Guest post published on mSearchGroove 

EDITOR’S NOTE: Mobile advertising is certain the hot topic at CTIA, where Mobile Web And Apps World Forum (Ajit Jaokar’s CTIA partner event) was standing room only. (Well done Ajit!) Players from across the ecosystem are anxious to explore new models to monetize inventory, apps and services. However, as I pointed out during my panel — moderated by well-known analyst and author Chetan Sharma – there’s still is a lot of mileage left in established models such as text and MMS approaches to advertising before we focus too much of our effort on the whiz-bang new ad units and creatives. In his guest contribution, Martin Wilson – MSG columnist and owner of Indigo 102, a strategic consultancy with a focus on media and mobility and a deep understanding of the local space— argues that traditional media owners also have a lot of untapped energy and assets.

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Advertising based on location is set to be the most valuable and highly contested sectors as players including AdMob, AOL/ Third Screen Media, Jumptap, Millennial Media, and Quattro Wireless jockey for position. Who will be in the winners’ circle? So far, traditional media owners and directory publishers appear to be the laggards and not the leaders in this race – although they clearly have the capabilities mix to dominate this space. Why are they hell-bent on missing the boat? Martin Wilson argues traditional media owners and directory publishers can still be among the champions, not the casualties, provided they act fast.

Mobile advertising has come a long way in a short time. No need to ask ourselves when it finally be the “year of mobile advertising” because the recent flurry of activity tells us mobile advertising has arrived.

First, it was the milestone acquisitions – Google buying AdMob, Apple snapping up Quattro Wireless and Opera surprising us by purchasing AdMarvel. Then it was the funding – Millennial Media led by New Enterprise Associates and Glam Media led by Aeris Capital – that sealed it. Mobile advertising has been validated.

Almost overnight our attention has turned from fixed online advertising to mobile. Now mobile – a personal device that enables brands to market to an audience of one – is widely regarded as the Next Frontier companies must conquer. Little wonder that companies – including Apple, Facebook, Google, Millennial Media and Yahoo – are lining up to do just this.

The market is crowding and muddying our understanding of what matters most.

Predictably, we want to reuse our understanding of old media (online and TV, for example) to comprehend the role and importance of mobile, the new mass media. Thus, we are fixated on size and those players with high volume inventory. Unfortunately, mobile advertising is not just the same numbers game.

Take the narrow view communicated in a controversial report by U.S. research agency Interactive Data Corp (IDC). It estimated the total 2009 mobile advertising spend in the U.S. at around $290 million, a figure based on total page impressions. It calculated market share according to share of total spend and concluded Millennial Media leads the pack with 18 percent ($51 million), followed by AdMob with 14 percent ($40 million), Google with 10 percent ($28 million) and Quattro Wireless in sixth place with 7 percent ($21 million.).

It was also reported by IDC that Glam Media counts 160 million monthly visits to the sites they control or represent, resulting in some 2.5 billion page views. Does this make them a market leader?

Maybe on paper.

However, as I argue in this column, it’s not about page impressions. That is not where the battle will be fought (or won, for that matter).

RAISE YOUR GLOVES

The money is in local advertising, or more accurately advertising based on location. That’s not just my view. Google has been clear about its interest in local online mobile content – and its intention to own the space. In its fourth-quarter earnings call, Google described local mobile advertising as a “huge” opportunity and more recently at the 2010 Mobile World Congress (MWC) claimed to have made mobile its number one priority.

Interestingly, going local (delivering advertising based on location) brings with it a whole new challenge. For one, it is infinitely more difficult to deliver relevant advertising to people
(which is the way brands must deliver advertising on a personal device such as our mobile phones). The opportunity to target an individual based on location is hugely powerful, but the room for error in these brand messages is frightfully slim. Get it wrong and the advertising performance diminishes — significantly.

Put another way, local advertising can’t be a matter of hit-or-miss. Generic advertising is a “fail” and tactical, targeted advertising is – literally – spot-on.

But it sounds easier than it is. This approach – though essential – flies in the face of how we measure advertising success. Suddenly, our singular focus on numbers and quantity (high volume and market share) is irrelevant. Local means delivering quality advertising. It also requires a totally new skillset, a whole new understanding of what we mean by context and how we should deliver relevant advertising.

WHAT IS ‘LOCAL’

If you say ‘mobile’ and ‘local’ in the same sentence, two scenarios spring to mind: ‘where I am now’ and ‘where I am going to be’. But which one is it? It depends. A common mistake is to assume your current location is important, that your location at that point in time is key.

Often it is not.

Mobile is about being ‘mobile.’ It’s about roaming. Mobile location can be a related to a number of things, places nearby or places close to my final destination. Deciding what is relevant is core to the success of any service or proposition delivered via mobile. I’m amazed by the number of services that get it completely wrong.

Why? Because there is more to delivering a mobile location service (let alone location relevant mobile advertising) than knowing the location of the individual. Companies need a detailed knowledge of what is really nearby.

In the U.K. alone, there are over 30,000 recognised places or points of interest. And that’s before you take into account synonyms, postcodes and street names. Linking them together in a meaningful way is no simple task. What are the postcodes or streets in London’s West End or Soho? The taxonomy is complex. When expanding a location to deliver results the relationship between places is important to get right – otherwise the service will deliver meaningless results and fail in the consumers eyes.

