The Kelsey Group November 28-30, 2007
Industry Overview
1:00 pm – 1:45 pm
Neal Polachek, CEO, The Kelsey Group Matt Booth, SVP and Program Director Interactive Local Media Peter Krasilovsky, Program Director and Senior Analyst
Next Session: Keynote Address
Introduction – The Kelsey Group
TKG is an independent Analyst and Advisory firm covering: Global Yellow Pages and Directories: Print and Internet Search: Local, Social, Mobile and Video Marketplaces: Verticals, Classifieds and Transactions
Data drawn from quantitative user and SMB research Forecasts based on quantitative data and industry
knowledge Recommendations founded on data, forecasts and
industry experience and insight Advisory services, consulting, conferences, reports
The Kelsey Group Analyst Team – Expansion Driven by 360 Client Feedback
Michael Boland – New Technologies Matt Booth – Search/Ad Models John Kelsey – Cofounder and Chairman Peter Krasilovsky – Marketplaces, Verticals Charles Laughlin – Yellow Pages – Print/Online Bobbi Loy-Luster – Client Inquiry Steve Marshall – Consulting and Research Michael Taylor – Sales Channel Analytics Princeton team – Al Hou, Nanci Karas, Pam Kelsey, Kathleen
Passarelli, Eileen Pacheco, Sheila Steinmuller
TKG in 2007
Advisory support for investment banks, private equity and venture capitalists seeking to understand the local space
Blog coverage is much enhanced and expanded blog.kelseygroup.com
Added three new FT professionals – Peter Krasilovsky, Steve Marshall and Michael Taylor
Proprietary research expanded internationally We have added a new coverage area called
Marketplaces: Verticals, Classifieds and eCommerce to address the needs of many of our existing clients and many new emerging companies around the world
The Kelsey Group Equation
If The Kelsey Group = Local And
Local = CommunityThen
Community = The Kelsey Group
At the End of the Day “A Global Community”
Local Search
YP/IYP
VerticalsVendors
Social
Newspapers
Mobile
Local Sales
Others
A Wide and Deep Community
Over 250 companies are represented 60 percent of attendees at first Kelsey
Group conference 30% are CEO, President, Chairman,
Founder, Managing Director, Principal 25% are senior vice presidents or vice
presidents 20 percent are director level. More than 20 countries are represented
No Shortage of M&A within the Community
FindWhat = MivaIngenio Inc. = AT&T (pending) Espotting = MivaInterchange = Local.comLeads.com = WebSite ProsSME Global Solutions = WebvisibleStepUp.com = IntuitAsk Jeeves = IACDigital Envoy = Landmark CommunicationsDex Media = RHDLiveDeal.com = YP.netPremierGuide = Local.comHomeGain, Inc. = Classified VenturesPlanet Discover = GannettYellowpages.com = AT&T
American Town Network = Idearc Media InfoSpace = DogpileJudy's Book = Asset SaleLocalLaunch.com = RHDInsiderPages = IACIPIX = AdMissionClick Forward = Yellow Book USAOpenList = MarchexBackfence = Out of businessDCCI = TelemetricsIntelliSeek = NielsonBuzz MetricsVoicestar = Marchexi411 Inc. = Intelligenx Vista.com = Out of businessQuigo Inc. = AOL (pending)Switchboard = Idearc Media
And People Stay a Part of the Community
Simon Greenman = European DirectoriesMark Cannon = Auto By Tel Peter Hutto = Local.comErron Silverstein = Yellow BotAndrew Shotland = LocalSEOGuideDick Larkin = WeblisticJim Larrison = AdifyJen Dulski = FatdoorPeter Krasilovsky = The Kelsey GroupDavid Galvan = TopixHilary Schneider = YahooChamath Pailhapitiya = FacebookKara Nortman = IACBrendan Benzing = InfoSpace
Anna Zornosa = DealixTim Lambert = SpotRunnerGeoff Avard = SensisJohnson Goh = SPH Rod Diefendorf = Idearc Media (pending)Matt Booth = The Kelsey GroupSafa Rashtchy = RetiredJim Riesenbach = Auto By TelPat Marshall = Yellow Book USAUdi Manber = GoogleTed Meisel = Veoh NetworksMark Pincus = Mark Pincus BlogAndrew Day = World DirectoriesPaul Levine = AdBrite
34,000 Air Miles . . . 2 Hemispheres
Many Big Questions . . .
• What is Google Doing in Local?
• Is Yahoo back on track?
• Portals – friend or foe of YP?
