Citysearch announced today that it has shifted its ad model for small businesses, moving from the cost-per-click model that it pioneered several years ago to a new model that will drive consumers directly to their own Web sites. The new model provides advertisers with a complete range of SEO and marketing services across the CityGrid network of 100 Web and mobile partners.

The new services are being offered as “CityGrid Complete,” and will use Orange Soda as a partner. As part of the announcement, Citysearch also announced an investment in Orange Soda, which competes with the likes of ReachLocal, Yodle, WebVisible, Marchex and MatchCraft to resell search engine advertising and optimize content. Orange Soda currently works as a reseller for media companies such as Gannett and Freedom Interactive, and also works with franchise operations such as Remax and Jiffy Lube.

Neil Salvage, Citysearch executive vice president of sales and service, said the announcement is consistent with the enlargement of his own job description, which now includes product development on the merchant side. Salvage acknowledged that Citysearch has had a “not robust” search engine marketing platform, and has been searching for a better solution for 18 months.

“We talked with everybody,” Salvage said, and came to the conclusion that Orange Soda is a superior solution with a “robust back end oriented system.” Its SEO solutions “fit somewhere between ReachLocal and Yodle,” he added.

To Salvage, what’s really important about the announcement is that Citysearch is moving away from its complex cost-per-click sales model and toward a fixed-fee model that will boast a wide bundle of services. The move should allow Citysearch to increase its monthly yield from$600 to $800 per advertiser to more than $1,000, said Salvage. “That’s where we need to be.”

Cost-per-click overemphasizes the reseller factor and has become “old school,” added Salvage. “It was built to go after Yellow Pages, but wasn’t really appropriate because the Citysearch product set did not really support that. It was an entertainment site. Now we want to focus our time and energy on platforms and the process,” he says. “We are focused on signing up more publishers, not on owning the [SMB] relationship. ”

Citysearch CEO Jay Herratti is a keynote speaker at Marketplaces 2010, which is taking place March 22-24 in San Diego.

As it readies its expected public offering, ReachLocal is branching out beyond its roots as a third-party SMB reseller for Google and others. First, it started selling display. Now it is set to offer improved search optimization, digital presence and reputation management via the acquisition of SMBLive.

Other companies in the space have made similar moves to branch out beyond their reseller roots to solidify their relationship with SMBs. Marchex and Yodle, for instance, have major organic search and reputation management initiatives under way.

The acquisition of SMBLive will enable SMBs to use Reach to publish multimedia content from a single interface to a business profile page, as well as to local directory sites, search engines and social media sites, including Twitter and Facebook. In addition, Reach will monitor local review sites, social media sites, and local blogs for references and comments related to the SMB.

SMBLive occupies a rapidly evolving space that also includes such companies as Google, Yahoo, YellowBot, MerchantCircle, ShopCity, Brownbook and various IYP sites. It started out providing upsellable free Web sites for ISPs that had separated from their Yellow Pages business. A couple of years ago, it launched operations for BT TradeSpace. Last year, it also launched TelMex.

The company has continually added features, such as video and blogs. But the company has recently focused on scalable cloud profiles that are entirely Web based and enable “write once, publish many times” functionality.

SMBLive’s Cloud Profile also enables SMBs to publish updates using e-mail and SMS text messages — tools that they’re already comfortable with. The service also includes a “virtual coach” to remind and encourage SMBs to regularly update their profiles and engage prospects in online conversations.

Are we omniscient? In our year-end predictions, BIA/Kelsey SVP Matt Booth predicted that “mergers and acquisitions between vertical ad platforms and social marketing companies” should be watched for.

The default strategy for many start-ups is to plan to be acquired by Google or Microsoft. But the M&A scene is much more complex than that. Jordan, Edmiston Group Co-President Tolman Geffs, speaking today at IAB’s Annual Leadership Meeting in Carlsbad, California, joked that Google is set to buy Oregon, Washington and Canada “just to mess with Microsoft.”

Speaking more seriously, he noted that “we don’t need Google and Microsoft to buy everything.” Incumbent specialist firms would find higher value in a number of areas. These include marketing analytics, consumer data, cable and entertainment, Web delivery, infrastructure, major agencies, large display ad networks and performance advertising (such as Demand Media).

Geffs noted there is currently a vibrant deal environment, with 178 deals made in the second half of 2009 worth $13.3 billion. This was a major change from a “dead” first half when just 129 deals were completed, he said.

Still, there has only been a “partial recovery from previous levels for online plays. Classifieds is the only sector of advertising that was down,” he said. Especially hot areas include online media, interactive marketing, video and infrastructure plays.

A real “head scratcher” for Geffs is the $1 billion+ committed by Google ($750 million) and Apple ($275 million) for two mobile ad networks: AdMob and Quattro Wireless. “That’s the entire forecast for 2012 mobile ad revenue” he said, noting that the high prices have led to a stunning $211 million worth of investment in nine other mobile ad nets by VCs.

