TKG’s recently completed Global Yellow Pages and Local Search Forecast underpinned most of the discussion at last week’s Local Online Media: London 08. Today it launches officially.

Each year the forecast measures the size of the local search industry and applies the most current analysis of trends to project growth of key segments. These have included the transition of revenues to digital ad products at both search engines and online directories. This year we have expanded the forecast globally and sized the search, display, classifieds and other relevant interactive ad products by market.

While most of the data are reserved for TKG subscribers, there are some takeaways in the publicly available high level figures. Here are a few:

On the online side:

The global advertising market will grow from US$605billion in 2007 to US$707 billion in 2012, a 2.7 percent CAGR.

Over that time period, global interactive advertising will grow from US$45 billion to US$147 billion, a CAGR of 23.4 percent.

At year-end 2007, the interactive ad market constituted 7.4 percent of the global ad market, up from 6.1 percent at year-end 2006.

By 2012 the interactive share of global ad spend will reach 21 percent.

In 2007 the global directional media industry grew 3.6 percent to US$33 billion.

On the print and Internet Yellow Pages side:

Print directories declined 0.6 percent for the year to US$27.5 billion.

TKG’s long-term outlook for print directories has softened considerably since last year’s forecast. TKG expects print revenues to decline globally at a CAGR of 1.4 percent from 2007 to 2012, totaling US$25.6 billion in 2012.

The outlook for print varies considerably by market. In the Nordic markets, for example, the migration from print to online is well under way, while in Canada, print revenues are expected to continue growing for the forecast period, albeit at a modest rate.

Internet Yellow Pages totaled US$3.7 billion in 2007, a 28 percent increase, and local search reached US$2.1 billion, up 34 percent for the year.

By 2012 TKG expects IYP and local search combined to total US$15.8 billion, or 38 percent of global directional media revenues.

Nearly 100 executives in The Kelsey Group community participated in a half-day session that we hosted in London titled Local Online Media. The panel I moderated was “The Financial Future of Directories and Local Search in Europe.” The panelists were Paul Gooden, equity analyst, ABN AMRO, and Paul Kuipers, director, media and telecom corporate finance, BNP Paribas. (As an investment banker, Paul has been involved in the KKR acquisition of PagesJaunes, the sale of TPI to Yell, as well as the Infote and European Directories transactions.)

I didn’t expect either the analyst or the banker to be all doom and gloom about the business, but I did not expect them to be as upbeat as they were either. Both felt the stock market has overreacted to a few pieces of negative information about Yellow Pages. They also believed that following the challenges of the debt market, we will see a resumption in Yellow Pages consolidation.

My colleagues Matt Booth and Charles Laughlin started the day with a number of slides from our new Annual Forecast “2007-2012: Outlook for Directional and Interactive Advertising.” One of the most important slides to our European audience is the following:

The Kelsey Group believes the total directional advertising (print and Internet Yellow Pages and local search) in Europe will grow from US$10.8 billion in 2007 to US$14.2 billion in 2012. Note that the print decline is a CAGR of only 1.2 percent, which is more than made up for in the very strong growth of both Internet Yellow Pages and local search. The obvious question is what companies will take this revenue?

In an executive interview at our London event, Andrew Day, CEO of Truvo (formerly World Directories), put it best: “Publishers need to see the new media upside as greater than the print media downside. Anyone who doesn’t believe that will fail.” In Europe, the urgency for action is even more imperative than in other parts of the world because Google’s share of the search market exceeds 90 percent.

The closing session discussed some of the themes of the day and came back again to the belief by the local search and Yellow Pages executives about the future of the business. From the audience Cornel Riklin, CEO of European Directories, asked what the industry can do to improve its perception among both advertisers and consumers. We will discuss this on Monday.

The Kelsey Group has generated considerable attention (and some confusion) in the media and on the blogosphere from a statement that appeared in an Advisory issued by our Marketplaces program on Jan. 4 offering picks and predictions for 2008 (each TKG research practice issued a similar document).

The statement in question reads as follows (referring to newspapers and Yellow Pages):

“In 2008 we think there will be a dramatic falloff in print usage due to two factors: Online has gotten ‘good enough,’ and users have grown fluent with online search. The falloff in 2008 could even reach 10 percent, compared with the 2 percent to 3 percent we’ve seen in years past.”

Several points are needed to put this statement in perspective.

This and all the predictions issued in January by The Kelsey Group’s analysts were meant to be directional in nature. In hindsight, we should have anticipated that using specific numbers to illustrate a conceptual view could be misconstrued as a firm projection.

In truth, the numbers included in the predictions Advisory were meant only to illustrate our sense of things and should not be interpreted as a Kelsey Group forecast. In addition, the figures cited relate to Yellow Pages and newspapers combined, rather than to each individually, which has further clouded the waters.

The Kelsey Group is in the process of updating its annual revenue and usage forecast for global Yellow Pages and local search, which will project out five years. This document will be released to TKG clients in mid-first quarter, at which time our forecast figures will be subject to debate and scrutiny.

