A while back Brendan posted an article on this blog about the Yellow Pages industry. As you might have deduced from that post, we’ve been spending a lot of time thinking about how the reputation-building tools bundled in StepRep can be incorporated into existing online business directories.

If everything goes according to plan, soon customers and advertisers on local “StepRep-powered” Yellow Pages websites will have access to all the features that StepRep users already enjoy:

• Profile pages that display recommendations from customers instead of anonymous (and usually cranky) reviews.
• Search results organized by social context, so customers can see how they’re connected to local businesses through their friends and their friends’ friends.
• One-to-many communications enabling customers to pose an open question to an entire service category.
• Reputation monitoring for businesses to keep track of what their customers are saying about them on other sites.
• StepRep rewards, a success-based advertising model that incentivizes customers to recommend businesses to their friends.

The idea is to restore the Yellow Pages to what they were in the pre-Internet era – the first place you turn to when you need to find a local business. I drew a little comic strip that covers the basics. (Thanks to Tavis and Nicole for modelling for me.)

Changes are coming

Changes are coming to the world of advertising and media. Given these changes, we have immersed ourselves in the world of advertising, and in particular the YP space. Here are some observations, facts, thoughts, predictions and opinions. We hope you find them interesting. We’re relatively new participants in the YP business, which gives us a unique perspective to develop paradigm-shifting solutions for the YP industry. If you’re an industry participant please feel free to let us know if you think we got it right or if we got it wrong – either way we want to know.

The origins of YP

Sometimes to understand something you have to go back to its origins, and looking to the origins of YP explains a lot. Back in the early days of the telephone in North America, governments passed legislation requiring that white pages (telephone books) be delivered free of charge to every land-line address. Today (with few exceptions) this law is still on the books. This allows YP companies to work in conjunction with Telco’s to either combine the Yellow Pages with the white pages, or at the very least piggyback delivery.

There was a time when the Yellow Pages were everything. In this time before the Internet, there were few ways for consumers to find businesses and services they needed. They could ask a friend, check the newspaper, listen to ads on the TV and radio, see a billboard or bus sign – or, they could pick up the Yellow Pages where they could “let their fingers do the walking”.

The truth of the matter was that for most business categories, the Yellow Pages were a must-have, and so for years the cost of Yellow Page advertising was almost inelastic. Business were born and thrived, at least to some extent, on the strength of their position and the size of their ad in the Yellow Pages. As an advertiser you could not reduce your spend, or you would lose your important position at the front of the directory. To be sure, the Yellow Pages produced real, valuable, and tangible results for businesses. An ad in the Yellow Pages connoted trust, and consumers turned to the Yellow Pages to find businesses and services they could trust. Consumers used the Yellow Pages because they were the easiest, fastest, most complete and trusted source of information.

YP industry today

Today things have changed. The Internet has become the ubiquitous and de facto starting place for global and local search. Consumers prefer the Internet because it makes search fast, efficient, mobile, and increasingly convenient. Most importantly, it has become the most information-rich and trusted source of information. An Internet search can provide more and better results. Results have richer information like maps, directions, hours, descriptions, photos, and videos. Most importantly, Internet results provide trust. Ads in the Yellow Pages are simply words created by the advertiser. Internet results provide expert reviews, peer ratings, and rich content like photos and videos. These are things that print alone cannot provide. The Yellow Pages were once considered the most complete source of business listing data, but this is no longer true. For these reasons, consumers are migrating online at an amazing and increasing rate.

As consumers migrate online, both advertisers and publishers follow. Traditional media have made attempts to create online properties, but have generally failed to innovate and leverage the benefits of the Internet to their greatest advantage. They are impeded by valid concerns such as cannibalizing traditional revenue while maintaining or growing their current share of SMB (Small and Medium Businesses) advertising dollars. Further, traditional media organizations are saddled with infrastructure costs, outdated pricing models, and publishing cycles that true pure-play Internet advertising plays need not consider.

The current state of the economy has only added fuel to this fire. The economy drives advertisers to question the value of all spends, and media spends are no exception. The transparency and pay-for-performance nature of online media is raising expectations for accountability across all media.

This environment has caused traditional media revenues to decline, and most markets are experiencing consolidation and rationalization as they struggle to find ways to maintain their share of current advertising revenue from SMB’s.

