Will Print YP Suffer in Recessionary ’08?

The Kelsey Group has always been a staunch defender of the print yellow pages industry, its efficacy as an ad medium and its outlook. But, interestingly, the firm is now saying (via MediaPost) that the trend toward online will accelerate – at the expense of print. What’s interesting is not that Kelsey is saying online advertising adoption trends will accelerate (that’s clear from a plethora of evidence) but that the firm itself is saying so publicly that print is likely to suffer in ’08, both in terms of usage and potentially advertising.

According to MediaPost:

The Princeton, NJ-based local advertising research firm is pegging the falloff in usage of newspapers and print Yellow Pages to reach 10% this year–much higher than the 2%-3% fade rate seen in past years.

“In the past, small and medium-sized businesses have protected their print Yellow Pages investment at the expense of other media,” said Charles Laughlin, managing editor, The Kelsey Group. “(But) given the structural changes in the local ad market, we believe the next downturn will favor media choices that are more flexible and provide a lower cost per lead than print directories, which would signal a profound shift.”

If Kelsey is saying that print will suffer, then you know they’re seeing very strong evidence of that.

People keep asking about the mythical “tipping point” for local. It has already come on the consumer side. The Internet (which includes IYP) has become the highest penetration medium for consumers seeking local business information with print yellow pages second (per 2007 research from TMP Directional Marketing and, separately, WebVisible). However, SMB advertisers lag consumers, just as national advertisers do.

As the MediaPost article goes on to point out and suggest, a recession this year (we’re probably in one now) may further accelerate a trend away from print YP. This is a mirror of the national market, which will likely see traditional media suffer as some of those dollars shift to online. Newspapers will likely see this most acutely.

The thing that may help “insulate” print yellow pages revenues to some degree is the “agency” role that most publishers have cultivated vis-à-vis their SMBs. As print publishers become the gateway to online marketing for many SMBs, print advertising is a part of the overall package being sold. (It’s also the case that print still performs.)

However, we’ll have to see how bad the economy gets and whether, as Kelsey’s Charles Laughlin suggests in the quote above, more SMBs abandon print in favor of online, as a more flexible alternative.

Another potential issue for print YP is growing advertiser sophistication. Firms such as ReachLocal, Yodle, Weblistic, Web.com, Orange Soda, Innuity and many others are competing for the YP advertiser base. If the YP publishers “initiate” SMBs into online marketing can they retain them as all these firms come after them? In other words, YP may be privileged when it comes to the online marketing neophytes but once they understand the landscape will competing firms be able to steal some of these SMB advertisers away?

Video and mobile may turn out to be key strategic offerings that (together with print) help differentiate the YP publishers from their rivals.

What do you think?

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Update: Here’s Kelsey Group CEO Neal Polachek’s clarification on these numbers (prompted no doubt by some unhappy phone calls received by the firm.)

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19 Responses to “Will Print YP Suffer in Recessionary ’08?”

  1. David Mihm Says:

    Greg, I think you’ve hit the nail on the head wrt to video. The best way for YP providers to stand out from Google, Yahoo, etc., is to offer video production & promotion services online. The local online video market in particular is still hugely untapped. TurnHere is an excellent provider, but no one has created a geographically-searchable directory yet, at least to my knowledge. Great opportunity for the YP’s to stay relevant.

  2. Greg Sterling Says:

    Video is a unique offering at the moment and in reasonably high demand from empirical and anecdotal evidence.

  3. The Kelsey Group Puts Print Yellow Pages On Notice : Natural Search Blog Says:

    [...] Greg Sterling points out, The Kelsey Group has historically been a very staunch defender of the print YP industry, so this [...]

  4. darknight247 Says:

    Having been on both sides of this fence, both as an outside display sales rep and now as a PPC strategy planner, I can tell you this has been coming for years, and I have already seen casualties on the front lines (the grunts known as ‘Account Managers’). The tipping point, even internally for these YP publishers has always been 2012…it may be that it may come a lot sooner.

    Another major hurdle for them, at least at the YP I worked for, has been the head in the sand approach that many of the mid to low-level managers have about the internet . They see it as a threat, as opposed to an ally, and corporate does it no favors by it’s “let’s offer the ignorant marketer a $5 to $15 price point for them to list there ad on our website”.

    As I was leaving the company, they started on “Bucket of Clicks” program, which any semi-educated SMB marketer would see it for what it is, a program for the uneducated marketer.

    Not really confident about some of these guys, though the telco’s seem to be a little better educated and the movement to a more social and open online directory bodes well.

    Ditto for all of the direct mail publisher’s.

  5. Greg Sterling Says:

    Bucket of clicks will eventually disappear in favor of a budget-based product already being sold by RHD and others. It can be packaged in a simple way and better reflects the realty of the marketplace.

    Can’t speak to the YP culture issues, although I know for years it was difficult to motivate the reps to sell online. Now, I’m told, everyone is selling it fairly enthusiastically.

    Would you disagree with that characterization?

