Is the ReachLocal IPO Imminent?

I recently ran into someone from ReachLocal at a conference and asked whether the company had pulled its IPO. That had been the rumor circulating. I was told no that it was still a go.

This morning someone emailed me and asked if I was going to buy any ReachLocal stock when the IPO happened “later this week.” Beyond the fact that I don’t own any stock in any company I write about I said I hadn’t heard that the IPO was imminent. The person I was emailing said that he was being told by some friends in Wall Street firms that it was coming very soon.

Here’s the original S-1 filing from December 2009 and some interesting data about the company:

At September 30, 2009, we managed 17,600 Active Campaigns across 14,500 Active Advertisers, a substantial majority of which we calculate spend from $500 to $3,000 per month with us. Our clients include SMBs in a number of industry verticals, such as home repair and improvement, automobile sales and repair, medical and health services, legal services and retail and personal services. Since inception, we have delivered to our SMB clients more than 250 million geographically targeted clicks and 20 million phone calls. We employ 525 IMCs in North America, Australia and the United Kingdom and work with over 350 third-party agencies and resellers that use the RL Platform to serve their SMB clients. We intend to expand our IMC sales force both in existing and new markets.

We generate revenue by providing online advertising solutions for our clients through our ReachSearch, ReachDisplay, Remarketing, TotalTrack and other products and services. We reported $146.7 million in revenue in 2008 as compared to $68.4 million in 2007, an increase of 115%, and $143.3 million in revenue in the nine months ended September 30, 2009, a 37.5% increase as compared to the same period in 2008.

It will be great to have a public company as a kind of barometer (beyond the YP companies) for how the local segment is doing. However I think ReachLocal has several challenges:

• Growing the advertiser base at rates sufficient to satisfy investors (though that’s arguably a formula that the company now has “down”)
• Retaining advertisers (this is more challenging though Reach says its churn is lower than others)
• Attracting and retaining quality sales staff at lower commission rates and salaries than they were making in YP positions

Public companies are subject to brutal pressure from the whims of fickle investors. The executives at Reach have worked hard and I wish them well. But I’m glad in a way that I’m not in their shoes.

Update: Joe Tartakoff at PaidContent just pointed me to confirmation that it is happening this week.

SMB Market Getting ‘Noisier’ by the Day

At the Borrell show last week there were a ton of terrific speakers and sessions. I had lots of interesting conversations “in the hallways.” But one thought keep coming back to me: no one is really seeing the world through the eyes of the SMB.  

In the opening session Jeff Jarvis discussed the movement from “selling scarcity to selling service.” I thought this was a clever slogan to capture changes in the market: the difference between selling a limited number of ad placements in your own publication to providing an array of marketing options and services to your customers that reach beyond your O&O properties.

In general Jarvis said some insightful and compelling things and there was also some, I would argue, naive thinking he put forward. But the concept he discussed — scarcity to service — is right.

Perhaps because it was an industry conference few people discussed the SMB’s perspective or predicament. There were a few mentions in some of the sessions I attended — I wasn’t at all of them of course — and I tried to do this in my two sessions. But most people discussed their margins and how the new product offerings would grow them or preserve them, etc. People also discussed why they were better positioned than the other one to sell into the SMB or local market. 

While the YP publishers have been selling SEM and related services for several years now (since late 2004), newspapers, radio stations, TV affiliates, credit card issuers and a range of others are now in the hunt. There are lots of platforms and white label SMB marketing “solutions” providers out there. It’s pretty “turnkey” to start selling SEM, SEO, websites, etc. to the SMB market these days. 

The market is getting more and more noisy. And many of the platform companies now are also moving into direct sales (e.g., WebVisible). 

The rising “noise level” contributes to the churn problem that concerns everyone in the segment. More competition, more aggressive pricing and more inflated claims of quick results all contribute to more confusion and more churn when SMBs are dissatisfied, disappointed or don’t understand what they bought or how it works. 

Everyone is coming at these small businesses and most of the offerings sound very similar. So even as the products to match SMB needs are in the market it’s very tough for SMBs to figure out whom to trust and how to think about all these things. 

