Are the small-business “home and trade service” advertisers that populate PennySaver and American Classifieds a good bet to buy search packages? That’s the question being posed by American Classifieds, the second-largest classified publisher franchise with 6,000 editions.

The company signed this summer with WebVisible to provide search tools and sales training for 600 sales reps. WebVisible CEO Kirsten Mangers acknowledges the effort is not a slam dunk but thinks it’s worth a try. These advertisers are “largely untouched by newspapers and Yellow Pages,” and they’re touched on a weekly basis by the sales reps. They are well positioned for “more consultative” solutions, she says.

Mangers notes that the AmClass salespeople are 100 percent commission-based, and as print usage declines, they’re hungry for new revenue opportunities, especially online. The search sales packages, typically sold in buckets of 50, 100, 150 or 200 clicks, gives them more diversity in their sales kit, she says. “It is another channel.” The packages might be worth $150 to $1,000 per month, depending on the volume of the buy and the size of the market.

At this point, two-day, Friday and Saturday training sessions have been completed with five teams across the U.S. American Classifieds itself is well poised to leverage search and is Google certified.

While earnings by sales reps for classified publications typically trail other local media, Mangers says the figures are somewhat distorted. It isn’t always that the sales reps are the bottom of the food chain so much as they often are working in rural towns with less revenue opportunity.

At J.D. Power and Associates’ Automotive Internet Roundtable in Las Vegas this week, several speakers said they believe mobile search and services are an increasingly important part of auto marketing — assertions backed up by J.D. Power research showing that 18 percent of auto shoppers use mobile during the car buying process, up from 15 percent in 2007. The same research said mobile use was especially strong for luxury brands such as Land Rover, Mercedes and Jaguar.

Mike Sage from Universal City Nissan said he’s incorporated mobile into his marketing mix, and now has 600 text messages flowing back and forth between dealer and customer every month, including text, video and click-to-call. “It doesn’t replace the Web site, but it is another source of information,” he said.

Sharon Knitter, the longtime Tribune Internet executive who now runs the mobile program for Cars.com, said the company launched mobile in 2007 with the twin goals of extending the Cars.com brand and delivering “best of” content.

The mobile site receives four million page views per month, and is growing 10 percent to 15 percent per month. People are using the site when they are out shopping, she said. “They used to see a new model, and then have to go home to look it up on the computer.” Now, 39 percent call right from the lot, and 40 percent use click-to-call. Mobile is also used by dealers to send information to customers. “They say ‘give me your cell number’ and send them information right there.”

Real estate advertising revenues will give way to transaction revenues, at least in SoCal, as the Los Angeles Times Media Group teams with several partners to launch Zetabid, a new site that will display and auction foreclosed homes and other properties. The other partners are London-based GoIndustry-DoveBid, an auction specialist, and CataList Homes of Hermosa Beach, a real estate brokerage.

Each of the partners will share fees on sold homes. For the sake of editorial neutrality, there will be an arm’s-length relationship between the newspaper (which has just folded its Sunday print real estate section) and the new entity.

“These businesses are transforming and [Zetabid is] another way to participate in advertising revenue with a slightly different model,” said Venture Chairman Bob Bellack, who is president of digital media, classified and development of Times Media Group. “The traditional newspaper model doesn’t exist anymore,” he said, in the paper’s own coverage. “The next generation media company is a company that facilitates transactions and helps buyers and sellers come together.”

The first auctions are Sept. 27-28, which MarketWatch, in its coverage, noted will be accompanied by an extensive, multichannel local promotional campaign that includes print advertising in the Los Angeles Times, broadcast advertisements through media affiliates such as KTLA, LATimes.com, other local sites, real estate sites and at Zetabid.com.

The Wall Street Journal today wrote about the challenges that newspapers have in trying to sell to small local businesses. Beth Lawton at the Newspaper Association of America kindly asked us to add some context to the article (subscription required). Here is our piece.

… As The Wall Street Journal article highlights, many newspapers are looking “downscale” to the high volume of smaller local advertisers to make up for their permanent losses in retail and classifieds. About 30 percent of an estimated 10 million local small businesses put the bulk of their marketing dollars into the Yellow Pages. They are “directional advertisers,” and more interested in making sure their phone rings than how many impressions their ads deliver. In fact most would have no sense of the CPM they are paying.