As seems always to be the case, the impact of the Internet on an industry is overestimated in the short run, but underestimated in the long run. This holds true for YP, and we believe that any revenue gains for Yellow Page print media are due to inertia. Customers are not just moving online – the fact is that most have already moved online, and will continue to do so, to the detriment of print.

It should be noted that there are a number of stats that indicate that consumers still use the Yellow Pages when it comes time to purchase. We suspect, and anecdotal observations confirm, that consumers still use the Yellow Pages from time to time as a method of phone number lookup – that is, in the same manner as the white pages – but not as a method of discovery or choice.

The Yellow Pages to date have only just begun to feel the sting of advertisers’ migration to online advertising sources.   Some, unbelievably, still attribute the revenue decline to only the current economy. A few others hold on to revenue growth, obtained through innovative sales techniques and a well-trained  cadre of feet-on-the-street salespeople, as proof positive that no such online migration is occurring. However, the majority of Yellow Page operators at the C level are savvy business professionals that understand there’s a sea change taking place, even though they may lack the motivation or tools to make the necessary changes.

How the YP industry has reacted

All of this would seem to point to a dismal future for the YP industry, but there are some powerful positives. Decades of being the heavyweight incumbent for SMBs’ advertising dollars have left the YP industry with some very valuable assets. The YP industry has perhaps the largest, best trained, most motivated and skilled advertising sales force in existence. For decades they have established and cultivated relationships with SMBs. It should be noted, too, that Yellow Page advertising for many verticals or segments still works and has a very positive ROI. While many business segments, such as travel, have all but disappeared from YP, other segments have grown. The YP sales force has done a great job of targeting and cultivating high-value segments such as legal and dental.

YP has also begun to embrace accountability. Pay-for-performance call tracking, once used only for non-traditional and rescue accounts, has now come into general use in many areas. The sales process has become increasingly multi-product, digital, and explicitly performance-based.  Many YP sales teams are leveraging their relationships with SMBs and are embracing a consultative sales approach, delivering a wide range of products such as SEM, SEO, web presence, analytics, and reputation management tools. At the same time, YP companies are very interested in developing self-service models for low-value segments, as consultative sales methods are costly and labor-intensive.

On the consumer front, YP has done a better job than their newspaper counterparts. They have migrated online faster and have begun to embrace user-generated content such as photos, videos, ratings and reviews to improve the consumer experience. But they still lag far behind their pure-play Internet counterparts, particularly in verticals such as real estate and automotive. YP has not truly embraced the “social” aspect of the web, beyond providing links to share or publish via Facebook or perhaps Twitter. The true value of Social Context has largely been unexplored. YP has done a decent job of leveraging their mass of local business data to provide mobile solutions, but could still do far better, particularly with respect to location and social context.

Prescription for the future

Clearly the advertising spend for SMBs is changing. This August, for the first time, the number of SMBs using the Internet to advertise (77%) was higher than the number of SMBs using traditional advertising (69%). However, the full weight and enormity of this has not yet been felt, as a disproportionate number of dollars were still attributed to traditional advertising. That, however, is about to change. In fact, Internet advertising, currently the third largest spend, is expected to surpass the newspaper spend before 2013 – newspapers being the biggest advertising spend overall today. Unless newspapers react with products other than print, we think this day will come as early as 2011 or 2012.

Much of this shift is happening as SMBs shift their advertising spend from traditional media  to their own online presences, pure-play verticals and Google adwords. The YP industry is in a truly unique position to take advantage of this opportunity and potentially even grow their share of SMB advertising spend.

A successful future for YP will include evolutionary changes such as transitioning online to IYP, embracing transparency, pay-for-performance, user-generated content, publishing cycle changes, pricing model changes, and sales process changes. However, revolutionary change will need to be embraced to truly seize the opportunity. The YP industry will need to think back to their origins and rediscover the essence of what made them the most valuable source of advertising to their customers. Before the Internet the Yellow pages were:

1. The most trusted and complete source of business information.
2. A business model that was incontrovertibly the best ROI available.
3. The most convenient, fastest way to engage local businesses.

Here is our prescription for how Yellow Pages can attain the above:

1. Become the most trusted source by providing Social Context to consumers visiting the directory.
2. Become the most complete and richest source of business listings by allowing all businesses to provide complete and rich data and participate in the online directory for free.
3. Provide an incontrovertible ROI by embracing a new advertising model in which advertisers set their own advertising fee and only pay based on a successful transaction, and use this model to leverage the advertisers’ spend on their existing web presence.
4. Become the most convenient, fastest way to engage local businesses by providing consumers with an interactive system to communicate with advertisers on a one-to-many basis.

