• by Mark Naples , April 2, 2004

Remember way, way back, in 1999? Back in the day, all the best analyst groups were telling us about the superheating Web ad market, broadband penetration, and all manner of can't miss business models that somehow missed by a ton, and not so soon thereafter.

This week, I attended the Kelsey Group's "Drilling Down on Local Search" seminar in Santa Clara, and I was very impressed by much of it - chiefly, the lack of BS from the panelists, most of whom were extremely well prepared. Since this series of seminars focused on Local Search, and since the panelists were, by and large, vastly better prepared than at most events, and since these were the real industry experts on stage, I heard none of the sort of "pie in the sky" projections that regularly were made by analysts and pundits "back in the day."

Most panels focused on HOW the industry would get there, not on silly arguments about how big the market really is, or was going to be in 2008. This was refreshing and, I thought, truly an expression of confidence. Let's face it. The US Yellow Pages market is roughly a $15B yearly market. When was the last time you used a hard copy Yellow Pages directory? When was the last time you found a business online? This is an industry segment that has ample reason to be confident.

In light of this, I was wondering about the timing of Jupiter's issuing of its report Wednesday. Jupiter essentially downplayed the expansion of the Local Search market, estimating that the segment will grow roughly 15% yearly, against an overall Web ad market expansion of 19%. This would bring Local Search or IYP revenue to roughly $824 million in 2008. Compare this to the $2.4 billion 2008 market size that has been estimated by Kelsey, and remember that the Kelsey Seminar was in its second day on Wednesday, and it seems pretty clear that there is some jostling going on.

In other words, one of the three or four smarties on the playground had everyone's attention, and one of the other smarties wanted to steal his thunder. Nice try, Jupiter.

Anyway, let's assume that the IYP/Local Search market increases by only 15% in the next few years. And let's measure that against the traditional Yellow Pages assertion that their books are losing 30% of their usage each year. Does that make sense? Maybe the numbers really do fall somewhere in between. This is the part that reminded me of 1999.

See, broadband penetration was never going to accelerate as quickly as Forrester and others thought it would in 1999, since - in addition to other factors - there just wasn't enough resource to lay the cable and install the at home service and market and sell it all. The idea and the capability were both there. But the HOW slowed things down to a pace that was well below what analysts said it would be then, but to what remains a pretty good figure. How many of you have broadband at home? It's more than half, and it's still only early 2004.

As I listened at the Kelsey Group's event to the lively debates over PPC models and self-serve Local Search platforms and larger SEM firms needing to develop affiliate programs with smaller SEMS to service the SME marketplace, I knew that we'd come far enough that most in the audience knew what those acronyms stood for, but not enough knew what would make the HOW move more swiftly.

See, I think that whether the growth number is 15%, 20%, or more, the companies and individuals who lay that cable, code that solution, and develop that API which enables SMEs to better leverage the Web though Search will be the ones that provide the jobs to their workers and the value to Web users. Some of you were displeased with me regarding my metaphor a few weeks ago of the chicken and the pig and who's more committed to your breakfast. It's inescapable when it comes to this kind of market sizing. VCs care about these figures, and God bless 'em. I don't.

Does this new data set mean that Google's IPO will lead to a smaller valuation? Do we care? Why? Will the companies present in Santa Clara hire fewer workers since they'll have maybe a little less capital to play with? Maybe. Is that a bad thing? Depends on how you feel about sustainable business models.

Me? I'm all for them. And I'll take that 15% market increase, compounded year on year, any time. Even if I think the number is probably closer to double that.