• Can YP and Classifieds Integrate?
• How do we Verticalize and Localize?• Mobile – is it real now?
A Global Perspective
Trends in Australia similar to U.S. market – fragmentation, mobile expectations exceed
mobile results, classifieds and directories boundaries blurring
A Global Perspective
In Singapore and Asia, emerging vertical sites to
capture deep, comprehensive content and then build supporting ad models
A Global Perspective
In Israel, 110% mobile penetration; YP publisher builds out comprehensive user experience across the
Internet and in print
A Global Perspective
In Riga, Latvia – European DA and Telco operators gather to address the emerging “free”
ad sponsored DA proposition
A Global Perspective
In Amsterdam, classifieds operators debate the virtues
of “free” v. “paid” listings and the eventual marrying of UGC
and classified listings
A Global Perspective
At Geodomain Expo, operators explore the
integration of “local search” into their tourist oriented sites
Today, Tomorrow and Friday
650 attendees gather at ILM ’07/SES Local to explore the real opportunities just now emerging in the local space
Looking Ahead
TKG and SES collaborate in
Chicago – December 4 - 6
Looking Ahead
TKG and SES again collaborate at SES London –
February 19 – 21, 2008
$585B Global Advertising Market – 2007
Newspapers, 14%
Classifieds, 7%
Magazines, 10%
Television, 29%
Radio, 6%
Outdoor, 4%
Internet, 6%
Yellow Pages, 5%
DM, 19%
By 2011 – $711B Advertising Market
Newspapers, 11%
Classifieds, 6%
Magazines, 6%
Television, 29%
Radio, 5%
Outdoor, 6%
Internet, 14%
Yellow Pages, 5%
DM, 18%
Significant Share Shift
CAGR 2007-2011
-0.5% -1.1%
-6.4%
5.0%
-0.5%
14.2%
28.6%
5.0% 4.9%
Newsp
aper
s
Class
ified
s
Mag
azin
es
Telev
isio
n
Radio
Outdoor
Inte
rnet
Yello
w Pag
es
DM
Significant Share Shift
$83
$41$56
$170
$36$23
$35 $32
$109
$82
$39 $43
$206
$36 $40
$96
$38
$132
Newsp
aper
s
Class
ified
s
Mag
azin
es
Telev
isio
n
Radio
Outdoor
Inte
rnet
Yello
w Pag
es
DM
2007 2011
By 2011 – $134B Global Internet and YP Advertising Market
Search, 29%
Display, 24%Video, 11%
Mobile, 5%
YP/IYP, 28%
Other, 3%
Global Display Ad Forecast
0
5,000
10,000
15,000
20,000
25,000
2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E 2010E
0
5
10
15
20
25
30
35
40
45
Pa
ge
s V
iew
ed
pe
r D
ay
pe
r U
se
r
Sources: JP Morgan, The Kelsey Group (2007)
To
tal
Pa
ge
s V
iew
ed
pe
r m
on
th (
B)
CAGR: Pages viewed per day / user 2.4%; Total Pages viewed 10.5%
Global Forecast: More Consumers Searching More Frequently
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E 2010E
0
10
20
30
40
50
60
Se
arc
he
s p
er
Us
er
pe
r M
o.
Sources: JP Morgan, The Kelsey Group (2007)
Se
arc
he
s (
M)
CAGRs: Search 8.4%; Queries 11.4% (2006-2010)
Revenue Per Search
$0.00
$0.02
$0.04
$0.06
$0.08
$0.10
$0.12
2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E 2010E
US RPS
Int. RPS
Sources: JP Morgan, The Kelsey Group (2007)
Re
ve
nu
e P
er
Se
arc
h
US RPS 7.1% CAGR, International 11.6% (2006-2010)
Source: JP Morgan, Kelsey Group (2007)
Like Yellow Pages, Search is a Directional Media that Offers Superior Targeting
3.2%
SearchRevenue
$8.6 b
BrowseRevenue
$5.9 b
96.8%
Summary
In 2006, Search accounted for 3.2 percent of the usage but $8.6 billion in revenue. Internet browsing and resulting display ad revenue, conversely, accounted for nearly 97 percent of the usage but only $5.9 billion in revenue. This comparison between Internet search usage and browse usage shows the power of directional media in terms of revenue generated.