With so much as stake, I wonder why companies are so willing to take risks. By adding location to the mix they think they are growing the size of their inventory. In reality they also increase their chances of failure.

Currently, mobile advertising companies work on serving relevant ads based on generic attributes such as country, mobile network, handset type, time of day or theme of the page content. Add location as an attribute and everything changes. Relevancy – potentially down to a micro level – has to be on the mark. Delivering advertising based on locations becomes a mammoth task with a very different set of management challenges.

FREEDOM OF CHOICE

Advertising is content and people will pay with their attention. The structure of the content is important, and keep in mind at all times that mobile is a ‘pull’ medium. Give the people what they want and need. Provide enough information to attract, influence and help inform the decision or action.

You also need to remember that ‘local’ at a micro level is all about offering rich content – which can be challenging to deliver and scale. At the other end of the spectrum, ‘local’ at a macro level is all about providing comprehensive content – which can be challenging to deliver with added-value and competitive differentiation. A rule that applies to both types of ‘local’ content: Content gives a service credibility, interest and value if there is a valid reason (that consumers can understand) why a particular content is shown to them at a specific point in time.

Poorly targeted content is more than a potential annoyance. For many consumers, being exposed to irrelevant content (this includes advertising) on their mobile phones represents a ‘fail’ that interrupts what they are doing and – depending on data plan – costs bandwidth and money. Get it wrong and deliver the wrong content and the consequences can be severe and instant.

Content also needs to be inclusive not exclusive. If a user wants a pizza place nearby, they mean it (!) The service should deliver them details on the restaurant nearby and not the one 15 miles away simply because that business owner paid a premium for it.

Put another way, a location-based social network service should offer people loads of places people can check-in to, and not just the ones a handful of ‘power users’ know, mark and promote. Likewise, a local guide service must have all the places of interest for a town or city, not just the well—known ones in the surrounding area.

Why do local services need to be all-inclusive?

Because the consumer is empowered. They are spoilt by choice and demand the content they want. The Long Tail taught us all that one-size-fits-all doesn’t work in entertainment content. And there is mounting evidence that the same focus on the mainstream will no longer be tolerated in location-based services.

Relevance, as I have shown, is critical in content services.

The consumer’s perception of relevancy is enhanced when:

• They are offered greater choice
• They are empowered to select from a range of options
• They are ultimately responsible for the due diligence and decision

Of course, offering a broad choice of content (in this case, location related information and location relevant advertising) requires the service provider has a stockpile of content to start.

WHAT REALLY COUNTS

Above all, a location-based service has to pass the toughest road test there is. It has to show the consumer what they know is there. Put simply, consumers judge the true accuracy and relevancy of a local service by its ability to offer breadth, choice and insight into the places and businesses they know are nearby.

If the service can pass the test, it earns consumer trust.

Thus, a shopping guide needs to list the shops nearby and not the ones across town. It needs to drill down to the hyperlocal level and present up shops in the area – even better if lists the shop they can see in the distance. Then they can feel secure knowing the service is up-to-date and mirrors the real world around them. (And isn’t that what we all expect of a service that professes to offer local information?)

The same goes for mobile advertising. A guide to city nightlife should be chock-full of bars and clubs and their promotions.

How do service providers get their hands on all this content and advertising?

They partner with companies that have it as their stock in trade.

Take the directory publisher Yell in the U.K. It boasts over 2.3 million business listings –that satisfies the requirement for basic core and structured content. Yell also has over 200,000 searchable online advertisers – that fulfils the demand for depth of differentiating content.

Surely tapping into this content (listings and advertising) is the first – and essential – step to building a strong foundation of content linked to location. What’s more, it’s shortcut to offering the wealth and breadth of content – including familiar content – that consumers have come to demand.

It seems self-evident. But some companies fail to grasp it. In the last weeks I have seen a number of services – TopTable, Grub.it, Center’d to name just a few – come to market with neither basic core and structured content nor in-depth and diffentiating content. Predictably, they were instantly knocked by consumers.

IT TAKES TWO [OR MORE]

As I have shown, the success of a service linked to location depends on the breadth and depth of content (listings and advertising) it offers. It’s content that has long been the lifeblood of directory publishers, but nowhere is it written that these giants will beat the nimble newcomers moving on their turf.

Granted, it will take time for these newcomers to learn the ropes and collect and index the location linked information core to competitive edge. However, there is little reason for more traditional media players, who sit on a stockpile of location linked content, to assume that time is on their side.

Take the case of uLocate Communications, a location services company, headquartered in the U.S.

Sensing a business opportunity it moved fact to fill the gap in the current mobile advertising environment and recently launched Where Ads, a hyperlocal and holistic ad network that pulls together local ad providers that work in other mediums, including directory services, coupons, events and other aggregation services.

Partnerships will be increasingly important. Even for the traditional players it is unlikely that they will excel alone. The recent pairing of directory publisher DexOne and Yelp in the U.S. is a testament that neither company has the critical mass and/or appeal to succeed in isolation.

The new network underlines the importance of getting the right players to the table. Strategic partnering brings a new dimension to the service offer and delivers value to the consumer. But it’s knowing whom to partner with that will decide if a service flies or fails. Picking the right partner requires knowledge and focus. It also helps if the partners we choose have a track record in local and a proven ability to generate revenue.

