The New York Times‘ David Pogue writes this morning about some of the outcroppings of new innovation at Microsoft, apparent through the newest version of Office Live for Small Business.

The product takes the “Webification” issue to heart by allowing tech illiterate SMBs to get up and running with a suite of tools for developing and hosting a Web site. This includes free hosting, analytics, and more compatibility (Firefox and Mac) and simplicity than previous versions.

In addition to upsells for added functionality to manage operations (track employees, resources, reservations), a good possibility for the product’s positioning is feeding SMBs into online advertising (via adCenter). This is similar to Google’s intended strategy of integrating AdWords campaign management into the workflow of Quick Books’ massive installed base (an integration that arguably hasn’t reached its potential).

As the tenets of Webification go, one of the benefits of being the one to bring small businesses online in the first place is to establish the trusted relationship to then be the provider of choice for their evolution to paid online advertising. Through this version of Office Live for Small Business, it’s apparent that Microsoft gets this. The proof will be in the execution.

I read with interest a recent post by Jennifer Osborne on Search Engine People regarding how Millennials fundamentally search for products and services differently as compared with those 30 years old and older. One of the fundamental differences Osborne points out:

Millennial Brains do not have the same neural networks that ours do.
That’s a fancy way of saying that they haven’t been trained to use category search. Young people no longer use the Dewey Decimal system and paper Yellow Pages (headings). If they want to find something they go to a computer terminal and look up exactly what they’re looking for. And with a few refined searches, they usually find it.

Our neural networks (those 30+) have been programmed to do category type searches. But the average 16 to 24 yr old doesn’t know how to do category level searches. If a 21 yr old has a leaky sink, they’re going to search under “leaky sink” not “plumbers.”

At The Kelsey Group, we are often asked about print product innovation from a product orientation view, but of late we have been examining how the print product can and should fundamentally change from a usage and navigational standpoint. Taking Osborne’s points a bit further, perhaps the way to fundamentally change the Yellow Pages is not a another product or specialty section but rather it is the core navigation of the product that needs to change.

One idea some major U.S. publishers have privately discussed is the notion of introducing a keyword version of the Yellow Pages that takes the most used keyword searches (natural search terms and widely used category terms) and creates a new directory that is “search” friendly. Some publishers have subtly begun experimenting with this with the introduction of new categories and “referral headings” that guide people to where they can find the information they are seeking.  

Publishers have access to the most popular keywords both from their own IYP properties as well as from their SEM efforts that should provide enough insight into the new way people search for local business information. Creating a new way of navigating the product would mean breaking apart a 100-year-old paradigm, but the fact remains that the product needs to fundamentally change if it can hope to hold off the decline of usage in the under-30 segment of the marketplace. Introducing a keyword version of the Yellow Pages would allow users to select the version that best suits their needs – category search or natural search.

The goal of local advertisers is to be found and contacted; changing to a form of natural search in print seems like, well, a natural step for publishers to explore to help push more leads and address the search needs of a growing segment.

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)

Allison Mnookin, VP of Intuit’s Small Business Division, gave a keynote address on Friday at The Kelsey Group’s ILM:07 conference that started with a recap of Intuit’s segmentation approach to the SMB market. (Kelsey conference regulars have heard an earlier version of the Intuit-ive approach at previous TKG events.)

Intuit has a huge roster of SMB customers — 7 million in the U.S., according to Mnookin. Through studying its own customer base, it has identified three main segments to the SMB market:

1. “Personal” businesses (about 22 million).
2. “Main Street” businesses (about 3.2 million).
3. “Middle Market” businesses (about 0.6 million).

The single biggest challenge facing all these small businesses is getting new customers.

To that end, as a group, SMBs spent about $110 billion on marketing last year. But only 22 percent have done any online marketing (in the past 12 months), and less than 5 percent of their marketing budgets are spent on online media. Finally, although 95 percent of SMBs say they want to have a Web site, less than 50 percent currently do.

To improve this situation, Mnookin emphasized that vendors and service providers will need to follow several simple but crucial principles in serving SMBs:

1. Solutions for “experts” don’t win (e.g., QuickBooks was the first small-business accounting solution that didn’t require the user to enter debits and credits). Mnookin pointed out that SMBs want to focus on their BUSINESS, and not have to become experts in accounting, computers, etc.
2. A vendor should provide help, then let customers do it themselves. Intuit calls this the “do it with assistance” model. Someone helps the customer with product set-up (either in person or by phone) and gets the user started.
3. To be successful, a product needs to solve integrated problems well. For example, a key customer dissatisfaction with existing payroll systems is that businesses would have to enter the same data more than once — because the payroll system didn’t automatically take data from the accounting system. By integrating these two systems, Intuit eliminated the need for redundant data entry. As a result, they have become the No. 1 payroll system provider to businesses in the U.S., with more than 1 million SMBs customers.