If you were getting 5 to 10 calls a week from competing providers of similar online marketing services how would you figure it out?

One answer, for later discussion, involves the idea of “trusted brands.”

Yodle Announces More Funding: $10 Million

This morning independent local advertising provider Yodle announced a new $10 million round. That brings the total funds raised to date to $38 million. From the release:

The round, raised from existing investors, was led by JAFCO Ventures and joined by Bessemer Venture Partners, Draper Fisher Jurvetson, and Draper Fisher Jurvetson Growth. The Series D funding round brings Yodle’s total financing to $38 million.

In 2009, Yodle continued triple-digit growth with a 135% year over year revenue increase . . . Additionally, the company continues to be an industry leader in innovation. In 2009, Yodle significantly expanded its nationwide franchise business (YodleFranchise) by bringing on clients like ServiceMaster and Two Men and a Truck, adding numerous strategic reseller partnerships, and expanding its local advertising network to over 75 hyper-local web publishers.

From its humble origins as “NatPal,” several years ago, Yodle has emerged as a top-tier firm in the segment.

Social: Not That Hard to Figure Out

Recent comScore data points out that social media are having an increasing influence on shopping and consumer purchase behavior:

Social media (a descriptive yet still ambiguous term) is often treated like it’s a mysterious thing. It’s not. You have several major distribution points online where people are interacting — among them Facebook and Twitter. Reviews and recommendations (word of mouth) are being disseminated in many cases through these distribution points. People are getting the information and taking action accordingly. Twitter for example has become an important distribution point for deals and coupons.

People fundamentally want credible information about products (and services) — rather than ads and claims — and they want to save money. Consumers are finding this information on social media sites, among other places online. Makes sense.

Companies lag in figuring out how to utilize these tools and platforms effectively and w/o the BS/PR spin they’re used to conveying in the world. That’s the major “cultural” obstacle for them. They mostly don’t know how to operate in the world with authentic, direct communication, which is what the Internet now demands for success in social media.

But if you’re a company that just can’t overcome the caution inherent in most corporate cultures, and you don’t want to be “authentic,”  you can always offer deals and discounts on Twitter as an alternative.

Marchex Offers Self-Service Ads to Partners

Marchex announced earlier today that it had extended the Marchex Connect platform to enable partners to sell or enable self-service by SMBs:

[A]n extension of its award-winning Marchex Connect platform that allows partners to sell call- and click-based advertising solutions through an online self-serve interface, under their own brands, directly to small- to medium-sized businesses (SMBs).

This product extension is designed to support two Marchex partner profiles: Companies who sell their products to SMBs predominantly through an online channel; and Companies who want to complement their “feet on the street” SMB sales force with an online offering they can support through direct marketing.

If the product is easy enough to use and the value to the advertiser is clear more SMBs will self-serve over time, especially newer businesses.

Comcast’s Yellowpages TV

AT&T has been putting Yellowpages.com listings on TV through its U-Verse cable-TV alternative for some time. Last week MediaPost wrote about a similar offering through Comcast, with click-to-call (PPCall probably in the future):

An arm of the Comcast Media Center has begun pitching a “Yellow Pages on TV” application to cable operators to offer on their local systems. The interactive-TV system allows one’s fingers to do the walking — with a remote control.

The function, among other capabilities, allows a viewer to scroll through lists of business types or search by company name — then access contact info. A viewer can also click a “call me” button initiating a call to a business, which immediately calls back.

There are several interesting dimensions to this:

• TV as another digital distribution platform for YP publishers/advertisers
• PPCall as the model
• TV as another place to showcase YP video advertising (video would be all but essential I would think)

But there are indirectly competitive dimensions too:

• Comcast sells video ads to local businesses, with a YP-like sales force of roughly 3K reps.
• Those videos cost much more than a video ad purchased through Yellowpages.com (however YP.com distribution/views are going to be less today)
• Cable cos and Telcos are competitors for ISP offerings and for TV.