A year ago, my colleagues Neal Polachek and Charles Laughlin predicted that Internet Yellow Pages as a percentage of total U.S. Yellow Pages revenues would climb from about 6 percent in 2006 to 24 percent in 2011. While the base is higher in most coutries outside the U.S., the trend is the same. The issue becomes whether the convenience and ubiquity of a print Yellow Pages directory will translate online. Even among diehard users of print directories, there is only so much space in a home or business that someone is willing to allot to a large book. The battle in print tends to be one of distribution; online the fight is for awareness, ease of use and the consumer experience.

Users who are seeking a product or service have a choice between print and online. If the choice is print, there generally are only a few places the consumer will go. On the other hand, if the decision is to search online, there are two dozen choices the user has every time he or she makes a local search.

Earlier this week, I called Pat Marshall, chief new media officer of Yellow Book, to discuss what Yellowbook.com is doing to position itself to claim market share in IYP. Marshall has been toiling in the IYP field since at least 1994 when he was creating and then running Superpages.com for GTE before the company became part of Verizon and now Idearc. He spoke eloquently and forcefully about the opportunities that are available to Yellowbook.com as it develops products that meet the needs of consumers, advertisers and corporate stakeholders. What was most encouraging to me was not so much the specific plans Marshall’s team is developing, although there certainly is an urgency to establish a position in the market. More importantly, Yell Group CEO John Condron has made a commitment to the corporation’s Internet activities in the U.S., the U.K. and Spain. This is backed up by “communication conduits” between the three parties that will facilitate growth in all three markets. 

At the end of the day, execution is critical to Yellowbook.com’s success, but Marshall has made it clear he has the backing of the corporation for needed implementation. 

Since at least 1997, when we gave a presentation at the YPA annual conference titled “Six Trends that Will Change the Yellow Pages Industry,” we have been making forecasts and predictions about our market coverage areas. Tomorrow the program directors and senior analysts responsible for our three businesses will once again make predictions for how they see their markets evolving over the next year.

Charles Laughlin, Kelsey Group senior vice president and Kelsey Report program director, provides an honest assessment of how he did last year. The predictions our analysts provide are not the same as forecasts, which will follow in a month or two. For instance, Charles will not talk about revenues, usage, percentage of local businesses moving to online advertising products; rather he will be looking at the bigger picture that provides our clients with the background and foundation of how we see the coverage areas evolving. This is a macro view, compared with the micro view clients will get from our forecasts.

As an avid sports fan, I always find it curious that sports experts are not only willing to pick the winner of a game, but its score as well. We’re not about to go that far because the environment that is painted by our predictions is too important to the livelihood of the people who work in our industries. Print and online Yellow Pages, local search, verticals, classifieds and e-commerce are all going through rapid transformation that will be informed by the flow of M&A money, high-level deal making and the decisions of owners to take risks. We encourage our clients to take the time to review our predictions and give us your feedback. These subjects will be discussed in detail throughout the year in our written materials, conferences and discussions with our analyst team.

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.

It is hard for me to comprehend, but we are finally finished with ILM:07. We were grateful to have had 650 interesting and enthusiastic attendees from all over the world, 72 stimulating speakers, a full load of sponsors and an excellent partnership with SES.

Our next conference, April 30-May 2 at the Westin in Seattle, will be a highly differentiated affair. Stay tuned for what we are doing with that (but not for a couple of months, OK?).

For those of you who can’t get enough coverage, a virtual conference will be up with all the PPTs in a couple of weeks (but only for attendees). You can also order the DVD.

For immediate gratification, however, check out the posts from my talented colleagues on the Kelsey Blog.

I especially liked Michael Taylor’s write-up of our discussion with Mahalo CEO Jason Calacanis. Michael is totally correct: “The long and short of Calacanis’ comments go to several of the key themes heard over and over again at ILM:07 — relevant content, deep content and engaging, passionate people are all needed to make a highly relevant and personalized search experience.”

In addition to the Kelsey write-ups, Mike Boland has captured links from the press and bloggers who attended our event. It was good to have them aboard. And Mel Taylor took some great pictures.

Here are easy links to Kelsey ILM:07 posts:

1. TKG Analysts Lay the Groundwork (Michael Boland)

2. Winebaum Provides a Fresh Look at Local Search (Michael Taylor)

3. Cash Is King for Local Search Investors (Charles Laughlin)

4. Herratti’s Citysearch: Social Media Video Partnerships (Bobbi Loy-Luster)

5. NCI: ‘We Can Work with Zillow’ (John Kelsey)

6. ILM:07 Spotlights mobilePeople (Stephen Marshall)

7. Stubbs Discusses AT&T’s Post-InGenio Vision (Michael Taylor)

8. TMP’s McKelvey Discusses Online/Offline Research Data (Michael Taylor, Michael Boland)

9. New West’s Weber and Independent Local Media (John Kelsey)

10. Marchex’s Horowitz: Bet on People Already Winning (Charles Laughlin)

11. Google’s Hanke: Maps, Mobile and Mashups (Michael Boland)

12. An Intuit-ive Approach to SMB Marketing (Stephen Marshall)

13. Injecting Social into Local Media (Michael Boland)

14. Taking It Home: The Final Panel at ILM:07 (Stephen Marshall)

Stuart McKelvey, president and CEO of TMP Directional Marketing, gave ILM:07 attendees a second look at their online user study to help clarify its results and provide insight on how this can serve to help more effectively plan both online and offline media. National advertisers drove the demand to track this information for both online and offline purchase influences to better understand how to appropriately balance their media spending.