Are Yellow Page publishers vulnerable to such entreaties from newspapers and other local sellers? Sure, but it isn’t going to be simple to take them on. While some portion of small-business advertisers have left the Yellow Pages (typically, more retail-oriented businesses), there is no wide-scale abandonment at this point. Depending upon the category, the return on investment can be remarkably high — even with an average annual spend of $4,800. In addition, Yellow Pages publishers have another advantage: Advertisers want to keep their position, year to year. Consequently, most efforts will be to grab budgets allocated to supplemental books or upsell efforts.

More importantly, at the local level, it is no longer an exclusive club of newspapers vs. Yellow Pages. Local advertisers are increasingly supplementing their YP buy with search engine optimization, search engine marketing, targeted e-mail, featured listings, video production and links, and online promotions. Many are also investing more in their Web sites.

Yellow Pages companies can (and do) provide such products. Many are selling seven to eight products, and because their own sites don’t provide enough traffic, they are syndicating traffic to a wide host of players. In this regard, they are way ahead of newspapers, which are still a world onto themselves — even with smaller and smaller local shares.

Yellow Pages publishers, of course, are not the only ones selling such capabilities. There are a lot of ways of buying Google. A number of other third-party resellers are seeking to sell such services to local businesses, in competition or partnership with Yellow Pages companies. In some cases, they are seeing large monthly budgets of $3,000 to $5,000. Some of these companies (i.e., ReachLocal, WebVisible, Orange Soda, Spot Runner and Yodle) are already working with newspapers, leveraging their strong local brands.

Ultimately, we see that newspapers have strong opportunities to enter these new areas of businesses and expect to see a great deal of new activity in this field. It will go beyond building a few vertical directories. The challenge, as the WSJ article correctly points out, is to get their sales and support activity to scale. While self-serve efforts are rapidly improving, many small-business owners are not ready for a self-service option.

The Kelsey Group forecasts that 25 percent of local online dollars will come from “marketplace” dollars (verticals and classifieds) by 2012. But positioning these marketplace dollars as replacement dollars for traditional newspaper revenues doesn’t do anyone a favor. They are, in fact, exciting new lines of business. As newspapers focus more on their niche and vertical strategies, all this has to become a larger part of their game plan.

The economy isn’t doing too well, but that hasn’t hurt the hiring picture for Yellow Pages and local search sales pros, according to YP veteran Ken Clark, who put out an interesting promo for his recruitment firm, Hawthorne Executive Search.

Clark says hiring via Hawthorne is up 25 percent in 2008. Publishers continue to expand in both print and local search, with SEO/SEM experts in especially high demand, as well as community managers.

Churn at pure local search adverting providers remains high, adds Clark. But that doesn’t necessarily mean sales slots are quickly filled. He notes that candidates can’t sell houses to relocate, they can’t pay for gas for jobs that are farther from home, they run away from uncertain entrepreneurial opportunities, and they see all the negative industry press.

One of the hard and fast truths about print Yellow Pages advertising is that the ads at the front of the heading almost always generate more calls and leads compared with those further back. The current trend is for small-business advertisers to move some or all of their directional media budgets from print to online believing that this move will produce the same or greater results. Those advertisers that remain with the directory are realizing some surprising results as they move up in the heading due to less competition. 

A recent blog post on Results Tracking showed a chiropractic group that benefited in AT&T’s Lancaster and Palmdale directory when the page count at the heading went from six to three pages. The charts below depict the uptake in calls between the 2007 and 2008 editions (click image to enlarge):   

From the blog:

As you will note, the 2008 AT&T directory is generating a 20% increase in results. Yellow pages are still heavily used by the older population. This market is the heaviest user of healthcare services. They are also the best insured (thanks to Medicare). This market also has large numbers of Empty Nesters with large disposable income. As more advertisers use emotions to guide their advertising choices they will continue to abandon yellow pages. The tactical marketer will use this window of opportunity to capture a larger share of the local leads generated by the yellow pages. 

The print product continues to deliver high-quality leads and may be more valuable at specific headings given the target audience, as noted by Results Tracking. The argument for online advertising is that it is less competitive on a local level, making it more attractive to SMBs. Some of the movement to online advertising may actually be creating the opposite effect, with print becoming less competitive and offering better lead generation.  Much like smart investors who look for opportunities counter to popular trends, smart marketers will seek out advertising opportunities that maximize their local exposure and deliver the volume and quality of leads that will grow their businesses.   