While the newcomers may have the ambitious mobile strategies, it’s the traditional media owners and directory publishers from the online space that have mastered the capabilities necessary to convert consumer activity (a need/desire to know what’s really nearby) into revenue.

Case in point: Pages Jaunes, the French directory publisher. In 2009 the company counted 885 million visits and online revenues of €461 million. That’s equivalent to €0.52 per visit – a staggering conversion to value. Imagine a scenario where consumers conduct the same number of searches using Google – it’s nowhere near the same conversion rate (or revenues for the advertiser, I might add).

Make no mistake: No other organisation can even potentially come close to the conversion rates and value delivered by traditional media owners and directory publishers. Their ability to create value is inextricably linked to their superior capabilities. They have infrastructure, sales teams and existing customers to target.

In the online space traditional media owners and directory publishers lost their edge to search giants such as Google and Yahoo and have been struggling to catch-up ever since. Mobile is a new game with new possibilities. It’s also a space where location linked content – and lots of it – combined with the capabilities to deliver this content when/where consumers need and appreciate it most can mean the difference between success and failure. These market conditions play in favour of traditional media players and directory publishers. Now it’s up to these companies to recognise their advantage and work with the right people/companies to evolve their businesses, embrace mobile and deliver what users demand.

THE TAKEAWAY

Context, relevance, critical mass and content quality are all key components to a successful and sustainable service in the local mobile space. Who will own this space? Hard to say. But don’t be too quick to write off the traditional media owners and directory publishers that lost the plot in online. They could make a collective and explosive comeback in mobile. Success will be achieved by the companies that see the opportunity, accelerate their efforts, focus on their core strengths and bring the people and partners on board who have mobile expertise.

Get this right and you’re more than fit for the fight ahead. 

Editor’s note: Martin’s next column will focus on how companies should evolve a digital strategy that harnesses mobile to complement existing digital services and thus generate more value. As he shows us: in digital, the outcome can be worth more than the sum of the parts.

Martin Wilson has been involved in digital media for over 14 years, during which time he gained a wealth of experience in the fixed line and mobile Internet. In January 2008, Martin established Indigo 102, an independent consultancy, to assist organisations (including digital advertising agencies, directory publishers, media owners and online service providers) take their brands – and value propositions – mobile. In this role Martin has supported the development and launch of mass market mobile services across three continents. You can contact Martin directly (martin@indigo102.com) and follow on Twitter (@indigo102).

In 2007, co-founder of Microsoft, Bill Gates said yellow-pages use among people under 50 would drop to zero in five years.

The trend in the decline in usage of paper directories certainly suggests this is going to be a reality, potentially even quicker than Gates suggested.

Visit any apartment building or business centre lobby the sight is common, unclaimed directories piling up. This spells trouble for publishers like Seat Pagine Gialle, Yell and Pages Jaunes; it shows advertisers that fewer people use them. Many consumers have not opened a directory in years; others that have use them as door stops or monitor stands.

Publishers Seat Pagine Gialle in Italy, the U.K.’s Yell and France’s Pages Jaunes are struggling to boost sales as users and advertisers ditch their printed directories for online searches. While the companies have beefed up their own Internet-based offerings, they still depend on published books for most of their revenue, and their online growth has yet to compensate for the drop in print-based sales.

 “Online is growing fast but not enough to offset the print decline,” said Lorna Tilbian, an analyst at Numis Securities Ltd. in London. “Someday there will be a tipping point.” Printed directories account for more than two-thirds of revenue for Seat and Yell and half for Pages Jaunes.

Seat and Yell posted their first losses in five years in the last full-year periods. Yell’s U.K. print business fell 20 percent in the six months through Sept. 30 while online sales rose 8.7 percent. Print revenue at Seat’s Italian unit dropped 14 percent in the first nine months, while Internet sales jumped 30 percent. In the first nine months, print sales at Pages Jaunes slid 5.4 percent, while online revenue rose 9.5 percent.

 Yell shares have tumbled 18 percent in London in the past year, while Seat has plunged 65 percent in Milan. Of the 15 analysts who cover Seat, only two rate it a “buy.”

Ask both companies they state the need to develop both their print and online directories to grow. Yet print has not shown any sign of positive growth for the past few years for either publisher, nor does it going forward. Are they right to continue to bet on the recovery of print?

 Analyst Fabio Iannelli of Kepler Capital Markets suggests otherwise;  “While the recession can be blamed for a drop in print advertising, the declining sales reflect a broader trend”, He goes on to say “It is not simply a matter of a weak economic outlook,” said Iannelli, whose price estimate for Seat’s stock is zero. “We guess the print business would continue to be lacklustre even with positive GDP growth. Print business is a mature media and has been, and will continue to be, crowded out by the Internet to a higher extent than any other media.”

 Seat is training its sales agents to focus on multimedia and is adding online content and tools to increase client visibility on the Web. Yell has been hiring Internet specialists and developing applications to access data on mobile devices. Seat and Yell both signed accords to sell Google Inc.’s AdWords service in Italy and the U.K., respectively.