Mnookin described how these principles are guiding Intuit’s own product development and M&A initiatives, talking briefly about its acquisition of StepUp, which powers the QuickBooks Listing Service by which SMBs can easily get placement on services like Google’s Froogle.

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.

Mr. Local SEO Andrew Shotland writes today about vertically oriented Web site development and hosting products for small businesses. This is an interesting concept because it brings together two local trends we’ve written extensively about: Webification and verticalization.

First, with Webification, the concept is that there are many businesses out there that don’t have Web sites. With this, the addressable market for online advertising is diminished. This is the reason why many search-based advertising providers such as Google and Yahoo! have lowered the barriers to getting online with free or cheap Web site hosting and development products.

At the same time we’ve seen growth in landing page or microsite offerings such as Smalltown that offer a de-facto Web presence that’s cheaper and easier (key factors for SMBs) than building your own Web site. These online training wheels, the thinking goes, can get small businesses online where they will slowly graduate to online advertisers.

Overall the goal is to expand the addressable market. And for individual providers, these products are offered with the hope that being the one to pop an SMB’s online cherry could create an advertiser for life. At least that’s the hope.

Vertical Leap

So what about verticalization? There is a lot of talk about vertical search lately. On a basic level, the thinking goes that vertical search has a refined corpus of content and ranking algorithms that ensure more specific and relevant results to certain users. There are also clearly more contextually relevant targeting opportunities and higher CTRs for the same reason.

This targeting concept carries over to Web site development, as Shotland points out, in having providers that have the design and SEO sensitivities that are specific to certain verticals. And as things are consolidating in the world of Web hosting providers (Hostway/Affinity, Websitepros/Web.com, etc.) there is a general convergence of abilities and offerings to appeal to small businesses.

This trend should continue with consolidation of search/IYP advertising and Web site development. But as Shotland points out, this won’t only join Web site development with print, online, SEM and the rest of the Yellow Pages sales tool belt, but it will be brought into the fold in specific vertical increments. This would be done to appeal to (and maintain relationships with) verticals that represent traditional Yellow Pages sweet spots, like trade services. Indeed, these are the categories that arguably need the most help getting online.

Furthermore, it’s often stated that the Yellow Pages industry as a whole has about a one-third penetration of the SMB marketplace. It could be that traditional Yellow Pages products are cost prohibitive or not of interest to these businesses. Either way, offering a new, less expensive, vertically specific and format-varied bundle of online services could help chip away at this sizable market opportunity.

Big names, interesting people, compelling research. Forgive the commercial message here, but we’re set to deliver the goods at The Kelsey Group’s Interactive Local Media 2007 (ILM:07), Nov. 28-30 in L.A.

I think there’s something for everyone. And this year, as most of you know, we’ve partnered with Search Engine Strategies for a series of practical “build it” local search sessions. The SES portion of the event features great execs like Chris Tolles, who runs Topix; Zorik Gordon, who runs Reach Local; Brad Geddes from Local Launch; and Court Cunningham from Yodle … SES is a great partner.

If you haven’t checked the ILM:07 landing page for a couple of weeks, you are going to be bowled over by all the great additions. Just today, Google Maps visionary John Hanke confirmed as a keynote. It’s kind of fun when you can look up a keynoter on Wikipedia. We’re also adding Marchex CEO Russ Horowitz to a session that features Bill Day, the company’s chief media officer (and cofounder of About.com).

Some other recent “adds” include:

• Jay Herratti, who runs Citysearch, and is being interviewed back-to-back with Jennifer Dulski, who runs Yahoo! Marketplace;

• Jorrit Van der Meulen from Zillow, who is partnered on a cutting-edge real estate session with NCI head Dan McCarthy and Homethinking’s Niki Scevak;

• Jeff Hughes, head of online advertising for General Motors, who is speaking about localizing national advertising with Centro’s Shawn Riegsecker and Consorte Media’s Alicia Morga;

• Mark Gorenberg at Hummer Winblad, who is partnered on the Local Investment panel with Kara Nortman from IAC/InterActiveCorp and Nick Veronis from Veronis Suhler Stevenson … (hey, this is a pretty smart panel);

• Robyn Rose, who’s building the LocalSearch.com platform for Idearc. She is on an all-star “convergence” panel with Candice Faktor from Toronto.com; Elaine Kunda from ZipLocal; and Malcolm “Premier Guide” Lewis at Local.com;

• Mike Orren from Pegasus News, who will talk about building TV station community sites, as will CityVoter’s Josh Walker;

• Chris Wagner from NeuLion, who will show us the company’s IPTV system for local sports teams;

• Jonathan Weber, of Industry Standard fame, whose NewWest is leveraging the Web to promote and cover the regional development of the Rockies.

All these speakers are being added to the great execs who we announced a couple of weeks ago. Top execs like RHDi’s Jake Winebaum; Autobytel’s Jim Riesenbach; Mahalo’s Jason Calacanis; TMP Directional Marketing’s Stuart McKelvey; Yahoo! Search Marketing’s Dave Schwartz; comScore’s Brian Jurutka; Judy’s Book’s Chris DeVore; Krillion’s Joel Toledano; Retrevo’s David Galvan; and Shopping.com’s Josh Wetzel.

