Rethinking directory strategies

Just before the year ended we attended the 2010 Interactive Local Media conference put on by BIA-Kelsey. As usual the heavy focus on search-type businesses yielded some surprising insights. One of these is how rapidly the directory space is changing - and how most traditional media companies are not looking carefully enough at the variety of new business models cropping up around the country.

I had the opportunity to discuss the variety of current models with SeniorChecked, CEO and AOL local alumni, Chris Spanos. Here are a few of the models we discussed that go well beyond the standard IYP upsell:

*Enhanced clicks. Used by Reply.com, this model is a Google-style auction for clicks which are highly targeted (visiters register giving specific interests and zip codes) making clicks more valuable. Businesses can buy up the best spots, similar to how they once could monopolize Yellow Pages if they were willing to spend enough.

*Background checks. SeniorChecked's model is like the Better Business Bureau on steroids: It charges for businesses for their own background check and seal of approval. Even if businesses don't get a lot of leads, the value is the the "seal," helping solve the chicken/egg issue of trying to sell directory listings while providing enough of them to have critical mass, read leads, for advertisers. Look for this model to ramp up in other verticals.

*Paid subscriptions. Angie's List's model may have plateaued for Angie, but the List is moving into vertical space starting with Health Care.

*Pay Per Lead (PPL). Yext is a great example of this model, also widely used in the B2B space. The company fields a huge telemarketing sales force aimed at at specific verticals, and selling PPL. ServiceMagic also uses this model.

*Listing upsells. Yelp, the grand-daddy of directory innovators not only uses this simple model for its recommendations platform, but also added a local outside sales force.

*ServiceAlley.com. The WP Company scored a home run with this new service built on the TeachStreet platform that connects people who want to learn with sites that teach. A giant step forward for a newspaper company, which fortunately owned Kaplan and thus already had the partnership with Teachstreet to work from.

*Social media and "service upsells." Of note, Matchbin has added social media features to its directories including blogs that get automatically posted to Facebook and Twitter and reprutation management tools. We have not reviewed this yet, but it is going in the right direction.

Reachlocal's remodeled CloudProfiles and Riverside Press' E-Media Waves are built on the same platform and pioneered in this space. Upsells can include providing Facebook services. More media are looking at simply linking to a WordPress page to duplicate the ability to sell blogging and updating as a service without an additional licensed platform.

In addition there are a variety of small and large vertical sites that sell things like exculsive listings for categories like doctors, assisted living and attorneys. Each industry category requires a slightly different approach and has a unique set of competitors; in smaller markets where larger directories have not penetrated, the field is wide open.

A key factor in choosing the model, however, is cost of entering the fray. The newer the business model, the heavier the investment costs. Up to $500,000 in programing for example, was required to launch a site like SeniorChecked. But this cost is spread over what is now a national site, making it a prime acquisition target for a large media company looking to acquire fast growing businesses. There may also be opportunities to partner to use, but redeploy, expensive platforms that are already built.

Rethinking niche strategies using these business modeling approaches may come up with different answers.

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