 But for both their online services are a mess. There is no clear competitive position and both fail to recognise that there are numerous competitive services out there that should represent a benchmark, none more so than Google.  Pages Jaunes is offering slightly more than just phone numbers and addresses online but still does not go far enough. The challenge for all is to recognise the new environment that they need to operate and get moving.

 The printed directory “business is in a structural decline, which may be mitigated by the ability to offset print with online revenue,” said Daniel Ek, an analyst at HQ AB in Stockholm.

Some companies say the writing’s on the wall for publishers of directories. Eniro AB, the biggest Nordic yellow-pages publisher, is betting on the online business, whose sales it says will exceed the print unit’s as early as next year.

 The big question remains. Can the likes of Seat, Yell and Pages Jaunes react sufficiently quickly to transform their businesses to outlive Bill Gates’ prediction of a dead printed product by 2012?  The jury is firmly out.

First of Martin’s Inside track columns on mobile. Directly from leading online site mSearchgroove.

Local focused mobile advertising is shaping up to be more than a revenue opportunity. There is every indication that it will be one the few channels to buck the downward trend in advertising spend over the next few years. Where’s the money? Martin Wilson – MSG columnist and owner of Indigo 102, a strategic consultancy with a sharp focus on media and mobility – argues the winners will be the ones that keep it simple and make it valuable.

Mobile advertising continues to be a good news/bad news story. And your view seems to depend on the news you want to hear.

November was a stellar month for mobile advertising. Google paid an eye- watering $750 million to acquire 3-year old AdMob, a Silicon Valley-based leader in display and iPhone ad formats. Google is not one to waste money, so you can imagine what a huge opportunity mobile advertising really is (even if the rest of the industry is blinded to it) if a Web giant is willing to pay almost $1 billion for a company with mobile expertise. I wonder if we won’t look back in two years and say it was steal…

At the end spectrum, there are always industry pessimists who ask when mobile advertising will finally be big business. However, I must also note (with a grin) that many of these nay-sayers are large publishers (can’t name names) who are 1) amazed by the tremendous traffic to their mobile Web destinations and 2) clueless about how they might harness mobile advertising and monetise these eyeballs.

And let’s not forget the mood among traditional media players. Doom and gloom everywhere you look: newspapers, direct mail, TV, radio, yellow pages, outdoor, magazines and PC Internet.

In fact, the BIA Financial Network (BIA), parent of the Kelsey Group, forecast spend on these media to decline to $144.4 billion by 2013 from $155 billion last year.  But there are winners among the losers. With budgets under pressure and advertisers beginning to demand far more tangible results, traditional media – such as print – is likely to be hit far harder.

Marketers have long realised this trend and increasingly turn their attention to online and new media channels. Against this backdrop, online commands an ever-increasing share of spend. BIA has forecast the new media share globally to grow from around 9 percent today to over 22 percent by 2013. Moreover, a recent study from Pricewaterhouse Coopers (PwC) predicts by 2013 the new media share of advertising in the U.K. will be around 34 percent.

Clearly, the advertising market is going to shrink and see a substitution of spend. It’s a trend that squeezes traditional media and spells opportunity for companies that either play in new media or migrate value to their online assets. Thus, your chances of survival are a measure of your willingness to rethink your media business models and refocus your operating principles.

MOBILE MATTERS

The media futurist Jeffrey Cole points out that the biggest challenge companies face is their own reliance on traditional advertising models. “The problem [is] people often believe there is enough life left in the ‘old advertising model.’” While many companies are still waiting for traditional advertising techniques to deliver, Jeffrey is convinced that the “big breakthroughs will be digital advertising developed by those who grew up their entire life with digital media.”

If Jeffrey is correct, and I believe he is, then mobile – a personal medium digital natives regard as an extension of themselves – is where we will see the meaningful innovation and positive business results.

Indeed, mobile continues to be the bright spot in a raft of recent industry reports. Then market outlook is even more buoyant when it comes to advertising approaches that successfully combine location and promotion.

The Kelsey Group, a research firm specialised in location-based services, expects mobile local advertising revenue alone to reach more than $3.1 billion by 2013, up from just $160 million in 2008. Meanwhile, Gartner forecasts total spending on mobile advertising to grow to $7.5 billion in 2012, up from $530.2 million in 2008.

Connect the dots in these reports, and mobile advertising revenues could outstrip anything that has gone before, making mobile one of the fastest growing advertising channels of all time. A remarkable feat when you consider that the overall advertising industry (traditional and online) will continue its decline. No wonder Google was so keen to snap up AdMob and stake its turf.

WHY WILL MOBILE GROW

In a word, mobile is different. While other media may be limited to a time or context in our daily routines (print in the morning when we read the newspaper on the train and TV when we get home in the evening), mobile is a 24/7 channel directly to us.

Look at it this way and mobile ticks so many marketing boxes that you ignore it at your peril.

• Mobile is a life-line for the 18 to 30- year old demographic, a very attractive demographic to marketers and notoriously difficult to reach.
• Mobile is a personal device and rarely shared, making one-to-one marketing a real possibility.
• Mobile is present at the point of purchase, providing marketers a channel to influence people’s brand choice and encourage the all-important impulse buy.
• Mobile is measurable, allowing marketers insights into campaign performance and their ROI.