Yellow pages publishers are compelled to develop new distribution for their advertising, including new digital distribution as search becomes less viable for them, with SEO’d listings falling “below the fold”:

More Info on Google Local Listing Ads

Yesterday morning I had a discussion with Mike Blumenthal and David Mihm about Google’s new Local Listing Ads. Since the announcement Mike had a chance to speak to someone from Google at the SMX event. Mike and David (and the jovial Will Scott and inscrutable Andrew Shotland) were among the group of people I had dinner with and discussed the announcement the other night.

According to the discussion that Mike had there are a number of issues that haven’t been fully worked out by Google. Chief among them is the issue of pricing. From what Mike told me, it appears undetermined whether SMBs are going to pay a single rate across all business categories they belong to or whether each category will carry a different price. For example, if I’m a wedding photographer I might be under “weddings” and “photography,” among other categories. Would each of these carry a separate price that might vary by popularity? That kind of question has apparently not been answered.

Another issue Mike, David and I talked about was Google’s non-indexing of the Place Pages. The decision was likely made to avoid alienating Google’s reseller partners, many of which rely heavily on SEO for their own traffic. The 10-Pack already pushes quite a few page 1 organic links down below the fold:

( . . . Hence the European Directories-Skype strategy.)

I was surprised that Mike Blumenthal was advocating in favor of Google indexing Place Pages. He said in some areas the Google Place Page might be the best local content available. He added that if they were going to be used as landing pages for the Local Listings Ads they also should be indexed.

There’s also the question of the potentially competitive AdWords (see lower right in graphic below) that show up on Place Pages. Will Google offer to remove those ads for local businesses that are participating in the program as advertisers? This is how others in the space operate, why not Google?

With Place Pages and Local Listing Ads Google is doing something of a balancing act, trying to advance its own agenda, while not alienating partners that it believes it needs as sales channels into the local market. Yahoo!’s Local Business Ads product was sold by resellers and didn’t create any friction (to my knowledge) between the parties there. But Google, because it so dominates search and now local search, is in a different category.

Gordon Borrell and others have already said that this product is unlikely to succeed at scale because “local advertising is sold not bought.” I’m not so sure: automated ad creation, structured rich landing pages, fixed pricing, customer service support (see Mike B.’s blog post above) . . . Google has a bunch of issues to work through and they might not execute well here. But just imagine this TV or radio campaign:

“Millions of people every month look for businesses like yours on Google. Now there’s a simple way to get your business in front of all those potential customers: Local Listing Ads. To find out more visit [site] or call 800-XXX-XXXX.”

Many many SMBs would respond to that. Google’s challenge is really in providing the necessary support and education (though it wouldn’t take that much). With the right execution, I’m guessing that Google could pick up a million SMB advertisers in 12-18 months.

Who thinks I’m completely wrong?

_____

Update: Is the “7 pack” clearing room for Local Listing Ads units?

Yext Scores a $25M Round of Funding

I guess presenting at the recent TechCrunch conference was a big win for Yext, to the tune of $25 million. Reportedly the money will be used to hire sales people and expand the range of categories that Yext is going after. Any direct sales effort to the SMB market is dicey but Yext claimed at the show to be on track for $20 million in revenue this year.

It’s not entirely clear to me how they’ve reached that revenue level without a brand and much visibility in the market, but I’ll find out.

Also, here’s another seemingly immutable principle of the VC culture on display: if you’re already succeeding there’s plenty of money to take you to the “next level” — or should I say “yext level.”

MerchantCircle Becomes Traffic Source for Others

Whatever you want to say about MerchantCircle’s robo-calling (in the past according to the company) the company has become a dramatic success story in the local space. It generates millions and millions of page views monthly through SEO (via Google). According to a release out this morning, more than 20 million page views.

The point of that release however is to announce a new pay-per-action program leveraging that traffic and featuring third parties, which will be getting leads from MerchantCircle:

The PPA platform enables partners to leverage the MerchantCircle network and deliver highly targeted customer leads to their local business clients on a pay-for-performance basis. Initial partners include OpenTable, Citysearch, ServiceMagic, Yodle, NearbyNow, eLocalListing and others.

