My Primer on ’Classifieds and YP Convergence’

Yellow Pages companies are increasingly eyeing classifieds as the final piece of a "local advertising hub." The "inevitable" convergence of classifieds and Yellow Pages was explored at Kelsey’s Directory Driven Commerce conference in Los Angeles Sept. 19-20. I gave a 10-minute primer on the state of the industry, and was joined on the panel by execs from Oodle, YPG of Canada and AdMission (formerly iPIX).

Here's a quick rundown of my Top 10 points:

1. Newspapers have traditionally dominated the classified marketplace, but face deteriorating market share due to competition from vertical sites (i.e., Autobytel), niche sites (i.e., real estate brokerages), social sites (i.e., Craigslist) and especially, aggregators (i.e., Google Base).

2. Local fragmentation is getting so intense that Borrell Associates recently determined that major market newspapers like The Philadelphia Inquirer may only count on winning 15 percent of local usage.

3. The emergence of numerous competitors means that newspapers often lag behind the competition in the number of listings they provide. Ultimately, the ability to provide not only the most, but also the most relevant listings will be classifieds' real currency.

4. To maintain usage levels, newspapers will have to develop new classified products and team up with other media and with aggregators like Oodle. A prototype arrangement might be the deal made this week when The New York Times agreed to provide its classifieds to The New York Sun, a free metro paper.

5. Where search engines like Google, Yahoo! and Microsoft fit in the mix hasn't really been established. But they'll seek to become master aggregators of free classifieds, while providing enough extra findability and tech features to upsell advertisers to a premium platform.

6. Technology enhancements are probably classified providers' best weapons against relatively primitive free sites like Craigslist. Microsoft’s Windows Live Expo, for instance, announced a $19.99 deal this week that will enable advertisers to upload photos and be searched based on numerous criteria.

7. EBay is another contender in the mix. But while CEO Meg Whitman says that she only sees classifieds as "entry-level e-commerce" and doesn't envision adding a transaction capability, it seems inevitable that eBay will eventually go there. The ability to find an item, promote it with coupons and then buy it is the true future of many classified categories.

8. Against this backdrop, we see shopper pubs (like PennySavers) and specialty products (like home and car publications) being sold to traditional local media, including Yellow Pages. The challenge with these types of pubs is they generally have weekly or monthly frequency. This doesn't necessarily position YPs in a medium that will be defined by the ability to be up to the minute.

9. Shoppers et al are doomed to be the first victims of the new Internet sites. They’ll have trouble with their premium advertising models. But exceptions will occur when they win strong online distribution and can provide synergies with existing advertising (i.e., auto listings and auto services). Generally, this is what the YP players hope to accomplish by partnering with them in their "local ad hubs."

10. It remains to be seen whether the power of YPs’ distribution, brand and sales forces will add enough extra oomph to "rescue" these pubs, which are all about micro-level marketing. But they do give YPs a base to build on.