However, for most brands and media owners, mobile remains one of the great untapped channels.

WHO WILL “GET” IT?

Not everyone is blind to the tremendous opportunities at the intersection of local information and advertising approaches. In fact, there is a staggering number of players across the ecosystem jockeying for a lead position. At one end of the spectrum you have the search engines and platforms: Taptu, MCN, Google, Yahoo, and Microsoft, just to name a few. At the other end, you have dozens of directory publishers (Yell, Pagine Gialle, Pages Jaunes, etc.). And let’s not forget the social networks, media owners, verticals, handset manufacturers and mobile operators all lining up for a slice of the action.

The market is crowded. But, if companies continue with their current approaches, then a shake-out is imminent.

To be clear, only a handful of mobile players have what it takes to be highly successful. The barriers to entry, the complexities of the mobile channel and challenges of distribution and discovery make this a game for deep-pocketed players. But other companies have an equal chance (even if they don’t have equal budgets) if they use mobile in a smart and meaningful way to deliver real value to the consumer.

WHAT WILL MAKE A WINNER?

The winners will be the companies that have much more than content (such as local listings, for example). It will be those players that have the capabilities mix to deliver mobile consumers a contextual, relevant and tailored offering. This presupposes the know-how to deliver to the device capabilities, provide consumers the features they expect, enhance location information, support social and viral distribution and add value through marketing and advertising.

It may sound simple, but why are so many companies still getting it wrong?

In my view, they lack focus and an understanding of the mobile channel.

In contrast, companies succeeding in mobile are those players that have recognised the gaps in their knowledge of new media and brought in professionals that do. (Even better if these professionals are themselves digital natives with an instinctive grasp of mobile and its impact on every aspect of our daily lives.)

Leading digital agencies such as AKQA and Ogilvy, and progressive media owners including the BBC and Sky have long had dedicated mobile teams in place. Now other companies are following their lead, dedicating more resources to mobile or buying in skills as they need them (either because they believe in the true potential of mobile or because they have been pushed into mobile by brands who understand how important it is to engage with consumers on their personal device).

If you doubt that mobile demands experts with a different skills set, then consider the real reason Google acquired AdMob: it’s easier (and cheaper) to buy skilled people than make the investments and risk missing the mobile advertising opportunity altogether.

While many agencies and media companies have a long way to go (and a lot to lose), it is encouraging to see so many brands moving full-steam into mobile and reaping real benefits. The list of successful campaigns is impressive: Guinness with its ‘Passport to greatness’ campaign, British Airways with its ‘Mobile check-in’, HSBC with its ‘Business banking’, Sky with its ‘Remote record’, the BBC with ‘BBC mobile’ and the New York Times with their NY Times iPhone app. It is interesting to note that all these companies have dedicated teams or experienced agencies that understand usability and what makes mobile different. Even if these brands appear to experiment or treat mobile as a separate business, they are serious about mobile’s position as part of the digital marketing mix.

WHERE ARE THE LOCAL CONTENT OWNERS?

Brands are leading (not all – but we have more solid case studies than last year), agencies are learning and everyone else is at least talking.

So, where are the director publishers? They are the only players with content and vast experience in traditional advertising who have yet to make the most out of their digital assets. They should have a natural edge over their competitors, but, as I pointed out in my last column for MSG, they are leaving money on the table.

Indeed, directory publishers are best placed to deliver compelling local mobile services and – importantly – commercialise them through advertising. After all, they have existing customers and a powerful sales force to sell advertising products.

It appears that directory publishers are so focused on the business challenge that they can’t see the opportunity mobile represents. This, unfortunately, leave the  door wide open to Google & Co, companies that “get” mobile and understand the value of listings.

WHAT DO THEY NEED?

To close this gap directory publishers must stop thinking of mobile as a technology and understand it is a utility. The mobile device has evolved into a multifunctional tool. It is our social organiser, our information resource, our boredom filler. Basically, it supports our lives. Directory publishers have content that is a perfect fit provided they also plug it into the equation to simply or enhance our daily routine.

Directory publishers must also acknowledge that mobile comes with a whole set of new rules. Granted, the industry has yet to figure out these rules, but borrowing ideas and approaches from traditional media will not work. A good starting point is to answer three core questions: how are you going to approach mobile?; why is your offer relevant?; and what do you expect a consumer to do?

My takeaway: As a marketing medium mobile is only set to grow in value. Providers that get the basics right and forge partnerships that allow them to unlock the potential of mobile, monetise their digital assets and deliver features that add value to our lives will be well-equipped to compete against rivals and win.

Editor’s note: Martin’s next column will focus on what companies (specifically, local media and directory publishers) should do to deliver contextually relevant mobile advertising based on location.

Martin Wilson has been involved in digital media for over 14 years, during which time he gained a wealth of experience in the fixed line and mobile Internet. In January 2008, Martin established Indigo 102, an independent consultancy, to assist organisations (including leading advertising agencies, directory publishers, media owners and online service providers) take their brands – and value propositions – mobile. In this role Martin has supported the development and launch of six mass market mobile services across three continents. You can contact Martin directly (martin@indigo102.com) and follow on Twitter (@indigo102).

Yesterday French yellow-pages publisher PagesJaunes said growth was more important than balance-sheet concerns as it wanted the freedom to be part of an expected consolidation among local information providers.