Over the past two months, we have been talking with sales reps in a variety of local media outlets who are selling search engine marketing. While we feel like some sales organizations are making headway in selling a significant volume of SEM products to their customers, we find that the technical aspects of SEM often work against salespeople who want to propose online marketing as an extension of an advertiser’s media plan. 

With the inherently technical nature of SEM, sales organizations often get too caught up in how SEM works rather than focusing on drawing parallels to the value delivered by known media offerings (Yellow Pages, newspapers, direct mail, etc.) so small and medium-sized businesses can clearly understand what they are getting. More often than not, SMBs could care less about how SEM works and more about what it can do for them and how much of a commitment of time it will require. 

Mike Moran, on his Search Engine Guide blog, makes a good point on this topic when he theorizes why more SMBs don’t use SEM:   

• The Internet is still too hard. Most small business owners are not comfortable with technology, because it still requires too much expertise to operate, sucking up time and money they don’t have. Time will solve this, because younger owners have more technology experience and because technology does get easier each year (I swear). We should expect that business owners that don’t use computers will be suspicious of Internet marketing. But most small business owners have at least made their peace with computers, so what else is holding them back?   

• Internet marketing is scary. No matter what you try, there’s too much to know to avoid looking like a fool or even breaking the law. Yellow Pages ads, trade show brochures, weekly circulars, and other tried and true small business marketing programs are at least understood. Sure, you could screw something up, but it’s hard. But with search marketing, you can blow money on paid search and get no sales. You can send out e-mails the wrong way and run afoul of the CAN-SPAM act. You can breach some Internet etiquette and be a laughing stock. No, for some, it’s just too dangerous.   

• Inertia. I honestly think this is the big one. Small business owners are the busiest people I know. They spend so much time just executing what they already know how to do that they are ill-equipped to spend any time thinking about something new.   

The local media industry cannot take the approach that only a limited number of SMBs will “get it” and buy SEM. With the large SMB audience still not using online marketing, the greater question is how can the message be simplified, what are the value drives that help SMBs make the decision to buy SEM, and what do they need after the sale to be sure they are anxious to renew their advertising?

We continue to delve into this topic and would be interested in hearing from our blog community what core messages are resonating with SMBs and how SEM can be simplified to draw in a much larger advertiser base.

In this economic downturn, I’ve heard so much talk about one medium or another making claims that it is delivering all the leads and traffic a company needs. Online selling against Yellow Pages, Yellow Pages selling against newspapers, newspapers selling against online classified sites, and the list goes on and on. The reality is no one marketing medium can deliver the entire prospect audience, nor can it deliver all the leads a small or medium-sized businesse needs in its local market. 

The fundamentals of marketing have always been to layer your media choices so they work together and complement one another to deliver the desired amount of awareness, traffic and leads for your business. But instead of taking my word for it or the words from a university marketing professor, I found the advice from a painters blog site, Out of The Bucket, made this point clear and easy for SMBs (and hopefully local media reps) to understand: 

The truth is no method of advertising is going to work every time. No method of advertising will create an endless stream of leads without fail (or at least not in the numbers most [painting] contractors need). More than focusing on an individual form of advertising, contractors should focus on a plan—a mix of advertising that creates exposure through a variety of means. I’ve long lost count of the people who tell us that they saw our signs, saw us in the phone book, and then found our web site when they did a search. It is the constant exposure that works, not any one particular piece of advertising. 

Local media reps need to keep in mind that while their particular medium does deliver value to an SMB, they must also be aware and be able to explain how it complements or leverages the other media the SMB is utilizing in its media plan.

This is why local media companies whose salespeople offer multiple products are in a better position to serve local SMBs. If the rep acts as a media consultant and demonstrates the value and ROI of a balanced media approach, particularly in delivering leads to a business, SMBs are more willing to listen and find value in the sales discussion.

Media sales organizations that represent single local media products must clearly position how their particular medium works best with other media and be able to comfortably and knowledgably discuss this if they are to have credibility with SMBs. 

While local media competition is healthy, understanding how media work together goes a long way in serving the needs of the advertiser.   