One of the main findings of the research, conducted in partnership with comScore, is that local search happens at the end of the buying process after consumers have figured out what they want to buy and move on to where they want to purchase the product or service. “The local search process seems to broaden as consumers begin to narrow who they want to purchase from and how much they want to pay,” McKelvey said. Local price promotions, sales, coupons, financing options are considerations in the local search process — and how can they get to the business offering quickly (are they close and at the best price). The business location and service area is critical information for advertisers to include in their online advertising.

One of the more surprising findings is that brand awareness greatly influences where consumers search. “General search site usage increases with high brand awareness,” according to McKelvey. “In the absence of brand awareness then proximity becomes the major driving force for consumers in their purchase decision.”

While there is a great focus on moving advertisers online, the reality, based on the research, is that the majority of purchases take place offline either in a store visit or in a phone call. Post-search activity is the same across general, local and IYP in that the majority either go to the store or make a phone call — advertisers simply can’t rely on an online-only transaction model in local (80 percent of post-search activity is offline). Surprisingly, of those who had an unsuccessful local search, the print Yellow Pages remains the top resource.

The bottom line is that advertisers need to better measure where customers are coming from in order to maximize their media budgets. This has been the mantra of publishers for years, but the TMP/comScore study clearly indicates advertisers must take advantage of multiple measurements to be sure they are getting high ROI and value.

McKelvey concluded by saying “Online and offline tracking is needed to fully realize the value of each media, thus assisting in the proper alignment of media mix and investment.” Print and online continue to complement each other, and it is important for media companies and advertisers to understand this synergy and spend on media appropriately to drive the best ROI and cost of sales goals.

Interactive Local Media: 07 is ready to roll Nov. 28-30 in L.A. That’s next Wednesday through Friday!

The show, which is being produced in partnership with SES Local, has attendees from all over the world. One exec told me he is coming on Wednesday, taking the red eye to New York that night due to a prior commitment, and flying back on Thursday night for the final day.

Attendance-wise, we have the biggest sign-up list for a Kelsey event since the mid-1990s. Almost everyone that we have slotted will actually be there. While the agenda has been tight for some time, with 70-plus speakers, here are some last minute adds:

• Christophe Maire, a cofounder of Nokia’s Location-Based Experience Development, is set for Day 3. HOT DISCUSSION TOPIC: Nokia’s $8.1 Billion purchase of NavTeq.

• Laurel Gilbert, from Microsoft’s Atlas division, is speaking on our localizing national advertising panel. HOT DISCUSSION TOPIC: How Microsoft will use Aquantative to transform itself into a true Web advertising giant.

• Doug Kilponen from MerchantCircle is speaking on the localized shopping panel. MerchantCircle just received a $10 million cash infusion from IAC and others. HOT DISCUSSION TOPIC: Best Practices for Signing up Small Businesses.

• Claudia Poepperl from mobilePeople is set to provide a demo of the London-based company’s cutting-edge social mobile technology.

We are also expecting a drop-in from a top executive of a company that’s been in the news, but we can’t say much more about it. And speaking of news, there are lots of interesting news announcements that will drop around the show as well. So, will we see you in L.A.? Here is the registration page.

The numbers are looking very, very good for the Interactive Local Media:07 conference in L.A. Nov. 28-30. Internally, we think this one is a record breaker. Register and book the hotel while you can. The latter tends to sell out.

In recent weeks, we’ve been putting the final touches on the program. For instance, we’ve added Facebook’s Chamath Palihapitiya, who is VP of product marketing. Here’s a snippet about Chamath from Fast Company’s cover story this month:

“Palihapitiya, 31, is tall and whippet thin, with elegant manners and a ready smile. A former electrical engineer, born in Sri Lanka and raised in Canada, he ran AOL’s instant-message group, then jumped to the venture fund Mayfield. He is part Sand Hill Roadster and part freethinker.”

Other notable adds include ShopLocal CMO Bob Armour, Scott Ferris from Microsoft’s Atlas division, LA Times.com’s Robertson Barrett, and City Voter’s Josh Walker. There is also a brand-new Local Mobile panel, featuring Gary Roshak, who has migrated from Marchex to Yahoo!, Jeff Torgerson at InfoSpace, and Collin Holmes at V-Enable.

Also, take a look at the SES side of the show. Google Local head Eric Stein, Zorik Gordon from Reach Local, and Topix head Chris Tolles are just some of the great execs SES is bringing in. Kevin Heisler and Kevin Newcomb are moderating the SES panels.

The Kelsey Group also has its LinkedIn networking set up for the show. We’ve got dozens participating already. Once you register, you should sign in for that, too (even if you haven’t used LinkedIn for a while). See you in L.A.?