In fact, Geffs questions whether mobile is even a good ad medium. “They help consumers complete tasks,” he noted. But “is this a great promotional medium?”

Geffs, former president of IBS, a TV station Web site builder and advertising provider, is also critical of “vertically integrated” models that rely on content aggregation and search, such as Citysearch and ReachLocal. Costs are too high.

ReachLocal, for instance, is a vertically integrated play that only leaves 7 percent of its revenues to support its product and platform, after spending 55 percent on consumer traffic and 38 percent on sales and marketing.

He’s more excited about local companies that solve a problem and keep content, audience and sales costs low, such as Outside.in, Datasphere, Triton Media, MerchantCircle, Manta, Yelp and Angie’s List. “We are big fans,” he said.

Monster Worldwide has bought HotJobs from Yahoo for $225 million. It will also be in charge of Yahoo’s recruitment content in North America for the next three years, bringing in perhaps another $100 million for the life of the deal from home page traffic, etc. As part of the deal, which closes in 3Q 2010, Monster also gets exclusive rights to negotiate similar arrangements with Yahoo’s overseas properties.

HotJobs has been on the market since Carol Bartz took over as CEO of Yahoo early last year (or even before). It hasn’t been clear if anyone would buy it for more than a fire-sale price. The deal’s price of $225 million does represent a significant discount from the $439 million that Yahoo paid in 2002, but it is more than some handicappers had been predicting.

The deal likely propels Monster well past Gannett’s CareerBuilder as the online recruitment leaders (by revenues). Lately, CareerBuilder’s lagging profits have become a drain on Gannett’s profits. Likewise, Monster today reported that 4Q revs were down 27 percent, and that it suffered a net loss of $2.1 million on 4Q revenues of $213 million.

For Yahoo, the deal is the latest in a series of selloffs. Notably, it sold its search business to Microsoft last year, has de-emphasized other areas such as shopping and small business, and has been rumored to put some of its other verticals in play as well.

HotJobs, of course, had been the original glue that brought Yahoo and the newspapers together. But the consortium has lately been focused more on using Yahoo’s APT behavioral targeting advertising platform. Some members of the consortium already use Monster.

Recruitment remains a huge category, but in recent years, has been challenged by the recession. It has also become a major battle zone driven by technologies, such as semantic search-and-match job listings, mapping and communities of interest. Indeed, a growing part of the market has moved to niche specialties, such as trade associations, etc. At the same time, ancillary verticals such as vocational education, relocation and job fairs have proved to be less important than once thought.

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.

IAC’s ServiceMagic,  a leader in delivering leads to services, has purchased Bethesda,MD- based Market Hardware, which provides websites and search engine optimization for 2,500 SMBs. Market Hardware, which has 30 people, targets “high online spend verticals” that closely mirror ServiceMagic’s base of 56,000 pre-screened professionals.

Market Hardware has relationships with 40 associations in the segments that it serves. It is also known for its “Vertical View” process of studying and launching new segments in six weeks or less.

The acquisition is the most recent of several for ServiceMagic, a 930 person company with an annual run-rate of $120 million. In the past several months, it also purchased ZipExpress, which partners with retailers to hire out installation jobs; and has expanded internationally via the acquisition of  Koening in the U.K. (including 123Devis.com and 123GetAQuote.co.uk) and Travaux.com in France.

ServiceMagic also recently invested in BuildProof. The company is described as “the PayPal for home improvement,” setting up escrows so contractors don’t run off in the middle of the night.

In a release announcing the deal, ServiceMagic noted that it is entirely logical for the company to expand its offerings with  MarketHardware. “Many top-rated home service professionals in the ServiceMagic-approved network don’t have a visible storefront. Having and maintaining a professional website gives them a chance to showcase their business online and the great home improvement work they are doing in the community,” said CEO Craig Smith.

Speaking at the ILM conference, Co-Founder Rodney Rice seemed to hint that a deal was in the works.  “We’re focused on broadening out our offering to service professionals,” said Rice.  “We won’t have a ‘one size fits all approach.’”

CEO Brian Kraff separately told The Kelsey Group that “the website is quickly becoming a focal point in all forms of marketing. It just simply makes sense for SM and MH to join together to bring a consultative, verticalized, full service approach to providing online marketing services.

“Our companies are a great cultural fit,” he continued. “Our team is looking forward to helping SM expand its offering. Their team is energetic, down-to-earth and operationally minded. They get a division that is a leader in the website space, and we get a parent company with 56,000 contractors who can make use of our competencies. Feels good.

At Kelsey’s recent ILM conference in Santa Clara, Kraff provided additional detail about his company, and it’s “vertical view” concept. The idea of vertical view is not to build a template, but to understand the segment so that Market Hardware could differentiate the business, he said. “The upper quartile of each segments especially needs to have a differentiated Web presence to stand out.”

