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.

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.”

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.” Sarah Pate, president and CEO of  AdMission Corp., gave an excellent talk that provided her view of this issue. At the end of her comments, the audience knew little more about AdMission, but a lot more about the evolution of online classifieds and Pate’s perspective on the future.

In the beginning, classifieds were controlled by local print properties, and the first major disruption was the entrance of online aggregators such as AutoTrader.com. Pate went on to discuss the entrance of eBay with its online marketplace and Google, which signified that you no longer had to own the content to monetize it.

At every juncture, there was a response by the providers of print classifieds. That didn’t stop entrepreneurs such as Craigslist, analytics companies or social networking firms, all of which were taking market share from the legacy classified advertising providers.

Pate predicted that the evolution of classifieds would continue. There would be no more walled gardens. Content would be media rich, provide real value, and offer both relevancy and optimization. The conclusion, with which the other panelists concurred, is that while it is necessary to drive the consumer to the content, it is equally important to drive relevant content to targeted consumers.

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. 

“We at the newspaper co have a uniquely local lens. we can’t compete in technology, but we offer a uniquely local perspective,” Smith says. “At any given time, people in two newsrooms in Seattle are asking what information matters most to people in this community.” 

Through NWsource.com, The Times has created a hyperlocal site that seeks to understand the local consumer, and combines professional and consumer-generated content. 

Smith told the audience that NWsource, while generating less traffic than The Times’ other online brands, produced three times the clickthrough rates as the main Seattle Times site, because of its relevant content that drives to the neighborhood level. 

Matt Berk from Marchex talked about how his company, which operates more than 150,000 local domains, described a much different approach to a similar objective, using content aggregation and sophisticated technology to build a very relevant experience for a consumer looking for information in Seattle. For example, Marchex has aggregated about 32,000 local business reviews in the Seattle area from a variety of content partners.  Berk acknowledged it is still early days in creating and monetizing the optimal hyperlocal experience. “We are at the beginning of learning what it means to target locally.”    

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.

In other words, the LA Times, like The New York Times and other major metro papers, has a national and international focus. But online national news has become a commodity given its saturation and accessibility. So online, the strategy should be to focus on the uniquely local stuff that can’t be replicated by The New York Times, Google News, Yahoo! News and the like (as argued in the past).

Work in Progress

In Barrett’s three-year tenure, he claims, the majority of things he’s worked on haven’t been seen yet. But we’ll start to see almost monthly product launches from now until the end of the year, involving various local mashups that are relevant to the 800 neighborhoods in the L.A. area, as well as the topics germane to the area.

Barrett names these as entertainment, car culture, the environment and immigration. Others are the key verticals that exist everywhere but for which there is a need for specifically local coverage and community, such as parenting. For all these topics, the plan will be to tap a combination of paid and unpaid editorial resources (staff reporter blogs) community experts and UGC.

Barrett’s goal for this new product is for online to drive half of total cash flow by 2011, when compared with print (amounting to 20 percent of total revenues). The higher engagement of locally and topically specific content, he predicts, will also make the LA Times’ local page views surpass national page views (as measured by topic) by 2009.

Optimizing for Local

One example of the many local mashups he gave was a photo site called Backlot, which is essentially an online forum for Hollywood news and gossip, whose centerpiece will be the photos taken by a prolific Hollywood photographer who has spent years developing a trust relationship to gain access to every major Hollywood studio. He previously supplied the back-page photos for Premier magazine but will now be the primary source for Backlot — photos which will be fed back into the print product.

These photos, according to Barrett, will be optimized for search engines — an implicit nod to the universal search trend whose name is hardly mentioned in the same room as newspaper people. After his first mention of SEO, I kept a running count that reached nine by the end of the presentation. The combination of good optimization practices plus sticky content and a trusted local name is hoped to be the winning combination.

“If you see our content, it’s probably because you Googled something,” he said, “and hopefully in the future you’ll see it because you went there directly.”

MediaNews Group, the fourth largest newspaper publisher with titles such as The Denver Post and The San Jose Mercury News, has teamed up with TauMed to launch a video-centric health vertical. The vertical launches this month at four of MNG’s smaller papers. It will eventually be incorporated across the chain. Other local media partners are also being lined up.

TauMed, which is privately funded and has 12 employees, is the brainchild of Tauseef Bashir, a former executive with FAST Search and Transfer, the search company recently acquired by Microsoft. FAST’s influence is readily apparent in the service’s intent to make every action searchable. (MediaNews Group is also a FAST client.) “All the information is search driven,” says Bashir.