Is this a version of arbitrage? It could be argued both ways.

Regardless, what this means is that third parties who sell clicks/calls/leads are now getting traffic from MerchantCircle. This can be seen as part of a “traffic diversification” strategy being broadly pursued by players in the local space.

Is ‘Hyper-Local’ a Flawed Model?

Claire Miller of the NY Times discusses the recent decision by the Washington Post to close LoudounExtra.com, a “hyper-local” news site. It was to be just one of several properties built by the WashingtonPost in a more ambitious effort that focused on smaller areas throughout its coverage area. According to a short post on the site, LoudounExtra will go from being a stand-alone site to a page within WashingtonPost.com:

Beginning Friday, Loudounextra.com will cease to exist in its current form. Many of the features you’ve come to enjoy and rely on will live on a new page on washingtonpost.com, including local news, your announcements and photos, a community calendar, youth sports and local entertainment information.

We want to be able to serve our Loudoun readers in the best way possible, and we believe we can do that more efficiently on washingtonpost.com. There’s no need to remember a new address; just go to www.loudounextra.com beginning Friday and you will be automatically re-routed to the new page.

And coming soon, a new home page on washingtonpost.com devoted to helping you navigate daily life in the Washington D.C. region, with more robust coverage of local breaking news, sports, traffic, weather, entertainment, shopping, real estate, tips and tools, local opinion, your contributions and more.

My guess is that the economic model didn’t work; costs were high and assumptions about revenues didn’t play out as anticipated. The company hadn’t “calibrated” the costs and the revenues correctly. Miller’s article quotes a Post spokesperson alluding to this:

“We found that our experiment with LoudounExtra.com as a separate site was not a sustainable model,” said Kris Coratti, a spokeswoman for the Washington Post Company.

“Updating the large amount of special features and technologies” on the site, which was run by Post staff members, proved unsustainable, Ms. Coratti said. For now, the newspaper will not start other hyperlocal sites it had planned.

I think there’s clear demand for the local information, though “hyper-local” is clearly not a universal solution to what ails newspapers. Consumers are interested in a mix of local and non-local content and so the reintegration of the content into the broader WashPo site may prove to be successful. For these hyper local projects by publishers the difficult problem to solve involves finding the right balance between professional and community content, together with a cost structure that does make it sustainable.

Why do you think LoudounExtra failed and what do you think it says, if anything, about the broader effort to build out these sites? Do you think “sustainability” simply involves the right  ad sales approach to the local market or is there something inherently wrong with the assumptions behind hyper-local news?

Where are the success stories? American Towns might say that it represents one such success. What are your thoughts?

___

Update: I got an email this morning from someone who pointed to the WSJ article written some time ago on LoudounExtra has a more accurate account of what caused the demise of the site and strategy, including a series of poor decisions and missteps. The email also said that the Chicago Tribune’s TribLocal site is doing very well and “expanding like crazy.” The writer took issue with my “top of mind” example of AmericanTowns as an example of a hyper-local success.

I would add that hyper-local implies community involvement at a fundamental level. It also implies a more “utilitarian” approach with tools that help people accomplish tasks of one sort or another (e.g., where to go, who to do business with, etc.).

Update 2: The story of why LoudounExtra went down seems to be more about in-fighting, internal politics and incompetence rather than a flawed concept or model re hyper-local.

MSFT’s Retail Plans: Smart or Just the Opposite?

Before they were opened people scoffed at the potential of the Apple Store, saying that Gateway Computer had failed in retail and that Dell was the model for the computer industry — online, virtual stores, etc. Of course those dour prognosticators turned out to be wrong, didn’t they.

Apple’s stores are very successful and a central part of the resurgence Apple has enjoyed over the past few years. In fact I bought my latest laptop (a Macbook) specifically because of the stores rather than wait for a Dell or Lenovo to ship to me:

Honestly, had there been local stores where I could have purchased the Lenovo or Dell models I identified I probably would have bought one of them. But there weren’t so once again I’m a Mac user.