Kraff also noted that Market Hardware is aimed at companies that are on their second or third websites and are ready to spend more on a “consultative approach.”  Market Hardware clients are especially spending more on high pay per call/per per click actions.

I’m here in San Antonio, Texas, having caught the tail end of the Association of Directory Publishers meeting, and now the Association of Directory Marketing’s event. One of the many questions floating around the U.S. Yellow Pages industry is whether the existing three U.S. trade associations will merge to gain efficiencies and, perhaps more critical, to create a common industry voice to deal with a growing list of challenges. A common voice might make it easier to combat a bad PR image that doesn’t seem to be getting better, and to articulate a consistent value proposition for Yellow Pages.

Two of the three groups, the Yellow Pages Association and the ADM, appear to agree. The ADP, however, does not seem as eager to go along, at least not before a list of demands can be met.

At the ADP event, President Larry Angove told his membership that the association’s view is the industry is “best served by one voice,” but it sees no reason to re-engage in talks about a merger until a set of conditions are met. These include direct engagement of the leaders of the major U.S. incumbent companies in discussions about the merger, a more Democratic voting system (one member, one vote versus proportional voting) and a commitment to engage in an industry marketing program.

I spoke with YPA President Neg Norton about this, and he said he believes many of these conditions can be met or fairly negotiated, but the idea of an industry ad campaign is a board decision that cannot be committed to in advance of a merger.

Realistically, the capacity to fund a larger marketing campaign wouldn’t appear to be there among the biggest industry players, facing high debt loads and low share prices, even if there is a demonstrated need to promote Yellow Pages.

For its part, the ADM seems to be interested in pursuing the merger. ADM head Herb Gordon told his membership that the association “remains open” to the merger. The ADM may feel some urgency to merge because of the recent resignation of TMP Directional Marketing, the association’s largest member, accounting for an estimated $250,000 in dues. Gordon did tell his members that the TMP loss will require the association to tap its reserves, but the ADM remains “sound financially.”

Combining the trade groups seems to make sense, particularly as the industry faces a declining core product and the prospects for some consolidation over the next few years. While the merger seems inevitable, it will only happen if the ADP’s concerns can be addressed. Merging just the YPA and ADM would primarily benefit the ADM membership, most of which already belongs to the YPA. The participation of the ADP is necessary for the full rationale for the merger to come into play.

Update 11/06/08: I learned today that our initial estimate of $250,000 for TMP’s ADM dues was high. The correct figure is closer to $150,000.

Yellow Pages Group New Zealand has acquired a majority stake in grownups.co.nz,  a Web site targeting the over 50s crowd, as reported on Stuff.co.nz. Voted as New Zealand’s best lifestyle Web site in 2008, this acquisition may well prove to be a smart move for YPG-NZ. According to Blair Glubb, Yellow Pages Group’s digital marketing director, “… there were good benefits to be reaped from combining grownups.co.nz with Yellow Pages, which publishes the Retirement Guide. He said grownups.co.nz had loyal existing browsers and Yellow Pages reached more than a million New Zealanders per month. Over 1.2 million New Zealanders are in this age group and 65 per cent of them use the internet daily.” 

In a recent post, I covered the economic impact people in their 40s and 50s make based on TVLand’s Generation BUY survey. In my post I wrote, “With boomers in the sweet spot of Yellow Pages’ current usage, the value of this audience is being overlooked not only by investors and pundits, but by Yellow Page organizations as well.”  

While I can’t take credit for guiding YPG-NZ in this purchase, it none the less is an indication that publishers are waking up to the notion that the real value of the Yellow Pages lies in the demographic groups it attracts rather than in sheer distribution or access to its data. Actively engaging this key audience, which appears loyal to both the print and online YP products, is a solid strategic move that plays to YPG-NZ’s strengths.  

With the recent acquisition of Get It Pages in Saskatchewan, Yellow Pages Group in Canada has now consolidated a national footprint in Canada. According to the New Brunswick Business Journal, Get It Pages publishes directories in the regions of Battleford, Prince Albert, Yorkton and Estevan. YPG will integrate these editions into its operations, and they will carry the Yellow Pages brand. 

Marc Tellier, YPG’s president and CEO, said: “Saskatchewan represents the final step in the consolidation of our national directories platform and this announcement represents a significant strategic move for us and for consumers and businesses in the province. In addition to providing relevant local content to consumers in the province, Saskatchewan businesses will benefit from access to a truly national marketplace, now both print and online, something which we can offer with unparalleled reach.” 

While many directory publishers are re-examining their commitment to print directories, YPG remains committed to the print product and continues to see growing revenues (up 1 percent). Tellier will be a keynote speaker at The Kelsey Group’s upcoming Directional Media Strategies conference, Sept. 15-17 in Atlanta, Georgia. Part of his presentation will detail his long-range view of the print product, which may counter common perceptions currently overshadowing the industry.