Chief executive Jean-Pierre Remy told an investor conference the group had no debt due until late 2013, and headroom on its debt covenants of more than 20 percent, meaning the company’s net debt of about 2 billion euros ($3 billion) was low priority.

“At the moment, it is not a priority for us to work on the balance sheet,” said Remy, whose company is majority-owned by private equity firm KKR and Goldman Sachs. “We are embarking on a very aggressive growth strategy.

“I think there will be further consolidation in our business. I don’t mean the directory business, but local information,” he said, adding: “We need to get more flexibility on the options we have.”

Not only yellow-pages companies but also local news providers, especially newspapers, have suffered from a slump in classified advertising as small businesses, their main customers, have tightened marketing budgets.

Remy said he expected no rapid improvement on that front. “We don’t expect the advertising market to rebound in the short term or even in the mid term,” he said.

PagesJaunes has been faster than peers such as Britain’s Yell to move its business online, helping its profit margin. Some 40 percent of its 1.2 billion euros in revenues came from online products last year, compared with Yell’s 15 percent. ($1 = 0.6680 euro).

It will be interesting to see how much energy directory publishers now place into mobile. Pages Jaunes has a leading service position in terms of usage, amongst international peers, but recently admitted it has not yet managed to deliver a revenue from the channel.  With mobile advertising revenues forecast to grow by over 1,400% over the next three years we should expect the mobile channel to figure prominently?

Should we expect a similar announcement from Yell once their re-financing is behind them, and do we think they can catch-up in mobile?

Story published by Reuters.

The past week or so has seen some interesting developments in the European Directory sector. Take three of the largest publishers; Eniro, Pages Jaunes and Yell.

Last week the Swedish Directory publisher Eniro passed a key financial milestone, according to its third-quarter and year-to-date earnings report. Through nine months of 2009, online revenues surpassed offline (print revenues), making Eniro a majority online directory business. Excluding voice, 50.6% of Eniro’s revenue is attributed to online.

The French Directory publisher Pages Jaunes is not that far behind, according to its third quarter and year-to-date earnings report. Through nine months of 2009, online revenues are approaching a similar milestone. Excluding voice, over 44% of Pages Jaunes revenue is attributed to online. A number they are clearly looking to rapidly grow. The new CEO presented a series of new products to be rolled out next year to accelerate organic revenue growth. Interesting mobile internet is highlighted as an important part of the Pages Jaunes equity story but despite a rapidly growing user base, for now, the company has yet to deliver commercial offering.

In contrast the UK Directory publisher Yell has some way to go, according to forecasts for the 2010 financial year Yell is expected to achieve online revenues of around £178 million in contrast to offline revenue of £395 million. Excluding voice, just 31% of Yell’s UK revenue will be attributed to online. Recently announced initiatives like the Google reselling agreement and the flurry of activity around mobile should help future online revenue growth.

It is clear that online and mobile is the future for these organisations. The challenge clearly is the speed of transference of their revenue online, ability to adopt new business models and stay true to their core business principles.    

Source: Exane BNP Paribas estimates

 The Board of Yell today announces that Toby Coppel has been appointed an independent Non Executive Director with immediate effect.

 Toby (aged 37) was, from April 2007 to December 2008, Managing Director of Yahoo! Europe. He joined Yahoo! in 2001 as Senior Vice President, Corporate Development. He was Chief Strategy Officer from 2006 to 2007.

 Toby holds an MA in Philosophy, Politics and Economics from Oxford University and an MBA from Harvard Business School. He started his career in 1993 as a Financial Analyst at Goldman Sachs, focusing on media and technology companies. He joined Allen & Company, a merchant bank, in 1997 advising various technology, media and entertainment companies on their internet strategies and made direct investments in early-stage internet businesses. In 2000, he was a Founding Partner of Windsor Media, a private investment company for media businesses.  

Married with three children, Toby lives in England. He is an Industry Fellow of the Oxford Internet Institute and a Henry Crown Fellow of The Aspen Institute. 

Bob Wigley, Chairman of Yell, said: ”We’re delighted that Toby, with his obvious media and internet credentials, is joining our board. His impressive track record of working in successful media and high growth internet businesses is highly relevant as Yell’s rapidly growing online operations become an increasingly large part of our Group.”

Yell Group (LSE: YELL.L – news) , the company behind the Yellow Pages directories, will launch an equity offering in a bid to raise at least £500m to pay down debt.

The group, which is currently struggling under a £3.8bn debt burden, aims to take that down to £3.3bn with the equity raising, before paying off a further £300m, either with any extra proceeds of the initial offering or by other means.

• Proposals are today being presented to the wider lending syndicate including:
• • Extension of debt maturities to 2014;
  • New covenant package giving appropriate headroom to the company’s updated base case financial model;
  • Ability to diversify the Group’s funding sources through issuance of bonds or similar instruments; and
  • A new margin of between 3.5% and 4.0% over LIBOR payable to consenting lenders, depending on quantum of equity raised and future leverage levels and a consent fee of 1.25% payable to consenting lenders
• Intention to launch an equity offering to raise gross proceeds of at least £500 million to repay debt and strengthen the Group’s capital structure.
• Intention to reduce senior term debt by a further £300 million within 18 months, by way of a receivables securitisation, high yield bond, larger initial equity issue, or other means.
• Agreement from the Group’s existing lenders is required before the proposed equity offering can proceed. Subject to this, the equity offering will be formally launched as soon as practicable and shareholder approval will be sought.
• The above proposals have received indications of support from a significant proportion of the Group’s largest lenders. 
• Current trading in line with guidance, with continuing strong cash flows and high cash conversion.