Now, as you know, Microsoft is going to open lots of stores — near Apple Stores — to showcase its products. Gadget blog Gizmodo seems to have obtained a PPT deck that shows the concept and some of the details of how the stores will be set up, complete with “Answer bar.”

Images: Gizmodo

John C. Dvorak (often curmudgeonly) believes this is a mistake for Microsoft. I would say, rather than outright mistake, it’s certainly a risk. Stores don’t automatically equal success; Sony Style stores are largely a failure for example. So opening stores doesn’t mean people will buy more of your stuff, although you get to control the context and environment in which it’s presented.

I once made a recommendation (several years ago) that Google open a “Google Store” (partly for the brand and partly to demo AdWords to local businesses). Nobody there took me up on it obviously.

What do you think? Do you think this new retail effort by Microsoft will pay off as it has for Apple or will it turn out to be a costly exercise in futility?

Borrell: Local Online Spending May Be Up

From a blog post by Gordon Borrell:

[W]e may have been far too conservative earlier this year when we projected that local online advertising would grow 8% in 2009. At the end of the first quarter, the increase looked closer to 11% . . .

Phenomenal as it may seem, we’re getting data indicating triple-digit growth for some companies selling interactive advertising. These are definitely the “get it” companies that have hired dedicated sales forces and are plowing ahead with the products advertisers are buying. We aren’t, however, seeing triple-digit growth from companies that continue to labor under the delusion that “convergence sales” is a viable strategy.

Right now we’re pegging local online advertising at $14.03 billion, up from our estimate of $13.3 billion issued back in January.

This may indicate something of an “inflection point” motivated by the recession in part. But it would also appear to be driven by competition among local media companies and independent sales channels. Any comments Gordon?

Fifteen Percent Margins?

The newspapers and yellow pages have been used to huge margins, in some cases up to 50% or 60%. There’s frustration in some quarters that margins on online products aren’t higher.

The ad agency world has lived off 15% margins historically, though now they’re less in many cases. Should that be the number that YP publishers pocket when they sell search, etc. to their customers. In other words, 85% to media, 15% to margin. There are some in the Local SEM world that think you couldn’t cover your costs at 15%.

Putting aside “hard bundling” of print and online, if publishers don’t get used to lower margins aren’t these third party search/traffic products doomed in a sense? Why or why not? What do you think?

Borrell Documents Local SEM Churn

Borrell Associates has just put out a fascinating report (sponsored by Clickable; can be obtained from their site or Borrell directly).  The report quantifies Local SEM churn, which I’ve also been writing about on this blog for some time. It starts to get at some segmentation and best practices for sales channels that are selling search-related products to local SMBs.

As I wrote at SEL this morning:

Google just completed its now annual local reseller symposium. A terrific event last year, I was unable to attend this year but heard from one attendee that there were many fewer resellers there than a year ago. Print yellow pages, newspapers, webhosting firms, stand-alone local sales channels (e.g., ReachLocal, Yodle) and a range of others comprise the the local reseller category. They’re all selling small businesses (SMBs) into search marketing. Whether a function of the economy or for some other reason, the lowered attendance may be a metaphor for the challenges that “Local SEM” now faces.

In October, 2004 I wrote a report entitled “SEM for SMEs: The Model Has Arrived.” That document proclaimed that a then “guaranteed clicks” product provided by WebVisible to yellow pages partners would enable:

• Large numbers of small businesses to buy search marketing in a simplified way
  
• Enable yellow pages to become the gateway to online marketing (on search engines) for their advertisers
  
• Allow Google (et al.) to tap the massive SMB market through third party sales channels, avoiding the need for direct outreach to this elusive advertiser population
  

In contrast to my happy proclamation in 2004, the road for Local SEM has been rocky. On my blog Screenwerk I’ve been writing for the past couple of years about the high churn rates for these products and other challenges. Here’s a representative excerpt from September, 2008:

[W]e’re now in a kind of “purgatory,” where the “old” methods aren’t working as well (they still work in many instances however) and the “new” methods aren’t delivering as promised. It’s a problem for everyone.

Read the rest of this post on SEL.

