2008: The Year That Was

We’re out with our predictions for 2009. But what’s the final word for 2008? Truly, it was a very stimulating and thoughtful year for our local media and commerce industry. But speaking for myself, it’s hard to say whether it was a good year, especially with fresh layoffs that we are hearing about every day. In fact, the year was kind of Dickensian (“best of times, worst of times”).

On one hand, there has been an explosion in local content with YouTube, Twitter and StumbleUpon, and omnipresent local reviews with services such as Yelp and Angie’s List. Online video has become a real medium, aided by $100 video cameras and the emergence of HD standards, and mobile is starting to be a real channel, aided by GPS and iPhones.

On the small-business front, search has gained wider acceptance in key local segments and has become mainstreamed in many ways, adding a useful channel to the ad mix. And the percentage of SMBs with Web sites or personal profile pages has crept up to 61 percent.

But what about the business? For traditional media, it was especially bad. In 2008 we had a perfect storm. Massive debt and declining circulation hit the newspapers hard — and the Yellow Pages in the same way. Sharp hits to retail, auto and real estate advertising sealed the deal. The decline in auto has not only hit traditional media. Online ad networks that aggregate local media, such as Centro, relied on auto for 30 percent of their revenues.

The result: Tribune stands bankrupt, while McClatchy and Lee and others are near bankruptcy. It even appears possible that Idearc and R.H. Donnelley — the two public YP companies in the U.S. — could file for bankruptcy (although we are not betting on that).

At the same time, old-line products such as Valpak coupons have been put up for sale, and we don’t see clear replacements for them yet. Vertical products remain compelling, but with the economic slump haven’t proved to be the hedge for which traditional media have hoped (at this point).

Moreover, third-party auto sites such as Autobytel have been put on the sales block. And vertical stars such as Zillow have begun to lay off workers, even as they form broad sales arrangements.

Local-oriented start-ups also got hit. Credit has tightened up. The only companies that are likely to get funding are those that can get to cash flow positive with as little money as possible. Social-oriented services seem especially poised to get hurt.

So, we have to change the conventional wisdom. The old CW: “If we just tweak things, and gradually switch advertisers over, everything should work itself out.” In fact, with the emergence of new, highly targeted ad products, we could see advertisers spending much more on marketing than in the past.

The new CW? It isn’t so simple.

We’ve learned that hyperlocal doesn’t live in a vacuum, and that there isn’t ready demand for block-by-block coverage. But it is a useful add-on. Content platforms have become a commodity but can be improved with navigation, tagging and geotargeting.

We’ve also learned that mapping is a feature that can be greatly enhanced with personalization and advertising, and could be the basis for a new portal (but there are lots of new fronts for portals). And that mobile content shows real promise, but is still kept “closed” by the carriers, which manage 90 percent of it behind their firewalls (although Google’s Android might begin to open things up).

Classifieds have taken a huge hit by free providers such as Craigslist, which continues to gather steam. But it is encouraging to see classifieds get extended by aggregators such as Google Base, Vast and Oodle, which actually started working with MySpace, Facebook and Wal-Mart (a new local player?) — a truly interesting development.

On the “national-local” front, geotargeting has become so widespread that it actually has put a crimp into CPM rates for local publishers, which have come down from $10 to $6 or $7 in many cases. But we’re seeing organic adoption by regional advertisers such as supermarkets, banks, furniture store chains and lotteries. As Centro CEO Shawn Riegsecker has noted: “They’ve been spending 1 percent to 10 percent of their revenue on the Web, with no strategy.” In 2009 they’ll get one.

For “local-local,” the bottom line remains the engagement of the small business. It is greatly encouraging to see the wide adoption of free online tools by real estate agents, for instance, and ad building templates and planning by companies like AdReady, which has deals with companies such as The New York Times.

It is also encouraging to see the evolution of leads-based services, where ServiceMagic, for instance, has moved the continuum from simply providing leads to delivering jobs (i.e., installation of flat screen TVs bought at Target). Angie’s List‘s “two-sided cash register” from premium subscriptions and advertising also represents a new model.

In the end, we are in an environment where we are absolutely climbing over bodies to get ahead. But the opportunities seem stronger than ever, as is the relevancy of the products to consumers. It is an important and meaningful thing for all of us to work on, isn’t it? Happy new year to all our friends, and thanks for your support. We’ll see you in 2009.