As with other health portals in the marketplace, the service isn’t focused on local information other than directory content featuring doctor and hospital search. More local content will come in a second phase, says Bashir. The local effort will be aided by the promotional, sales and editorial capabilities of the local syndication partners. Ratings and reviews are probably the core of the local experience, he notes. The site will also be mobile enabled.

Matt Booth and I had the chance to meet with Topix at its Palo Alto headquarters last week to unearth some of its user data, as well as some heretofore unannounced content partnerships.

Late last year, the site redefined itself as an aggregator of ZIP code level news and community forums. As recently argued from the ups and downs in hyperlocal sites, the right formula has to be found and sometimes it’s out of your hands as a function of the direction users take it. Topix has mostly found the right formula in its new model, as evidenced by a 2x year-over-year increase in page views in March.

Meanwhile its forum posts also doubled during the same period, and the site is averaging 100,000 posts per day across 20,000 U.S. towns (see heat map below). ComScore also puts it in the top five trafficked online news brands. To further qualify this traffic, it has proved to be relatively engaged, shown by 3x page views for forum users compared with news readers, and 5x session lengths (per Google Analytics).

Local Forum Activity (Click for larger, live, map)

Quantity + Quality?

Another important qualifier is that the forum content is mostly original and non-overlapping with newspapers or other hyperlocal sites. The company now gets somewhere in the neighborhood (bad pun) of 60 percent of its total content from user-generated posts. It’s seeding this activity with sticky features like user-generated polls, of which there were almost 9,000 created in March, generating almost half a million votes.

So forums essentially amount to ad inventory with engaged local users, which on this scale is somewhat rare in the local space. Others such as Marchex and Local.com have done a good job building valuable local inventory, albeit not as focused on community forums. Meanwhile there is some debate over advertiser interest in UGC content, which CEO Chris Tolles addresses here and here.

Previously Topix’s ad revenue stream was primarily text ads via AdSense, but VP of Sales Mike Linton is on a charge to bring in more display ads from national advertisers that wish to target locally. This is a growing opportunity given the realization among some brands and agencies that conversions are taking place locally and offline. We believe more agencies will come to see this, though the majority currently don’t.

Beefing Up and Beefing Out

To further attract this advertising and grow user levels, the company is pushing hard to augment UGC content with feeds in certain classified verticals. These include autos, tickets, pets, roommates, relocation services, events, new home builders and personals.

This has been the department of VP of Business Development Dave Galvan, who in the past few months has signed on (previously unannounced) Apartments.com, Oodle (autos & tickets) White Fence (relocation services), Informa (mortgage leads) TinBu (horoscope & lottery data) and PA Sports (sports stats). These join existing content deals with Trulia, and SimplyHired, among others.

On the other end, Galvan has been working hard to find distribution partners to take in Topix’s Local news feed, and has recently landed OurTown, AccuWeather and ESPN. These join AmericanTowns, CNN, Ask, and others that have shown interest in ZIP code level news feeds that basically aren’t available on this scale from anywhere else.

Meanwhile, it’s getting a fair amount of distribution for its forums by feeding into parent sites including Tribune, MediaNews Group and NBC Universal. Some of this will be discussed next week during the Drilling Down on Local conference in Seattle, where Galvan will join a panel discussion on classifieds. Stop by if you’re at the show.

In light of BostonNow’s closure this week (apparently for investment-related reasons), I’ve been mulling over the future of free metro papers in the U.S. The Chicago Tribune, The Washington Post and The San Diego Union-Tribune are among newspaper companies that have developed free (or discounted metros). Some have done so in response to a deep-pocketed effort by billionaire Philip Anschutz, and his Examiner papers, to storm their markets.

There are now Monday-Saturday print editions of Examiners in San Francisco, Washington, D.C., Baltimore, Seattle, Denver and other markets. They seem to be geared up to have regional offices. Its Internet editions are published in 57 markets, and now reach 2 million unique visitors, according to Examiner collateral.

When initially launched a few years ago, on the backbone of the dying San Francisco Examiner, the papers did not have an Internet strategy, according to company insiders. But now, synergies with a snappy Internet edition are clearly are main part of the strategy. This is combined with a red-line philosophy that focuses its print distribution on upper demographic households. Seventy percent of its readership is college educated; 85 percent have a household income over $75k.

Content-wise, the newspapers largely make do with wire copy for news, sorted under various “examiner” themed sections (i.e., “Automotive Examiner,” “Right Side Political Examiner,” “Go To Education Examiner,” “Celebrity Examiner”). For local flavor, they are building a strong base of columnists/bloggers in several markets. Baltimore, for instance, appears to be among the most developed.