Percent Consumer Search vs. Browse
Revenue Generates from Search vs. Browse
US Search vs. Browse: Comparison Usage & Revenue
Print Yellow Pages is Losing References and Advertisers
0
5
10
15
20
25
30
35
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
0
10
20
30
40
50
60
PY
P R
ev
en
ue
s (
US
$M
)
Source: Census, Kelsey 2006, YPA
US
Off
-lin
e T
rav
el
Ag
en
cie
s(L
oc
ati
on
s 0
00
)
Bars = Off-line LocationsLine = Print YP Revenues
© 2007 The Kelsey Group
Notable Shift: SMBs Use of Specialized Directories
Use of Specialized Directories (Print & Online)
23%
34%
Feb. 07 Aug. 07
SummaryUsage of “Specialized” directories (both print and online) jumped in the last 6 months. Defined as “Specialized directory for your specific business, industry or location”
Source: Kelsey Group (2007)
© 2007 The Kelsey Group
Notable Shift: SMBs Online Usage
Online Metrics Show Growth in 6 Months
30%
4%
34%
9%
Ad Budget for Online PPC (Performance)
Feb. 07 Aug. 07
Summary
SMBs continued to increase spend on online media and performance-based advertising. PPC is a significant sift over past surveys.
Source: Kelsey Group (2007)
Composite of Consumer Usage per Month (2007e)
41
25
1.2
5.5
2007e Usage per Month
Search IYP/LS
Ad Sponsored DA Landline DA
Print YP
Source Kelsey Group (2007)
Internet Search is now the front door for consumers. This trend will compound overtime as search engines push into local search.
Comparing Average Page Views Shows Search Growth Effect
17
2.3
2000 2006
Search engines are indexing more pages. Consumers are using search to find local information. This trend is driving less usage per user session of IYPs and local search engines (company removed)
Average Page views Per User (2000 and 2006)Local Search Company
YP Sales Channels Control Local Advertisers
YP Sales 89%
Search Engines 3%
Resellers 8%
SummaryYellow Page companies dominate the advertiser landscape. They are very effective sales organizations.
The Advertiser Relationship
If…
Consumers are looking at more content
Search is the front door to access information
Search + targeting are driving verticalization
SMB behavior and spend is changing to match
Yellow Page sales channels have the most existing local advertisers but not front door internet traffic . . .
Then – Conclusions and Predictions
2008 will be the year of multi-channel expansion driven by Yellow Page companies
Move advertisers across multiple platforms like Ad Sponsored DA, Mobile, IYP, Search, etc.
Call-tracking will unify platforms
Yellow Pages will begin the move to Value Based Pricing in under-developed headings
Effort to grow ad base and content
Con’t . . . Conclusions and Predictions
SEO / SEM ‘Landing Page Optimization’ will become central to all local efforts
Platforms will be ubiquitous
Verticalization will accelerate
Consumer and expert reviews will continue to grow in importance
Mobile will become the next search product
Push current advertisers into mobile experience
We’ve Gone Thru the First 2 Generations of Local Online Advertising
1st Generation1995-2001: ‘City Guide Era.’ Up-sells from traditional media and cream skimming from them. Large advertisers are Low Hanging Fruit.
2nd Generation2001-2006: + ‘Online Classifieds and Search.’ Search Boosts Value of Local; begins disruptive change. Add Medium Sized Advertisers.
Now Arriving….The Third Generation of Local Online Advertising
3rd Generation2006-Present: + Verticalization, GeoTargeting and New Channels
More Focus and Value; Increases marketing spend by local business; “Localizing” and user generated content. Mobile and TV.
Add Small Advertisers (VOLUME) + National Advertisers
At ILM: 07….Directional
New dimensions to connecting Buyers and Sellers
•CitySearch, RHDi
•Local.com, SuperPages.com,YellowBot, ZipLocal
•Intuit, Merchant Circle
•ShopLocal, Krillion, Shopping.com,
At ILM: 07….Verticalization
•Auto by tel, Yahoo
•Zillow, NCI, Homethinking
•Marchex
At ILM: 07….Social and News Driven
User Generated Content Propels Initiatives
•Facebook, Mahalo
•City Voter, Pegasus
•The LA Times, New West
At ILM: 07….National
Bringing National Players to the Local Level Buyers and Sellers
•GM Planworks, Centro, Atlas
•Consorte Media
•TMP
At ILM: 07….Mobile and Phone Extensions
Anytime, anywhere is everything
•Ingenio/AT&T
•Skyhook Wireless, E-Enable, Idearc media, Yahoo
•Mobile People
•Google, Nokia
At ILM: 07….Money
Injection of Money Moves some things faster than others
Veronis Suhler Stevenson, Hummer Winblad,
IAC