In the next week or so, we’ll be adding a couple of real surprises as speakers (we hope); as well as a great Local Mobile panel, which takes its lead from Matt Booth’s Mobile Forecast.

(Tip: If you plan to come, sign up now for a cheaper rate, and book your flights and hotel ASAP. It takes place one week after Thanksgiving, which is a busy time. It is a NICE time to be in L.A. But get situated, OK?)

While I am in Reston, VA, attending Kelsey’s Directory Driven Commerce conference, I thought it would be a good time to start talking about our next show, which I am co-producing: Interactive Local Media 2007. The show is being done in tandem with SES Local, takes place Nov. 28-30, and is at the Los Angeles Hyatt Regency Century Plaza — a nice location with a very good pool and a lot of local history (movie stars, Reagan, Nixon, all that).

Kelsey started doing this show in 1997; I started co-producing it in 1998, and we are proud of the legacy. It is typically the biggest local show in the industry, with the best networking, the best speakers and the best demos. My goal is for every participant to get an inspiring, 360-degree perspective on local online, mobile and video issues.

We’re just getting started confirming our guest list of 50+ speakers. Watch this space for updates. But here’s who we have to date (in alpha):

• Jason Calacanis, CEO, Mahalo

• Bill Day, Chief Media Officer, Marchex

• Chris DeVore, Cofounder and COO, Judy’s Book

• Jennifer Dulski , GM, Yahoo! Local

• David Galvan, VP, Retrevo

• Elaine Kunda, President and CEO, ZipLocal

• Malcolm Lewis, VP, Local.com

• Stuart McKelvey, CEO, TMP Directional Media

• Alicia Morga, Chairman and CEO, Consorte Media

• Daniel McCarthy, Chairman and CEO, NCI

• Mike Orren, President, Pegasus News

• Shawn Riegsecker, Chairman and CEO, Centro

• Jim Riesenbach, President and CEO, Autobytel

• Niki Scevak, President, Homethinking

• Joel Toledano, Cofounder and CEO, Krillion

• Nick Veronis, Managing Director, Veronis Suhler Stevenson

• Jake Winebaum, President, RHDi; CEO, Business.com

We’re putting the Kelsey analysts up front with the new mobile forecasts and other research. There’s a lot of mobile at this thing.

Local.com announced today that it will launch a basic version of its Local Promote service for small businesses. The full version of Local Promote ($39.95 per month) is a tool offered to businesses to establish a Web presence with a landing page on Local.com, in addition to various distribution, pay-per-click and featured placement options.

The free basic version includes the ability for businesses to post and update business name, description and contact info. This will make it easier for lots of small business to form a Web presence  in line with the Webification trend we see growing in the local search marketplace.

This comes with the premise that there is a large segment of small businesses that have erstwhile been averse to getting online for various reasons. A growing number of those are coming around, but for the many borderline cases, a free offering can sway them to start a basic landing page or micro site.

Once there, they are hoped to evolve into paid marketers, whether that be a subscription service like Local Promote, featured placement or paid search (in the case of Google’s and Yahoo!’s free landing page services, among others).

In each of these cases, the idea is to provide Internet training wheels, as we’ve said in the past, in order to increase the number of businesses online and essentially expand the addressable market of online advertisers. Hosting company Hostway’s recent acquisition of Affinity Internet is a play toward doing just this, according to Hostway VP of Global Marketing John Lee, whom I recently spoke with.

However, this won’t scale, for traditional publishers, to equal offline revenues, as Greg Sterling points out. This means opportunities exist for online pure plays such as Local.com and IYPs alike. But IYPs face cannibalization sensitivities with their offline counterparts.

I was also able to sit down with Local.com VP of Marketing Jennifer Black and COO Bruce Crair at SES, who both endorsed the online Webification strategy as central to Local Promote and relevant to Local.com’s general direction. Local.com is, in fact, going in many interesting directions coming off its US$8 million investment from Hearst.

A deeper dive on Local.com and Local Promote will be in this week’s issue of Local Media Journal.

Yahoo! this week launched a new version of its free Web site development and hosting product, through Yahoo! Small Business. Although it previously had a free tool for small businesses to establish a Web presence, this is an improvement because of its simplicity and better site design tools.

This comes weeks after Google made enhancements to its Local Business Center. Both are meant to bring more small businesses online, which is the first step toward evolving them into paid search advertisers, and essentially expanding the addressable market of online advertisers.

This is a key strategy in the online marketplace right now  the Webification of SMBs  as we’ve pointed out in the past. Others that have gone down this road in various ways include WebVisible, Affinity Internet, Smalltown (microsite development) and vFlyer.

Search Engine Land has more details on the new Yahoo! tool.