Having been through the post 9/11 advertising downturn with a Yellow Pages sales agency, I can attest that 2001 and 2002 saw a dramatic increase in bad debt and slow-paying customers. Some publishers in the U.S. went from 2 percent to 3 percent bad debt and slow-pay customers to 5 percent to 8 percent in the first six months after 9/11.

Since that time many publishers and local media companies have instituted a fairly aggressive pre-qualification requirement for advertisers as well as purging long-term problem accounts from the system to improve cash flow and aid the sales force in writing sales quotas. Many publishers went so far as to create special collections teams to get advertiser payments up to date and clear them to go into the next edition.

The real danger of increasing numbers of bad debt and slow-pay customers is they become a drag on the current sales campaign because their accounts must be brought up to date. In major markets, some sales campaigns began day one of sales with as much US$3 million in debt while still carrying a 3 percent to 4 percent objective. If a sales team has to make up US$3 million just to reach even, it is extremely difficult to then bring in enough increase and new revenue to make a 3 percent to 4 percent objective.

While post 9/11 was a difficult time with increasing bad debt and slow-pay, some publishers are saying the current economic situation has pushed the bad debt and slow-pay levels beyond 15 percent to 20 percent in some markets. Combined with general SMB reluctance to invest too much more in current marketing programs, increased levels of bad-debt and slow-pay advertising customers pose a serious threat to current earnings potential for many of the major publishers both in the U.S. and in Europe.  

A recent article in Bytestart.com, covering a new study conducted by Credit Management Research Centre (CMRC) produced by Leeds University Business School, reported that U.K. bad debt has more than doubled for both major companies and SMBs. The article points out that to replace this lost income requires Herculean efforts:

Bad debt amongst larger firms has almost doubled, so they now face, on average, £88,000 worth of unpaid invoices every year. At a 5% profit margin these losses would require additional sales of £1.76 million to cover the shortfall. If the profit margin were 1%, then the turnover would need to increase by a staggering £8.8 million!

SMEs, on the other hand, write-off, on average, £14,000 in bad debt at a 5% profit margin they would have to drum up additional sales of £280,000, or £1.4 million with a 1% profit margin to make up for the loss.

The tendency of the sales force during down marketing investment periods is often to relax or “bend” some of their credit approval or due diligence procedures in order to put as much revenue into play as possible. The real danger in this approach is further loading on potential bad debt, slow pay and advertiser turnover well into 2009/2010, which would extend the current revenue challenges.

While it is often easier to sell with fewer restrictions, selling on value to advertisers that are good credit risks is a wise strategy that will position directory and local media companies for a successful (and shorter) recovery when the current economy improves.  

A recently released research paper from Integrated Media Measurement Inc., based on data from 3,000 panelists in six major markets, finds that multi-platform advertisers see increases in the number of consumers they reach while also significantly improving conversion rates. 

According to the IMMI paper:

Increasingly, major advertisers are launching multiple platform campaigns and media companies are packaging their inventory to encourage this strategy and deliver on its promise. Given the impetus in the marketplace, both buyers and sellers of ad opportunities need to understand the value of thinking across multiple platforms. Traditionally, the value of a multi-platform campaign was seen in its increased reach among the potential audience. IMMI data shows that reach is increased, but in relatively small numbers. A potentially more important impact of a multi-platform campaign is its ability to convert individual consumers more effectively.   

(Click image to expand)

The positive effects of multi-platform advertising here are similar to what IMMI data reveal for television shows, and perhaps even more applicable to advertising in general since movies involve a buying decision by the consumer in a way that television does not. Multi-platform advertising was more effective at getting panel members to make the decision, leave home, and buy the movie ticket. 

In the ever increasing multi-product world of directory and local media organizations, this type of data gives even more credence to selling a set of media solutions that all work together to increase both reach and improve conversion rates. The core concept is that by reaching more people with a consistent message SMBs increase their opportunity to convert prospects into customers.

While eyeballs (the number of people you reach) are nice, the real value to advertisers is the number of calls and visits the campaign drives. Being able to present this concept to SMBs, in a single sales event, is important since the salesperson has the ability to match and layer appropriate media to address the business goals of the company. By breaking media options into siloed sales channels, this opportunity is often lost in a single media mind-set.