We would be remiss if we did not tell you that we have developed the set of tools that can help YP companies do exactly what we’ve described.

Using our platform, the Yellow Pages can once again attain this position of advertising dominance. Yellow Page companies have both the sales force and the means to take advantage of the shift of advertising dollars from traditional print to online models.

Thisaway, on the MyFrontSteps blog, I discuss the slight shift in our marketing strategy which we have dubbed Plan B. Originally we thought we could lead users to the benefits of the StepRep rewards model via the scenic route. Now we’ve decided to just build an expressway.

Thataway, on the Spokesmonster blog, I have some cartoon fun with Microsoft’s new Windows 7 Launch Party campaign.

A while back we abolished our last secret.

It wasn’t a spooky, life-or-death, Dan Brown-style secret. We discussed it openly around the office and with our friends. But we didn’t blog about it or talk about it in public.

The secret concerned what StepRep was. When we launched, we told everyone StepRep was a free reputation monitoring tool. And of course, it is a free reputation monitoring tool. But that’s only part of it.

The big secret was how we were going to make any money off our free reputation monitoring tool. People wondered, were we going to start charging a subscription fee? Would we make our users look at ads? Sorry, we said. Can’t tell you yet. It’s a secret.

That went on for months, and it sucked. We’re not naturally reticent people. But we had to keep it on the down-low while we built the product so that, instead of telling people what StepRep was all about, we could just show them. (Also, we were worried that someone would come along and steal our great idea.)

We’re not quite done building. But we’re far enough along that we no longer have to act all mysterious and vague. Now when people ask what StepRep is all about, we tell them to go try it for themselves. They quickly see that it’s not just a free reputation monitoring tool.

It’s a better way to advertise.

I’m glad we no longer have to hide this, because transparency is essential to what we’re trying to do. We want to be transparent about how we make our money, and we want to bring the benefits of transparency to the advertising business.

Whenever a StepRep user pays a reward to a customer, we take a ten percent transaction fee. That’s it. That’s our revenue model. Maybe someday in the future that percentage will change, but if it does, we’ll always be upfront about it.

We want every transaction in our system to be that transparent. Say you’re a realtor. Jenny’s selling her house. Her friend George suggests that she get in touch with you. When Jenny looks at your StepRep profile, she sees 1) how many people trust you, 2) how many of her friends trust you, and 3) how large a reward you’ll pay.

Jenny knows that she’ll be splitting the reward with George. She knows whether or not George’s advice can be relied on. When she looks at the list of her friends that trust you, she makes the same assessment for each of them – can I depend on this person’s judgement?

So Jenny hires you. You sell her house right away, because you’re awesome. You take your fee. You pay the reward to Jenny and George. We take our ten percent of the reward. No secrets, no surprises.

Isn’t it great when we’re all open with each other?

What’s happening on the other blogs?

Well, over in MyFrontSteps land, we just completed our big name change. A while back when we launched our Facebook app we decided to give it the name Homebook. That name only led to confusion. Now it’s just called MyFrontSteps. So much easier.

Also, on the Spokesmonster blog, I have some thoughts on health care reform. Really! …Well, no, not really.

As promised, we’ve begun to spend more time explaining what MyFrontSteps and StepRep are all about. We’ve got two blogs around here – the MyFrontSteps blog to explain things from the costomer’s angle, and this blog to deal with the service provider’s point-of-view – but there’s a lot of crossover, which is why you might want to check out this post.

You’re probably already familiar with this line attributed to the Philadelphia retailer John Wanamaker:

Half the money I spend on advertising is wasted; the trouble is I don’t know which half.

Hold that quote in your head for a moment while I relate an anecdote about Marshall McLuhan. You’ll remember McLuhan as the Canadian philosopher-cum-guru who coined the phrase “The medium is the message” and enshrined the distinction between “hot” and “cool” media (and had a cameo in Annie Hall).

In 1965 the journalist Tom Wolfe followed McLuhan on a speaking tour of America and watched him blow businessmen’s minds with his gnomic pronouncements on the future of the media. Wolfe describes one such encounter:

McLuhan is sitting in the Laurent Restaurant in New York with Gibson McCabe, president of Newsweek, and several other high-ranking communications people, and McCabe tells of the millions Newsweek has put into reader surveys, market research, advertising, the editorial staff, everything, and how it paid off with a huge rise in circulation over the past five years. McLuhan listens, then down comes the chin: “Well…of course, your circulation would have risen about the same anyway, the new sensory balance of the people being what it is…”

Here’s a scary thought. What if John Wanamaker was being overly optimistic? Maybe business owners should count themselves lucky if they can say with confidence that only half the money they spend on advertising is wasted.

