$5.8 Billion in Local Revs Projected for 2006

My friends (and former colleagues) at Borrell Associates are out with their fourth annual survey of local online revenues. As usual, the survey is a data goldmine, based on confidential reporting from 2,266 local sites- a very impressive count. Borrell found that local online revenues were $4.8 billion in 2005. For 2006, they’re projected to surpass $5.8 billion in 2006.

Borrell indicates that a perfect storm has kicked local up a notch. Traditional media companies have accelerated their efforts on the Web; the portals have ramped up their local initiatives; thousands of entrepreneurs are selling local advertising; and there is a natural migration of local advertisers, who are finally accepting the Web as part of their marketing plans. “It is no longer a case of artificial upselling,” says Borrell.

Major trends include a jump in local search revenues from five to nine percent, and the rise of targeted advertising, including paid search, lead generation, directories and classifieds. Display ads such as banners and popups are down to just 14 percent of revenues.

NAA: Google Eyes Six Newspaper Initiatives

In a conversation with Newspaper Association of America members this February, Google Local head Shailesh Rao and colleague Jim Kolotouros outlined six Google initiatives that they’d like to work with newspapers on. These include AdSense; a premium tier version of AdSense that enables online order entry for merchants; GoogleLocal; video; GoogleBase; and ongoing experiments with print ads in papers.

Kolotouros said that the initiatives are being developed on an adhoc basis, but that Google would like to put them into “one bucket” to streamline their use by newspapers. Separately, Rao said that Google would like to enable newspapers to act as sales agents for Google to upsell existing customers along the lines of “a model we’ve tested in the Yellow Pages business.”

Highlights of the conversation are transcribed as part of “Getting Serious About Search,” a new survey and report by the NAA’s Melinda Gipson that effectively updates my 2004 survey and report, “Paid Search and Newspapers: Issues and Strategies.”

BackFence Adds San Francisco

BackFence, the Washington D.C. – area social network that strives to blend the best of community journalism with Yellow Pages and classifieds, is reaching across the continent to launch BackFence San Francisco. Rather than starting from scratch, it is taking over Bayosphere, a site started by “We The Media” author Dan Gilmoor and Microsoft Sidewalk founder Michael Goff. To buy the site, BackFence will apparently use a small portion of the $3 million it recently raised.

Bayosphere had been initially funded by Lotus Notes founder Mitch Kapor and The Omidyar Network, but ran out of money a few months ago. On his blog, Gilmoor expressed relief at BackFence’s takeover, and promised to stay involved, even though BackFence is more focused on hyperlocal news and content than the Silicon Valley tech community that has been his forte as a tech columnist for The San Jose Mercury News. Goff, a Los Angeles resident, won’t be contributing to the new site.

What they hand over is a site with 10,000 regular visitors; occasional or fewer visits from 90,000 others; and a legion of fans who will probably follow Gilmoor’s activities whatever he does. Even as the conversation shifts more heavily to traffic and PTA meetings, one imagines they’ll be much more involved than BackFence’s current users in Washington.

Key Execs Leave American Towns

Lorren Elkins and Susan Kelly Panian have left American Town Networks, a pioneering social network that I occasionally consulted with. The site is now in maintenance mode with a reduced staff, awaiting next steps. The site had been the default town site for AOL Local, and continues to provide local sites for 168 communities in the northeast and Michigan.

During its six years of operation, American Towns has been especially noteworthy for two things. It relied initially on part-time efforts from local women, mostly mothers, to sell local ads and maintain local information.

I liked the model, but the economics never worked, and it was forced to become more of a standard, automated community site. The site was also noteworthy in forming a 2004 deal with Time Warner Cable on Staten Island, where the site was sponsored by local video ads for small business, such as plumbers.

Zixxo Tries Again with Local Coupons

Online coupons lower DM costs. And when redeemed, they’re living proof that an advertisers’ message has gotten through. But they also make up the bottom rung of the media food chain. It’s hard to get consumers to look them up, and hard to get advertisers excited about them. They can also be hard to sell.

A couple of years ago, Bay Area-based Zixxo discovered the downside of coupons the hard way. It launched a franchise model based on charging $30 for coupons, and free classifieds. But the site never really caught in.

Now, founder Mike Hogan has come back with a new, improved model. In a conversation with Local Onliner, Hogan said he has been greatly inspired by all the changes that have occurred in coupons since he first came on the scene. He noted that consumers are now routinely getting together for coupon “trains,” sharing codes, and going on eGroups to hunt for the best coupons. With Zixxo, they can also share coupons, as well as RSS them.

Why NewsCorp Barely Registers in Local

Rupert Murdoch’s Newscorp. would seem to be a great contender for driving the local Internet. The Fox TV stations , in particular, have local reach across the U.S., and could theoretically anchor all manner of online and offline promotional and directional advertising. They could sell it, too.

Riding the fringes of any TV efforts would be Newscorp.’s opportunistic assemblage of Internet sites. MySpace, for instance, is being positioned as a teenage Craig’s List, with city-by-city ads focused on wheels, guitar amps, and housing. Scout.com has a different kind of potential, and is currently seeking to sell local online advertising for its network of high school sports sites.

The present reality, however, is that Newscorp. barely registers in local – and the problem starts with its inability to lasso the TV stations, including both its affiliates and owned- and-operateds. This was really brought home last week, when Newscorp. announced that it would quell affiliate concerns that their local TV audience would be undermined by Fox’s direct sale of programs over the Internet.

Classified Ventures Exec Joins Google (Corrected)

Sam Sebastian, a longtime veteran of Classified Ventures’ Homescape real estate vertical, is joining Google to develop its local real estate efforts, and to work on other local advertising efforts. I had previously reported that he was joining as head of Google Local. As Zach Rodgers of ClickZ writes, “Sebastian will not work directly on the Google Local product, but rather within the AdWords sales organization.”

In the new position, Sebastian might build bridges to newspapers. But he also poses something of a threat, since he conceivably knows all the details of classified initiatives of all the Classified Ventures’ newspaper owners, which include Tribune, Knight Ridder, Gannett, McClatchy, Belo and The Washington Post Co.

It isn’t the first time that the portals and search engines have picked up a newspaper veteran. A number of Knight Ridder execs, in fact, have left to join Yahoo.