Nearly 100 executives in The Kelsey Group community participated in a half-day session that we hosted in London titled Local Online Media. The panel I moderated was “The Financial Future of Directories and Local Search in Europe.” The panelists were Paul Gooden, equity analyst, ABN AMRO, and Paul Kuipers, director, media and telecom corporate finance, BNP Paribas. (As an investment banker, Paul has been involved in the KKR acquisition of PagesJaunes, the sale of TPI to Yell, as well as the Infote and European Directories transactions.)

I didn’t expect either the analyst or the banker to be all doom and gloom about the business, but I did not expect them to be as upbeat as they were either. Both felt the stock market has overreacted to a few pieces of negative information about Yellow Pages. They also believed that following the challenges of the debt market, we will see a resumption in Yellow Pages consolidation.

My colleagues Matt Booth and Charles Laughlin started the day with a number of slides from our new Annual Forecast “2007-2012: Outlook for Directional and Interactive Advertising.” One of the most important slides to our European audience is the following:

The Kelsey Group believes the total directional advertising (print and Internet Yellow Pages and local search) in Europe will grow from US$10.8 billion in 2007 to US$14.2 billion in 2012. Note that the print decline is a CAGR of only 1.2 percent, which is more than made up for in the very strong growth of both Internet Yellow Pages and local search. The obvious question is what companies will take this revenue?

In an executive interview at our London event, Andrew Day, CEO of Truvo (formerly World Directories), put it best: “Publishers need to see the new media upside as greater than the print media downside. Anyone who doesn’t believe that will fail.” In Europe, the urgency for action is even more imperative than in other parts of the world because Google’s share of the search market exceeds 90 percent.

The closing session discussed some of the themes of the day and came back again to the belief by the local search and Yellow Pages executives about the future of the business. From the audience Cornel Riklin, CEO of European Directories, asked what the industry can do to improve its perception among both advertisers and consumers. We will discuss this on Monday.