On 30 June 2009, Yell Group plc (‘Yell’ or the ‘Group’) announced that it had embarked upon a process comprehensively to refinance the Group and that this would lead to the Group holding discussions with its debt holders with a view to extending the maturity and changing the terms of its debt facilities and in due course, to discussions with its principal shareholders. These discussions and the resulting process were expected to take through to the Autumn to complete.

Since June, Yell has held discussions with a significant proportion of its largest lenders. The outline proposals announced today are the result of these discussions and will shortly be presented in detail to the full syndicate of the Group’s lenders. The process is consensual and the equity raising and debt proposals are inter-dependent. Subject to approval of the proposals by lenders representing 95% by value of Yell’s current term debt facilities, the equity offering will be launched as soon as practicable thereafter and a general meeting of shareholders called.

John Condron, Chief Executive Officer of Yell, said: ‘We have made good and constructive progress in a consensual process comprehensively to refinance the Group. It reflects the recognition of the robust and cash generative nature of Yell’s business model, which continues to show resilience relative to other media despite the current economic challenges. The process still has some way to go, but we believe the proposals developed as a result of our discussions with our principal lenders will deliver value to all parties, will support our Group through the current difficult economic times and ensure we are well positioned to benefit from any economic recovery.’

John Davis, Chief Financial Officer said: ‘Yell is trading in line with the guidance that we provided at the end of June, with particularly strong cash flows and high cash conversion but the economic environment remains challenging. The proposals we are outlining today would achieve an immediate reduction in net debt allowing the Group to deleverage more rapidly and to diversify its funding sources. We believe it represents a positive, credit-enhancing outcome for our lenders and increases the attractiveness of the Group to existing and prospective equity investors.’

Group financial outlook

Yell confirms its second quarter trading is in line with guidance given on 30 June 2009 and reiterated on 23 July 2009, when it indicated it expected revenues for the second quarter to be around 17% lower and EBITDA in the same period to be around 30% lower than the comparable period last year at constant exchange rates.

Trading conditions continue to be challenging and Yell believes it is too early to tell if confidence has returned to its core target customer base. As a consequence, Yell does not currently anticipate any significant improvement in the rate of year on year revenue decline for the remainder of the fiscal year. Its current expectation for the third quarter is for revenue to be around 16% lower than the same period last year at constant exchange rates.

In-Brief: Local focused mobile advertising will present significant revenue opportunity and will be one the few channels to buck the downward trend in advertising spend over the next few years. In looking to reap rewards the single biggest challenge will be about providing an offer that is simple, accessible and delivers value to the consumer.

There is so much doom and gloom about local advertising – across newspapers, direct mail, TV, radio, yellow pages, outdoor, magazines and fixed online collectively forecast by BIA Financial Network (BIA), parent of the Kelsey Group, to decline to $144.4 billion by 2013 from $155 billion last year. Despite this the decline is clearly not going to be consistent across the full range of media. With budgets under pressure and advertisers beginning to demand far more tangible results, traditional media as we know it is likely to be hit far harder.

As consumers continue to turn to online services, traditional media will become more and more redundant as an influence in the purchasing decision. Marketers have long realised this trend and increasingly turn their attention to online and new media channels. Online commands an ever increasing share of spend. BIA has forecast the new media share globally to grow from around 9% today to over 22% by 2013. A recent study from Pricewaterhouse Coopers (PwC) predicts by 2013 the new media share of advertising in the UK will be around 34%.

So the advertising market is going to shrink and see a substitution of spend. Not exactly positive until you consider where a significant amount of spend is today – traditional media. The opportunity exists for the traditional players to migrate value to their online assets. The changing environment demands a significant rethink of the traditional media business models and operating principles to potentially even survive.

The media futurist Jeffrey Cole suggested that a key challenge is the reliance on traditional advertising models, “The problem I see is that these people often believe that there is enough life left in the ‘old advertising model”. Cole went on to say “I really believe we are still waiting for ‘indigenous’ advertising techniques. I think the big breakthroughs will be digital advertising developed by those who grew up their entire life with digital media – hence the word indigenous.”

Mobile I believe will be a very different story, and one of the few channels to see significant organic growth. It is already being driven by leaders who are not bound by legacy thinking, business models and operations. They recognise the old models will not bear fruit, a new approach is required and the potential rewards mean it is worth it.

In terms of numbers, the Kelsey Group recently reported they expect mobile local advertising revenue to reach more than $3.1 billion by 2013, up from just $160 million in 2008. In May this year the Internet Advertising Bureau (IAB) reported UK mobile advertising spend for the first time in 2008 mobile advertising was £28.6 million. In isolation these figures today do not sound particularly impressive, and the 2013 figure potentially unrealistic, until compared to the fixed online environment. In 1998 the IAB reported UK internet advertising spend of £19.4 million, just 10 years later spend has grown to over £3.35 billion.

