In his Search Insider column, Resolution Media’s Aaron Goldman lists ways to “fix” Yahoo. It’s a list of 10 things he would do if he were “running Yahoo!.” At number 10 Goldman advocates:
Buy RH Donnelley. The key to search monetization is tapping the long tail. Supposedly, the reason Yahoo did the Google deal was to help it make money off those obscure one-off queries. Google, with its 1 million+ advertisers, has an ad for just about every search. Yahoo needs to get access to the hoards of small and medium-sized businesses that are only buying Google today. RH Donnelley has over 600,000 advertisers, having sold Yellow Pages ads to them for years. Yahoo and RHD already have a relationship but the print reps aren’t having much success selling search. I propose giving away YP ads as added value with search buys. Short term, it’s a money-losing proposition, but print’s a dying medium anyway. Jumpstarting the bidding on the long-tail terms will pay off in the long run.
Whenever rumors of Google buying UK-based Yell have surfaced I’ve always dismissed them as unfounded for several reasons, among them the fact that Google doesn’t want the cultural and HR headache that would come with integrating a traditional publishing/media business like this. Yahoo! is in a similar situation and would be unlikely to buy a directory business. But directories are comparatively cheap now.
Given how much of its market cap the company has lost RHD might be now be worth the takeover effort for the advertiser relatioships and sales force.
September 3, 2008 at 8:32 pm |
C’mon. Notwithstanding market-cap, what about the debt? How would Y! shareholders feel about absorbing that (as of July 31 about $10 billion)? Or paying over $17,000 per advertiser (based on market cap + debt); a heck-uva premium considering that within the year around 40,000 won’t pay, over 100,000 won’t renew, and almost half those that will pay and will renew are considering abandoning the print product for the likes of Google and Y! in the near to mid-term anyway? Never mind the logistics of sales force re-education and integration. Needless to say, I don’t think Goldman is in line to be running Y! anytime soon.
September 3, 2008 at 11:19 pm |
“Yahoo! is in a similar situation and would be unlikely to buy a directory business.” And you’re right about the debt.
September 4, 2008 at 2:05 pm |
At $17,000 for each advertiser with their average spend of $100? per month and even if an web based buyer had little or no cost of goods going forward- how could any business get a directory deal financed?
September 4, 2008 at 3:17 pm |
Hmmm:
Before I saw these comments and debt I looked at a five year history of the stock price. From 2004-early/mid 2007 the stock climbed from around 40 to in excess of 80. Since then a horrible collapse in stock price.
Then I saw the comments, about debt load, and the shrinking base of customers, etc.
Its still a very interesting idea….and a way to get sales people on the street to move their advertising from print to the web and specifically Y.
For every sale and customer they have those sales people and management have contacts of hundreds of former or prospective customers. A comprehensive sales pitch offering everything from the “gold standard of web visibility” to an inexpensive option (say roughly equaling getting a $10/month line in the print YP could be offered.
The above doesn’t address the debt and other issues raised above….but cripes, you were correct with the low price ticket that the stock carries today.
Dave
September 4, 2008 at 4:22 pm |
Seems to me that the major search engines have low incentive to acquire any major IYP, since the cost of starting one from scratch would appear to be far, far lower. Most the major search engines already are well along in building their own versions anyway.
So, the main benefit potential to a search engine acquiring an IYP would be to acquire their existing advertiser base and their sales force. I’m not sure those are compelling enough reasons — if they incrementally build their own sales forces, they’d likely be simultaneously building their advertiser base with it.
I do think some of the major yellow pages companies might ought to seriously consider mergers — the synergies and current low stock prices could make it a win-win proposition.
September 4, 2008 at 7:41 pm |
RHD’s $2,700,000 proforma cash flow / 600,000 advertisers =$4,500 annual revenue per advertiser @ $375.00 a month.
Its been reported Google has 1,000,000 advertisers. Google’s approximate annual sales of US$20 Billion translates into $20,000 annual revenue per advertiser @ $1,667 a month.
September 4, 2008 at 8:26 pm |
[...] their investigations reveal about how much SMB advertisers are spending online. Reader and marketer Tim Cohn did some math on RHD numbers and found an average annual spend of $4.5K (all [...]