Sometimes it’s possible to tell when advertising leads to a sale. Often it’s not.

Maybe your new radio ad brought in a dozen new customers, or maybe those customers would have found you some other way.

Maybe your business is booming because of that billboard you put up on Highway 11, or maybe it’s spillover traffic from that new Starbucks next door. Or maybe it’s word of mouth. Or maybe it’s…”the new sensory balance of the people”!

But what choice do you have? That’s the way advertising works, right? You pay for an ad, and you hope the increase in sales is greater than the outlay of buying the ad.

But what if there were another way to advertise?

What if you only had to pay after the fact, once the transaction had been completed?

What if your advertising dollars went directly to new customers…and the past customers who had referred them?

What if every time you closed a deal, it was broadcast on your customer’s Facebook page for all her friends to see?

You might think StepRep is just about managing your reputation. But that’s just one little part of our vision of changing the way businesses advertise.

We’ll be talking more about this in the coming weeks. Here’s a quick video that gives the broad outline.

On the MyFrontSteps Blog:

Used to be, the main page at MyFrontSteps.com wasn’t much to look at – just a bunch of links to other pages. I imagine it turned a lot of visitors off. They’d see this page that didn’t seem to have much going on and they’d say, “I don’t get it. Who are these MyFrontSteps clowns?”

Now a visitor to the main page should be able to get a better idea what MyFrontSteps is about – which, to reiterate, is connecting homeowners with experts that their friends trust and recommend. But there’s no point going into it here, because I just did a whole blog post about it.

(Or you can go try MyFrontSteps for yourself.)

On the Spokesmonster Blog:

Less consequential in the grander scheme of things, but still of possible interest, I recently had some thoughts on advertising, prompted by the new FedEx YouTube campaign starring Fred Willard.

Seems like these days I barely have time to absorb, blog about, and Twitter my excitement over the latest StepRep update before it’s shouldered aside by yet another StepRep update. Every two weeks or so they push out a new version. The changes are usually pretty small, but they make a big difference to usability.

Take this week’s improvements to the Customers tab. You may have been ignoring this tab because, if you live in an area without many MyFrontSteps users, the tab probably contained nothing but an empty page.

But now, there’s a handy filter that allows you to filter by location (city, state/province, or country) or by service category. It looks kinda like this:

So if, like me, you’re located in MyFrontSteps world headquarters – Saskatoon, Canada – and every day you’re inundated with Asks of questionable relevance, you can use the filter to focus only on the ones that interest you. Or, if you happen to be one of the five lonely StepRep users in West Virginia, and there’s no action in Charleston or Wheeling or wherever, you can flick the filter to Pennsylvania or Ohio or Kentucky and see what’s going on over there.

Other changes

We also spent some time styling the Homepage. Now when you respond to an Ask your identity will be visible to everyone. If you’ve uploaded a photo to your profile, your photo will appear right there next to your answer, with the word “Expert” underneath. What an ego boost!

Sometime very soon we’ll give you the option to make your replies anonymous to other service providers.

PS. If you have no idea what I’m rattling on about with this whole “Asks” business, you might want to read this post from a couple weeks back.

PPS. Or just log in to your account and check out the improvements.

It’s a bit risky to give your promotional cartoon a title like “Goin’ Viral” when it might not, in fact, go anywhere. But seeing as the cartoon is meant as a kind of meta-commentary on the concept of “viralness”, I think the title fits.

“Goin’ Viral” tries to explain, at the most basic level, what MyFrontSteps is about for consumers. As our CEO Brendan King says in the video, “MyFrontSteps connects homeowners with local experts that their friends trust and recommend”. Speaking to all you StepRep users out there – you’re the experts. As for the homeowners, they’re just starting to trickle in. Their numbers will be increasing soon.

If you’ve logged into your StepRep account lately, you’ve been seeing a steady stream of questions from MyFrontSteps early-adopters. We encourage you to get out there and answer them. Mix it up. Show everyone how smart you are. Maybe pick up some new business. StepRep is about building your reputation, and here’s a perfect way to do it.

Anyhoo, the cartoon’s over on the MyFrontSteps Blog.