Google just completed its now annual local reseller symposium. A terrific event last year, I was unable to attend this year but heard from one attendee that there were many fewer resellers there than a year ago. Print yellow pages, newspapers, webhosting firms, stand-alone local sales channels (e.g., ReachLocal, Yodle) and a range of others comprise the the local reseller category. They’re all selling small businesses (SMBs) into search marketing. Whether a function of the economy or for some other reason, the lowered attendance may be a metaphor for the challenges that “Local SEM” now faces.

In October, 2004 I wrote a report entitled “SEM for SMEs: The Model Has Arrived.” That document proclaimed that a then “guaranteed clicks” product provided by WebVisible to yellow pages partners would enable:

* Large numbers of small businesses to buy search marketing in a simplified way

* Enable yellow pages to become the gateway to online marketing (on search engines) for their advertisers

* Allow Google (et al.) to tap the massive SMB market through third party sales channels, avoiding the need for direct outreach to this elusive advertiser population

In contrast to my happy proclamation in 2004, the road for Local SEM has been rocky. On my blog Screenwerk I’ve been writing for the past couple of years about the high churn rates for these products and other challenges. Here’s a representative excerpt from September, 2008:

[W]e’re now in a kind of “purgatory,” where the “old” methods aren’t working as well (they still work in many instances however) and the “new” methods aren’t delivering as promised. It’s a problem for everyone.

Google Unveils LBC Dashboard

I spoke to Google’s Carter Maslan on Friday about the new Local Business Center dashboard but when the embargo lifted earlier today — cause people noticed it and started posting — I was on a plane. So now I’m in my hotel room and have a few minutes to dash off some thoughts before the drinking (at SMX) begins [insert maniacal laugher]. Here’s the mock screenshot Google provided to everyone:

This sort of thing is not going to be new to any experienced user of analytics software. The dashboard shows impressions, clicks, search queries — and driving directions requests by originating zip. That last element is novel. But to many SMBs this will all be new information and pretty fascinating. SMB surrogates may also find value in some of these data. I also predict this dashboard will see more online-offline data and tools in the future. Notice, for example, the coupon tab in the screen above. (Google has long offered coupons but it’s been a bit of a dud so far; that could change.)

Google already has all the data so it makes sense that they’d expose it as they have in other contexts and with other tools such as Google Trends. But beyond the simple fact that Google can do this, why is it doing this? My view is that Google will gain better and more complete data from SMBs over time and do some education about online marketing in the process. A deeper level of direct engagement with SMBs will benefit Google in the near and medium term in several ways.

In the category of getting better and more complete data, the module in the upper right shows (as with LinkedIn for CVs) how “complete” the business listing is:

Maslan said that Google was going to make this area (and related pages) very explicit and help businesses better understand the categories of information and types of content (e.g., video) that can/should be uploaded. The implication for SEOs will be: more complete information, better ranking. But Maslan told me that lots of SMBs have no idea that you can add videos from YouTube, for example, to their listings.

Moving on . . .

This part of the screen shows impressions vs. clicks and “actions” like CTRs to the SMB site and (more interesting) driving directions requests. Many people will get very excited about seeing this. I asked Maslan about calls and call tracking. Google had free call tracking with its radio ads product but that’s no longer available. He said that there was no call tracking available, but he didn’t entirely exclude the possibility in the future.

This module shows verbatim queries that resulted in the exposure of the business listing. This will obviously be interesting to professional SEMs but also very interesting to SMBs and help “demystify” Google and search engines a bit. That may sound crazy but there’s still lots of confusion and uncertainty surrounding search marketing and online marketing more generally among SMBs. The “transparency” of the information presented here will help overcome some of that confusion over time.

The area depicted above shows where local customers are coming from. The chart points are based on the “start” zip codes for driving directions. The obvious implication is business service area and it has some pretty interesting implications both online and offline marketing. Imagine translating this data into AdWords custom targeting areas, with the system offering a suggested service area by business category and location. When the browser very soon (or mobile device today) can better pinpoint the user, a relatively narrowly defined area could be more effectively served with ads. I may be spinning a fantasy here but there’s some interesting potential uses for this data on the advertiser side it seems to me.

