeted Consumers
There is a tendency for speakers at a large conference to want to sell (they would say “educate”) the audience about their companies’ products and services. I know I’m guilty of it. Nevertheless, it is refreshing when a person making a presentation focuses exclusively on the session topic.At The Kelsey Group’s Drilling Down on Local conference in Seattle, one of the two dozen sessions was titled “The Revolution in Classifieds.” (read more…)

Google Says It’s All About Partnering
A leading auto vertical and Google sat on stage together this morning and provided some insight into how they might coexist. Cars.com President Mitch Golub made clear that sales and customer service will serve as an effective firewall that will prevent his operations from being disintermediated by Google. (read more…)

Zillow’s Rich Barton: Age of Verticals Just Beginning
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. (read more…)

Yellowbook.com’s Pat Marshall Talks Partnerships
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. (read more…)

Building Hyperlocal Content in Seattle
In a session called “The Online City: Close Up on Seattle” here at Drilling Down on Local, The Seattle Times’ Patricia Lee Smith reiterated a point made earlier by the LA Times’ Rob Barrett, which is that online newspapers cannot compete on technology. The only way for newspapers to carve out a unique position online is to leverage not just unique local content, but also unique local understanding. (read more…)

Live From DDL: LA Times’ Rob Barrett
The Drilling Down on Local conference kicked off this morning with a presentation and conversation with Rob Barrett, the LA Times’ VP of Interactive. The underlying theme was how the Times is reengineering its online product to be … an online product. What it is now, Barrett admitted, is mostly a “dump” of the content that appears in the print paper (similar to the model we see at most online papers). This not only fails to take to heart the way online users consume content, but also has a geographic scope that isn’t differentiated. (read more…)

Meanwhile, here is what others are saying.

Today at DDL, Call Genie Director of Product Evolution Gary Galinsky pegged the lineup of mobile ad formats (SMS, pre-roll audio, post-roll audio, banner, etc.) as “interruption marketing.”

The only way to skirt this is relevance, and like real estate, he says, the greatest source of relevance in mobile is “Location, Location, Location.” In mobile search, location comes ahead of primary decision drivers in other media, such as brand and price.

“Even if I’m a loyal Starbuck’s customer, if there is a Tully’s closer, I’ll opt for that,” he says. The point is well taken but probably loses credence the further away one gets from commodity products (coffee).

Location is also gaining importance as more and more mobile devices are equipped with location awareness including GPS, cell tower triangulation, cell site ID, Wi-Fi ID, etc. More importantly, the way we communicate should be taken into consideration in the way that mobile search content and ads are indexed and served.

“We don’t communicate by address; we reference things based on landmarks,” he says, pointing out that directions you give friends and family will generally involve at least one “take a left at the water tower” or something similar. People are also naturally inclined to search for local businesses using terms like “near SFO” (San Francisco Airport).

How to approach this problem from a data standpoint is one issue, and companies such as Urban Mapping are working to better index mapping data based on local colloquialisms (albeit, more in the online mapping arena).

Galinsky’s vision also reminds of the important challenge of natural language search. This is something that will be a major area of development in online search, and is at the heart of the semantic Web, coined already by some as “Web 3.0” (sigh).

Given a big move toward multimodal search and the fact that the mobile device is, after all, a phone, natural language processing will be as important in mobile as anywhere else.

We’ll be in Seattle next week for the Drilling Down on Local conference. See the Agenda here. If you’re at the show, do your best to tackle us between sessions or during networking events. We’re interested in talking. Also check back here for live blogging and updates/announcements from the show. Hope to see you there.

At long last, The Kelsey Group’s Drilling Down on Local: Marketplaces program is just around the corner. Our version of Coachella (or Woodstock) takes place NEXT WEEK, Wednesday to Friday, April 30-May 2, at The Westin in Seattle. We think it is the first conference exclusively dedicated to the development of local online marketplaces.

It is certainly a big part of what is going on. In fact, new Kelsey projections suggest that  “classifieds,” propelled by verticals, will grow from 18 percent of all local online advertising in 2008 to 24 percent by 2012.

Some last-minute adds to the show include Adrian Madland from Google Automotive, who was a big wheel in the development of Ford Direct; Mark Britton from Avvo, the new legal vertical being co-developed by Zillow and Expedia founder Rich Barton (a keynoter); and Dan Goodman from Loladex, the new IYP that uses Facebook groups as a platform.

We have 43 handpicked speakers, and they are all leaders. But some of the bigger names include:

• Adam Bain, Fox Interactive Media
• Rich Barton, Zillow
• Rob Barrett, LA Times
• Tom Bates, Cox Enterprises
• Merrill Brown, Consultant (“Media Genius,” says me)
• Mitch Golub, Cars.com
• Erik Jorgensen, Microsoft
• Genevieve LeBrun, Trader Pubs
• Pat Marshall, Yellow Book
• Patricia Lee Smith, Seattle Times
• Michael Yang, Yahoo!

It is going to be thoughtful, and it is going to be fun. And you will do business. Come!

There are a number of new or re-energized hyperlocal efforts out there, trying to crack the code. New efforts are expected shortly from Outside.in and SmallTown. Ongoing efforts are being made with AmericanTowns, which counts Idearc as a lead investor, and Dallas’ Pegasus News, which is owned by Fisher Communications. CitySquares in Boston continues to build its model. Topix has also remade itself into an aggregation of local news and hyperlocal commenting.

And that’s just a rundown of the hyperlocal efforts that have regional and national aspirations. Some of the best hyperlocal efforts, of course (BaristaNet, WestportNow) are actually tied to specific communities. We also count some well-funded newspaper efforts in that category (LA Times, Boston.com, Washington Post, et al).

This week, The Online Journalism Review covers OurTown, a new hyperlocal chain based in Cincinnati. The site proclaims that it represents “America’s Local Websites. Neighborhood by Neighborhood. Local and Regional Content, Chat, Weather, Maps, Personal & Family Calendar and Community.”

OurTown’s primary business concept is that local editors will sell the local advertising, keeping most of the revenue; $100 monthly contracts for advertising are envisioned. The site will also have paid classifieds (but free classifieds for individuals).

In addition to local ad dollars, the editors will also get 40 percent of national ad dollars. It is suggested that local editors covering two ZIP codes can make between $45,000 and $60,000 per year.

Eventually, OurTown expects to charge a license fee to the local editors, but as a come-on, it is offering a one-year license for free to the first 1,000 takers. Seventy thousand sites are expected in Year One. The site is being advertised on Google, Yahoo!, Craigslist and other Web sites. While an illustrious advisory board of “top journalists” is claimed, there is no link to such a board on the site, or names of management, for that matter.