On the Web sites, the local information is filled in with syndicated content. Traffic information, for instance, comes from Traffic.com and Outside.in (providing conversations about traffic — nice). Events come from Zvents. Yellow Pages are provided by Yellowpages.com. Movies are provided by Fandango. Shopping is from ShopLocal.com. And weather comes from Weatherbonk.com.

There are also links with other Anschutz projects, such as Christian-themed Walden Media (“Adventures of Narnia” movie) and The Foundation for a Better Life, as well as his AEG Worldwide entertainment conglomerate. The links alone would never pass the objectivity tests of most newspapers.

But most of the package is fairly attractive and compelling — especially for a generation getting their headlines on Yahoo! Mobile. It is a nice 1-2 print/online punch with a breaking news factor that isn’t always emphasized enough in local news/blogger aggregator sites (Topix, Outside.in, OurTown, AmericanTowns).

Examiner is currently advertising for account executives for auto, real estate and recruitment. Auto dealers are getting the biggest push and are provided with significant discounts over local dailies. That’s not hard to do. But are the dealers dying to support another newspaper effort? It is still hard to establish the readership value of these metros.

My own free metro in San Diego, Today’s Local News, comes from The San Diego Union- Tribune. It is delivered to every household that does not subscribe to the flagship paper from Wednesday to Sunday — whether they like or not. My neighbors usually have several copies littering their driveway by the end of the week. But I like it. The problem is I only spend about 45 seconds on it. Is that a good place for Hoehn’s Honda to advertise? I read The LA Times for over 25 minutes.

I am always leery of reports that point to a “Scandinavian miracle” (or a “Massachusetts miracle” or what have you). But a December 2007 NAA Growing Audience report has some valuable details about how Schibsted Media, the Scandinavian publishing giant with additional properties in France, Spain and Switzerland, has begun to remake itself for the digital age.

The report, by David LaFontaine, says Schibsted sees up to 60 percent of 2008 revenues might come from interactive — vastly higher than the 8 percent to 10 percent contribution made to U.S. newspaper revenues (and perhaps overstated, or concerning just one or two markets). Key to its online revenues is its ability to keep its newspapers as destinations, rather than relying on Google. Ninety percent of the traffic to VG.no, for instance, comes directly to the site due to its hosting of a robust search engine and addition of video, social media and mobile apps.

About 38 percent of adults read the print edition, but almost 50 percent of the Norwegian market uses a VG product — print, online or mobile — every day. “Our target is to pass 60 percent,” CEO Kjell Aamot told LaFontaine. “We call that building an audience, even though we’re slowly, slowly eroding our print audience.”

Zillow continues its march up the real estate value chain with a new feature that allows house buyers to apply for mortgages. The mortgage service, like everything else on Zillow, is ad-supported and free to both buyers and lenders. It is a direct strike against companies like IAC’s LendingTree.com that sell leads.

The company’s goal is to place high-value contextual advertising. BankRate.com, another mortgage service, apparently gets CPMs in the $50 range.

Key features of Zillow’s mortgage service are a “blind” registration that doesn’t compromise the identity of home buyers; the input of more detailed registration information, such as house value, which allows for more exact quotes; and a requirement that lenders stick to their quotes — a real problem in the mortgage quote game, where “bait and switch” is rampant.

Also in place is a lender rating system along the lines of eBay’s rating service. It would presumably take a half-year or more before there are enough ratings to make it scale.

Zillow expects its high user volume will give it a major lead over rivals, such as LendingTree.com. It claims 5 million monthly users, propelled by the recent addition of 1.5 million listings from various brokerages and real estate media such as NCI’s The Real Estate Book. There is still a backlog of 400,000 listings that haven’t been put up yet.

Those are internal numbers, however — and quite remarkable given the housing recession. Rating services such as comScore and HitWise suggest Zillow has considerably less usage.

Jorrit Van der Meulen, Zillow’s VP of partner relations, notes that a high percentage of Zillow’s users are looking for a mortgage. Plus there is a built-in group of potential advertisers. If there are 5 million users, that means 150,000 lenders are already using Zillow.

While Zillow is bullish about the mortgage service, it says it won’t have an immediate impact on its earnings (the company hasn’t turned a profit yet, but claims a big boost in recent ad revenues). “Marketplaces don’t happen overnight,” Van der Meulen says. “The (immediate) impact of this will be really, really small.”

In other Zillow news, Van der Meulen says the company has formally completed its deal to provide an exchange of services with many members of the Yahoo! newspaper consortium. There had been some skepticism that such a deal would get completed.