The overall, net effect of this dashboard will be to show SMBs (that don’t already know) Google is driving traffic and leads to their sites and into their stores. This won’t directly translate into a big rush into AdWords, but it will stir up demand among SMBs for a more effective online presence and better online marketing. Google should also get more engagement from many SMBs who will want to offer an improved and more “complete” presence on Google.

This kind of simplicity is required on the advertise side if Google is going to penetrate more deeply into the traditional SMB market via self-service. This dashboard may give the company some insights and ideas that it can then use in AdWords as well.

___

Another thought: Here Google does seem to be taking some “responsibility” for data quality by trying to encourage businesses to complete their listings profiles. The flip side of this was permitting any user to edit data on Maps. That was introduced last year. Once the listing was claimed by the verified owner or rep, however, it could no longer be edited. Google does realize that beyond other methods it has to get content and information directly from SMBs in order to address the data quality issue we’ve discussed so many times on this blog.

SMB Ad Sellers: Twitter Time

I spoke to a local marketing company yesterday that told me its clients were asking for help with Facebook and Twitter — they didn’t know how to effectively use these sites, they just knew they wanted to use them.

There’s an emerging opportunity for new or existing players to build marketing tools around Twitter in particular, but also Facebook.

Start thinking about (and productizing) this now.

Publishers Looking to a ‘Post Google’ Future

The Local SEM products that YP publishers have been selling with varying degrees of success are deeply flawed in many respects — going to the way they’re sold and/or explained — and they don’t deliver the margins that publishers need. Google, Yahoo and MSFT will always be central to some “network” proposition that the YP publisher (or newspaper) offers local advertisers. But increasingly the “sales channels” are looking for alternative sources of qualified traffic.

Call it the “post Google” future, where reliance on Google as a source of traffic is not as heavy as it is today. That future requires lots of cooperation and the knitting together of many different traffic sources. Eventually the sources of traffic may become totally “opaque” to the individual advertiser — “We’ll deliver you 100 leads from our network.” As with the old Overture or the online ad networks today, publishers and traffic sources will be listed but advertisers may have little or no choice regarding where the traffic comes from.

Yodle has undertaken to build a version of this. YP publishers Idearc, RHD and Yellowpages.com, in exchanging traffic and advertisers, are moving down this path. Citysearch and Marchex have as well. Local.com and a range of others are doing a version of this too.

More of them are coming together to try and deliver quality clicks, calls and impressions without relying on buying search traffic as heavily.

More to come . . .

Local SEM Churn Part 106

I continue to be fascinated by the Local SEM churn issue (50% to 100% annually), why it exists and whether it will be resolved in some way. The Local SEM or local online ad products being sold are generally speaking the right products for the SMB market — conceptually. Execution has been a problem.

On the publisher/sales channel side there are a bunch of issues going to sustainability and margins but that’s a discussion for another time. The central problem from a advertiser churn standpoint appears to be the apparent disconnect between the promises of sales people incentivized to acquire customers (but not retain them) and the actual experiences of SMB advertisers. 

I was sent an email by someone, which tells an interesting story about working with a firm in the Local SEM segment. I won’t identify the source or disclose the verbatim contents of the email. The advertiser was not a typical SMB but a more sophisticated PPC marketer with more budget $10K+ to spend online each month. The person eventually cancelled the Local SEM service in question (I don’t know how long they were with it however). 

The firm being criticized managed only a portion of the overall PPC spend. Here is my paraphrase of the main complaints conveyed in the email:

• Service and communication after signing were poor. This person was very frustrated in not being able to communicate with the people managing the campaign directly
• The quality of the creative and keyword selection fell below the level of “best practices” 
• Inflated representations were made by salespeople about the specific expertise of the PPC campaign managers, which apparently were unjustified

Overall the salespeople reportedly created heightened expectations that were largely unfulfilled.

This is a snapshot or microcosm of what’s going on across the industry. The way to deal with this is to be more cautious about ROI claims and expectations, as well as considering tying a meaningful portion of sales compensation to customer retention. In addition, more and better communication and customer service appear to be called for. 