The Kelsey Group forecast for mobile advertising means it could outstrip anything that has gone before, making the mobile channel one of the fastest growing advertising channels of all time. A remarkable feat when the overall advertising industry will be in decline.

Why is mobile so different? Consider the audience. In nearly every country in Europe and around the world mobile has mass penetration – a large audience to target.

Mobile ticks so many marketing boxes.

Some of the most prolific mobile users are aged between 18 and 30 years old – a very attractive demographic to marketers and notoriously difficult to reach. A mobile is a very personal device and is rarely shared – making one-to-one marketing a real possibility. Consumption of mobile services continues to see rapid growth – people are open to consume new content. Mobile activity is often needs driven and action focused – consistently close to the point of purchase. At every level activity and audience actions are measurable – return is very transparent.

For these very reasons I view mobile as one of the great untapped channels for brands and media owners alike. This is not revolutionary but potentially controversial when I consider those who I believe are likely to win out and why.

Who are likely to be the key players? There are a number of players that are vying for position in the mobile local space. At one end of the spectrum you have the search engines, Taptu, MCN, Google, Yahoo etc. at the other the directory publishers, Yell and Pagine Gialle, Pages Jaunes etc. In addition there are the social networks, media owners, verticals, handset manufacturers and mobile operators who all too want a slice of the action. The market is already crowded with get rich expectants and the race for signing deals to support distribution and gather content firmly on.

For most, if the current approaches are maintained I believe that we will see just a handful of mobile players becoming highly successful. The barriers, complexities of the channel and challenges of distribution and discovery play into the hands of some of the established deep pocketed players. This balance does not have to be the case, when you consider the real opportunity will be created by organisations that use the technology and channel in a smart and meaningful way to deliver real value to the consumer.

Who are going to be the winners? The winners will be those not simply with content but those who can recognise and deliver a contextual, relevant tailored offering to a mobile consumer. It will be the ones that ‘get mobile’; those that deliver to the device capabilities, present the expected features, use location well, support social and viral capabilities, add value through marketing and advertising. Sounds simple but why are so many still getting it wrong?

In short, lack of focus and understanding of the channel. Those who are delivering good results have largely franchised mobile away from their traditional business and brought in those with ‘indigenous’ experience. For some time leading digital agencies such as AKQA and Ogilvy and progressive media owners like the BBC and Sky have had dedicated mobile teams. Others are now following their lead with dedicated resources as they either realise the true potential of mobile or are pushed by their clients to engage.

Some of these have used the mobile channel to great effect. Brands like Guinness with their ‘Passport to greatness’ campaign, British Airways with their ‘Mobile check-in’, HSBC with their ‘Business banking’, Sky with their ‘Remote record’, BBC with ‘BBC mobile’ and New York Times with their ‘NY Times’ iPhone app all show they get mobile and the mobile consumer. All have dedicated teams or experienced agencies that understand usability and focus on mobile. Mobile is treated in relative isolation but remains firmly part of the digital mix.

I find it surprising that brands and media owners do not treat mobile differently. Ten years ago most saw the opportunity Internet presented and were quick to develop specialist teams that could take forward viable business plans. Not to approach mobile in the same way is like suggesting radio programmes translate well to television. The channels have very different characteristics and capabilities.

The players with structured local content should have a natural advantage. In a previous column I wrote for mSearchGroove (MSG), I said that directory publishers are best placed to deliver compelling local mobile services and importantly commercialise them through advertising. I still firmly believe this should be the case. They are best placed to commercialise the channel, all have existing customers and a very powerful sales force to sell advertising products. Despite the opportunity the challenging business conditions that many find them self in today are impacting on their ability to focus on the mobile environment and realise opportunity it presents. This leaves the door wide open.

Why is the mobile experience different? Go back to grass roots. For most people the mobile is a communications device. This is unlikely to change. What else it is capable of is increasingly important. The device has evolved into a multifunctional tool – it is our social organiser, our information resource, our boredom filler. Basically, it supports our lives. Personal attachment is unrivalled. As well as the form factor this is what makes mobile different.

Mobile comes with a whole set of new rules. The challenge is that many businesses have not yet figured out these new rules. Most try to adapt what they understand from existing media and simply move it to the next. This will not work. Understand these new rules and the channel can deliver real returns. A good start point for many will be to answer three core questions: ’how’ are you going to approach? ’why’ is your offer relevant? and ’what’ do you expect a consumer to do?

Despite a tough economic outlook for advertising mobile is set to buck the trend it will present a significant opportunity for many. I believe the jury is still out for those that can and will be winners. What is for certain is those that continue to carry on a path which does not reflect the potential new rules and the recognise level of expertise needed to execute are unlikely to reap rewards.

As a marketing medium mobile is only set to grow in value. A channel that brands and advertisers can no longer afford to overlook as part of their mix, as such the potential for commercial reward will increase. Providers who get the basics right, deliver features that add value and bring together quality partnerships that enhance the offer and support commercialisation will be the likely winners.

Importance of mobile is increasing, the channel is set to become a primary content environment for the majority. Gearing content and commercial capabilities for mobile will be key. 

Need more advice?  We specialise in mobile and are here to help.