September 5, 2008 at 1:32 pm |
Tim, I did a posting early this year, trying to extrapolate from an “insider’s comments” article that appeared on Silicon Alley Reporter. Take a look, and see if this makes sense to you. The key conclusion I reach is that the active participation by what the YP industry considers SME’s is a LOT smaller than the macro numbers indicate.
http://evansink.com/2008/02/22/smes-adwords-recession-math/
September 5, 2008 at 1:45 pm |
Yes, it would be interesting to try and determine a “real” advertiser figure for the industry as a whole: 3.5, 3.2 or 3 million (or less)? Each of these numbers has been used in different contexts by different parties and interest groups.
September 5, 2008 at 2:45 pm |
Thanks Perry and Greg.
I haven’t done any research on this from a publishers perspective yet.
September 5, 2008 at 6:44 pm |
[...] Sterling over at Screenwerk wrote a great piece on the possibility of a web-based company actually purchasing the yellow pages and if it would make [...]
September 5, 2008 at 6:55 pm |
Except I was reminded of the billions in debt that almost no one would want to take on.
September 5, 2008 at 7:35 pm |
Anyway, It´s a good investment now. RHD and yellow pages wont go away. And the pps will go up from here. Not saying $30+ but i think fair value around $15
And i don´t se it as a takeover.
September 11, 2008 at 12:20 am |
I received a call from our print YP advertising rep today and it made me think of this and so many other print YP posts, let alone learned experiences from the past.
The advertising rep called introducing herself and explained she had just been handed the account. We have been a wide region advertiser in a lot of editions in a fairly large metro region. We aren’t huge but not tiny by any means….speding somewhere in the vicinity of $2-4,000/month. We have been using YP for decades. For years, prior to the internet, it was never the highest volume lead generator but it was always the number 1 or number 2 source for percentage of leads turning into sales. We have been an example of one of the sales premises that YP continuously repeats….”YP users tend to convert”. For years ROI on YP advertising was excellent.
It has generated miserable ROI for several years, yet we kept advertising. Fortunately we could afford to do so, and to continue to test this medium.
As a past and potential customer the phone call and effort to sell was a turnoff toward the advertising medium. The sales rep was nice, but the call was made last minute. One of the issues was going to print at the end of September and she wanted to get me in. The business attitude from YP was that they were doing us a service. I can’t comment on this approach for decades but over the last several years, as I handled this, YP always approached us in this manner. It was always as an afterthought. It was last minute, and always an approach that assumed we needed them –not vice versa or even in an equal handed manner.
Is print YP so understaffed that their sales agents can’t get to customers on a timely basis? Is sales management at print YP so full of problems that they can’t get customers needs and desires handled on a timely and respectful manner.
The sales rep reviewed that she would be handling the bulk of books in which we had traditionally advertised, one of which needs a quick response. I surprised her telling her that we probably aren’t spending a dime this year. I explained that the return from print YP had become miserable for years and we had continued spending the money with a horrible horrible return.
She didn’t hard sell me; she referenced buying trends from market sources, the turnover in the region, the need to be in front of people, etc.
Today the corporate approach, this year as with the last several years, reminded me of a talk I heard from senior corporate sales people from MCI probably about 2 decades ago. Every year, after AT&T went through divestiture and was faced with competition in the long distance phone service business it lost market share to MCI, Sprint, and other long distance competitors. Every year AT&T approached customers, or potential customers from an old attitude that stayed in place for a decade or longer –> AT&T is THE PHONE COMPANY–you have to choose us, etc. Every year MCI treated customers better, matched service and offered better pricing. AT&T didn’t change an antiquated attitude from the years when it was a monopoly for decades even as they lost market share. It was a corporate marketing sales thing.
In the comments above in this thread various concepts and pricing formulas were thrown around and a discussion ensued about the value of the “sales force on the street, the sales contacts, etc.”. These comments have been made over the last several years.
My experience as a customer over the last several years, and this latest experience is that the sales force on the street, and the management of print YP’s sales force is worthless until they learn how to handle customers and realize they are in a fierce competitive fight for SMBs’ advertising dollars.
Dave
September 28, 2008 at 7:51 pm |
Best Bidding Directory – Promote your Business
October 12, 2008 at 11:45 pm |
yellow pages directory…
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