If you have any different experiences, feedback, ideas or critiques please let me know.

Yodle Diversifying Traffic Sources

One of the conversations I keep having with people in the local space is about margin pressure that comes from always having to buy traffic from Google and Yahoo! Lots of folks are looking around for different, qualified sources of traffic. Yodle is one that has gone a fair distance down this path already.

I had a chance to catch up with CEO Court Cunningham yesterday and we talked about an array of things on and off the record. He told me that the company has segmented its prospects more finely and is now “pursuing 200 segments and sub-segments instead of 100.” Yodle also has 50 sites in its “network,” rather than depending (as many do) so heavily on G & Y for traffic. 

Here are some other bits that Cunningham disclosed: 

• The company’s churn is lower than the “industry” average
• He observed that the bigger spending clients have lower churn
• The company is focused on SMBs with fewer than 10 employees
• Average spend is around $1K per month
• The company’s franchise product supports 30+ franchises and 700-800 individual accounts
• Yodle uses CPM, PPC and PPCall to drive leads to advertisers. The margins by channel vary
• The company recently launched Yodle Local: 

Cunningham said that this was not intended to be a branded destination; rather it’s about SEO. 

SpotMixer Gains New Funding, Distribution

There are lots of folks in the SMB video-ad-creation segment: TurnHere, Jivox, Mixpo, Spotzer, SpotRunner and SpotMixer, among many others. The challenges in the space, generally speaking, are three: 

• SMB advertiser acquisition
• Features/functionality (video quality might be in here)
• Distribution (and tracking/analytics)

Those aren’t in any order of difficulty.

In “round 1” everyone was busy pushing video to SMBs through sales channel partners and/or trying to gain self-service adoption if that was the model. In addition, competitors were trying to build scalable and economically efficient “platforms” for video creation. The Spotzer-MerchantCircle deal is perhaps the ultimate example of automated, mass video-ad creation. 

But the missing piece in many of these scenarios was distribution. Many companies put videos on their own sites or directories put them up and very often the videos wind up on YouTube.  That helps for SEO but doesn’t really represent actual distribution in my mind. That’s because people generally don’t go to YouTube to look for plumbers or contractors or lawyers. However, hosting video on YouTube does allow it to be uploaded to Google Maps, where it is relevant to those sorts of lookups. 

SpotRunner of course began with cable TV distribution and moved online later. DIY video site Jivox has been building a video distribution network. And Mixpo, which has been positioning itself as a platform did a deal with Comcast, which has its own cable TV distribution of course. 

SpotMixer, which this post is really supposed to be about, has had distribution via YellowBook, Superpages and several other places. The company is now announcing the addition of the Google content network (AdSense for Video) and combining it with Google TV Ads distribution (since July, 2008) via Google’s cable partnerships. The two distribution options now for SpotMixer customers are: the SpotMixer Network ($49 per mo.) and Google content network distribution (CPM or CPC). 

SpotMixer video creation is free; SMBs pay for distribution only. 

In speaking with Kathleen Farley, product VP, and John Love, CEO, they told me they were somewhat surprised by the apparent sophistication of many of their DIY SMB video creators, who were using pre-existing radio or cable TV ad assets and the SpotMixer video tools to create new commercials. They also described a range of A/B testing scenarios that their SMBs were doing, which were surprising to me. 

Here are some video-related data from the recent Opus/AllBusiness SMB advertiser survey:

Building out broad and appropriately targeted distribution is going to be a critical success factor unless you’re positioning entirely as a toolset/ platform or production facility. In addition, offering distribution through other media will also be a potentially significant differentiator. SpotRunner, Spotzer and SpotMixer are the ones, to my knowledge, that offer this today via cable TV. 

But an arguably greater challenge — indeed the challenge of the SMB market as a whole — is advertiser acquisition. Farley and Love told me that their newly announced $9 million B round was in significant part about building awareness and SMB customer acquisition.

SpotMixer is owned by consumer DIY video site One True Media.