  6. nhayes Says:

    I find it interesting that the Kelsey Group treats the falloff in print Yellow Pages as big news — when the truth is that WhitePages print editions probably succumbed to the online onslaught several dog-years back.

    The Web world is already assuming that everyone who is alive will be listed online, and that when you search, you may want a person, as Wikia proves. No need for the print phone book.

    Still, it’s amusing to watch print advertisers holding on — as desperately as they can — to the myth that print will retain its advertising power into the next few decades. J. Battelle points out, print media is on its death bed. And it ain’t going to rise from the dead, people!

    Ned Hayes / WhitePages.com

  7. darknight247 Says:

    Well having been away from the business for close to two years now, I would be hard pressed to characterize the current culture. What I can tell you is that when I was there; 16 reps came in and out in about a year, our commission and base pay structure was cut, and the yearly growth forecast went from 9% to 3%. I can’t believe that has gotten any better.

    I would also like to point out that this type of disruption has also occurred in the other print advertising vehicles, such as direct to home coupon mailers/magazines. It’s amazing to me the speed and the depth to which print ad spends have diminished. Is online marketing all to blame for that; probably not, but it it has to be one of the many reasons as SMB get more sophisticated with there ad spend.

  8. Greg Sterling Says:

    The disruption is happening across the board in all traditional media to varying degrees.

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  10. Yellow Page Grunt Says:

    To add to darknight’s comments …
    I work for a telco YP. My commission-based income is down 45% in the last four months of 2007 compared to the same period in 2006. And in my office of 40 reps, everybody’s income is down 10% ot 15% on the from a year earlier. And the geo-market we work is one of the most lucrative in the country.

    Another thing ailing telco YPs that few consider is their 100-year legacy. Today, “the rules rule,” meaning if a customers request doesn’t fit into a decision matrix – like YP discounts only if an internet product is sold, even if the customer doesn’t want the internet product – then the customer is canceled. In other words, when “the rules rule,” the company would rather force the model than keep a customer. That is arrogance. And that non-flexible arrogance, perhaps more than even the Internet’s emergence, may prove to be the downfall of legacy YP publishers.

  11. Greg Sterling Says:

    I wonder how representative (no pun intended) your experience is? Have you talked to reps at other companies?

  12. nparekh00 Says:

    Hey Greg, I am a former executive at an online Internet marketing firm called HouseValues Inc. We looked at the jobs market in the recession of 2001-2003 as a proxy for online ad spend where the recession accelerated the use of the Internet as the preferred marketing mechanism. In the real estate downturn of 2006 through today, we have actually seen a temporary retreat from online marketing and a return to traditional marketing. All online companies in the space have been devastated by the real estate downturn, BUT the real estate sections for many local papers grew in 2006-2007. Many agents had more listings on their hands and were looking to advertise listings versus generate new business which may be better suited offline than online. I also hypothesize when the average real estate agent (50 year old female, not online savvy in general) though about their marketing mix in a real estate downturn, they returned to the tried and true marketing mix of local newspaper and rack publications. I think this trend may turn around in 2008, but 2006 & 2007 have seen less online and more offline (in my analysis and opinion).

    Not sure what this analogy means in the recession – will the general SMB market behave more like the help wanted category or the real estate section of the newspaper? I think a recession will drive a short term pull back from all marketing and online will be harder hit. Medium term online will come back stronger and faster than offline.

  13. Greg Sterling Says:

    Interesting analysis. I know HouseValues well (or did). Psychology is a kind of “X factor” as you suggest. There are considerable barriers for SMB adoption of online marketing, which are quickly coming down.

    However, “inertia” and habit are powerful forces in the lives of individuals and even at a cultural level. So I don’t doubt the RE trend you cite as a by-product of “irrational” factors. In the next year, we may see nationals accelerate and SMBs “retrench” in existing methods — so there may be a dichotomy in terms of “pull back” vs. shifting of dollars from traditional to online.

  14. Will Local Advertising Suffer in Recessionary ‘08? Print vs Online? « Modelry Says:

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  15. Canada’s YPG the Latest to Add Video « Screenwerk Says:

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  16. Pamela Says:

    Has anyone heard if TMP Directory Marketing is being sold?

  17. Greg Sterling Says:

    Don’t know.

  18. John Mazur ReachLocal Says:

    Hey Greg -

    You are correct that the tipping point has come on the consumer side of our business, and I suspect the decline could even be greater than 10% in some markets. At the end of the day, the SME calls the shots on where they spend the $$$, — as they are further educated on new technology and consumer touchpoints online the choice to put more spend where their customers are searching will be inevitable as you have been saying for years. It is so clear that this is a rolling snowball for print. The focus for all of us serving the local business or the local consumer is to provide products and services that deliver real value that can be VALIDATED by the user (be it a consumer searching or an SME advertising on/offline).

    Thanks for the great post!

    JM

  19. Reginia Ostrander Says:

    Real nice layout and superb content, hardly anything else we need .

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