Integrating Directories and Classifieds: A Conversation With LiveDeal

Summary

Online-only Yellow Pages site YP.com announced this morning that it will buy online classified site LiveDeal in a stock transaction estimated to be worth about $12 million. The deal will bring together directory content and classifieds in one online destination, something that has been developed to varying success internationally but largely hasn’t been executed in the U.S. This type of integration brings a sizable opportunity to gain broader appeal among users and advertisers and also to alleviate the perennial challenge of monetizing free online classifieds. There are also technical challenges in bringing together these two types of content, traditionally served in different buckets, but LiveDeal’s technical team is up to the challenge.

Analysis

In the Newspaper 2.0 White Paper released last summer by TKG, it was argued that there is an untapped opportunity in the U.S. to bring together classifieds and directory content. This has been successfully integrated by a few international directory publishers, such as Sensis in Australia and Yellow Pages Group in Canada. But it hasn’t happened in the U.S. because of strategy development led by legacy print directory businesses, where the integration doesn’t apply. Organizationally it has been difficult to bring together newspapers and Yellow Pages publishers, which have different sales cycles and publication and distribution attributes.

But in many ways classifieds and directory content go hand in hand when it comes to online local search. Add news content to the mix and the proposition is a site that can return the search term “Toyota” with auto listings, dealership information and news stories about recent recalls (taking this a step further, classified platform provider Adicio yesterday integrated Kelley Blue Book ratings). This concept is analogous to Google’s recent push for universal search, which could represent a growing area of opportunity and competition in local search.

Applying this to LiveDeal’s traditional strong points, such as pets, the idea is to do a search for a Golden Retriever and also find related directory listings for veterinarians, pet food, groomers and any of the businesses that populate the sizable pet services industry. There are complementary businesses that are willing to pay to be featured near these classified searches, according to LiveDeal CEO Rajesh Navar.

“Pet services for instance is a 36 billion business and is one of the fastest growing businesses in the country,” he says.

The biggest advantage here, according to Navar, is that this is a way to monetize free classifieds, something that has been a significant challenge.

“[Online] classifieds is a consumer play with good traffic and it’s nice to build a consumer brand, but you can only make money on advertisements,” says Navar. “If you charge a company a listing fee, you will lose them.”

This same monetization challenge has kept newspapers from aggressively pursuing online classifieds, due to the legitimate cannibalization fear that considers the off-balance transfer of a dollar offline to a dollar online and the $80 billion global classifieds industry at stake (TKG forecast figure).

For LiveDeal, the integration will include monthly subscriptions for Yellow Pages listings (as is done on YP.com currently) with upsell opportunities for banner, featured placement and contextual placement near classified searches. This will all be sold by YP.com’s growing telephone sales operation, according to YP.com CEO Dan Coury, while LiveDeal will be positioned as the front door to the combined product.

Bringing It All Together

The challenge here, as echoed by Oodle CEO Craig Donato during a panel discussion on this topic at last September’s Directory Driven Commerce conference, is one of engineering. It’s hard to bring together two forms of content that have traditionally been in different silos and form the algorithms to successfully integrate paid placements with appropriate classified searches.

This comes down to the fact that classified search is more “messy” in the variety of search terms possible (i.e., 50″ Sony high-def LCD monitor) compared with the relatively clean and structured nature of Yellow Pages lookups (i.e., “Pizza”). LiveDeal, however, is confident in its ability to bring the two together and serve relevant and unified results for product, business or category searches.

“When you talk about keywords correlated between classifieds and Yellow Pages, the first thing you get to there is to have a platform that integrates everything,” says Arjun Srinivasan, director of business development for LiveDeal. “Having a classifieds platform takes a lot of time and effort and integrating Yellow Pages into it is the first step, and we’re already there.”

LiveDeal in fact launched a Yellow Pages feature on its site last December that proved to be a precursor to the larger integration of directory content that will come from this deal. The greater integration of YP.com listings will happen by the end of the year, according to Coury, and we’ll have to wait and see how well it comes together and if this consumer value proposition rings true.

For now, the potential exists to provide something unique and user-centric. The other end of the equation will be successfully selling ads and upsells to populate the accompanying directory content that will close the loop on making this a user-centric product with an attractive revenue model.

This will also depend on the integration of other features on the roadmap, such as video advertising, a mobile search product, store inventory data and local coupons. These all warrant separate discussions, and it will be interesting to watch things develop for LiveDeal on all these fronts.