• by Ross Fadner , November 7, 2004

Fearing the ambitions of deep-pocketed Web search giants, newspaper publishers are allowing themselves to be pushed to the periphery instead of being open to new partnership opportunities, according to Internet search company executives speaking last week at a local search conference.

Dave Galvan, director of business development at Yahoo! said it's hard to know if a partnership would benefit both sides because local newspapers are "terrified" that small business traffic aggregators are compromising their revenues from classified ads. "We ate their lunch in personals, we ate their lunch in autos," Galvan said. "If you don't own any technology, it makes it difficult to be competitive in this marketplace," he said, speaking at The Kelsey Group's Interactive Local Media conference.

While the local search and Yellow Pages market moves toward consolidation, newspaper publishers' classifieds revenues are slowly eroding, plagued by advertiser migration to eBay, Craigslist, and Internet Yellow Pages (IYP) sites.

"Newspapers are still in protective mode," said Jean-Pascal Lion, vice president, electronic directories, Yellow Pages Group. He said that many local newspapers are now regressing after having moved their content online, because they feel the cannibalization of their print distribution.

"There is absolutely a fear of losing classifieds revenue," added Kate Bowler, search strategy manager for Australian IYP portal Sensis Search. "They can't break their business model by offering lower-priced classifieds online," she said, emphasizing that publishers "have to do something special" to save their falling classifieds revenue.

Sukhinder Singh, general manager of Google Local, pointed out that IYPs, unlike newspaper publishers, have been heavily involved in cross-selling and traffic distribution partnerships. "I think Yellow Pages companies have a tremendous opportunity. They have great relationships with local advertisers," she said, opining that Yellow Pages companies could eventually become an "agency equivalent" for local advertisers, by brokering media buys across various online providers and media channels.

Despite steady advertiser adoption, executives at the conference seemed to agree that it will take several more years before IYP and local search usage supersedes that of print Yellow Pages. "I think tech cycles always take longer than you imagine," said Google's Singh. "I don't think you change consumer habits overnight."

Daniel Read, vice president product management for AskJeeves, said that consumers haven't yet reached a tipping point with local search. He said this is partly because local search products aren't yet complete; consumers in many cases want more information about the businesses and services they're searching for. He added that improved relevance and comprehensiveness will foster consumer adoption.