‘E-Word’ Used in WSJ re Yellow Pages

Here’s an unpleasant headline for the yellow pages industry in the Wall Street Journal: “Extinction Threatens Yellow-Pages Publishers“:

The audience for online yellow pages remains relatively small, and traffic growth is slowing. So many directory services are vying for the ad dollars of local businesses that no single site has an authoritative roster.

Meanwhile, ad dollars are drying up as small businesses — the industry’s bread and butter — find it harder to pay bills or have cut their spending sharply.

Print and online ad spending on yellow pages will plummet 6.3% next year, more than double the rate of decline expected for broadcast TV, according to forecasts by Wachovia analyst John Janedis. Within the next four years, ad spending will fall 39% in print directories alone — the steepest projected decline across all local-media categories, according to media-research firm Borrell Associates.

They’re talking mostly about print, and about the publishers that depend on print as their primary revenue source. Definitely the “half-full” version of the story.

The issue it highlights accurately is the “dilemma” that print publishers face: growth is online but revenues are offline by a large margin. The newspapers face a more dire version of this same problem. Yellow pages have done a better job than newspapers of selling the Internet and offering ad products to SMBs that reflect the changes in the marketplace.

The article doesn’t discuss the value of IYP leads (vs. general search) or the almost unique position of the industry in terms of reach into the small business market.

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14 Responses to “‘E-Word’ Used in WSJ re Yellow Pages”

  1. SHobbs Says:

    According to Rupert Murdoch, those who predict the demise of newspapers because of the Internet are “misguided cynics”. What does that make the WSJ reporter? She’s predicting the death of Yellow Pages for the same reason.
    I urge your industry readers to respond to what appears to be misguided interpretation of what’s actually going in Yellow Pages. With an ROI of 33 to 1 for national advertisers and 14 to 1 for locals and 17.4 billion references in 2007, we continue to connect sellers with buyers not browsers. Small businesses rely on the Yellow Pages, in all it’s forms to find new customers – nearly 40% of print users and 50% of IYP users are new customers. So let’s set the WSJ straight. Full disclosure, I work for the Yellow Pages Asslciation.

  2. Eric Fredine Says:

    There is a relatively transparent market for online leads in the form of the sponsored search auctions that establish prices paid for online leads. Unfortunately for the IYP’s these prices are generally far lower than the prices they effectively receive for leads delivered through the print media. As such, I think their greater challenge may be that as they deliver increasing numbers of leads through online media their margins (and thus their revenue) will be much lower. While I think there are arguments to be made that the price of these leads (those that have clear local value) may go up over time (to reflect their true value to local merchants), I don’t think these increases will ever equal the kind of effective prices achieved through print media. Online media is just plain more efficient.

    In a recent blog post (http://radar.oreilly.com/2008/10/network-effects-in-data.html) Tim O’Reilly talked about the law of conversation of attractive profits:

    “The consequence of IBM’s design of a personal computer made out of commodity, off- the-shelf parts was to drive attractive margins out of hardware and into software, via Clayton Christensen’s “law of conservation of attractive profits.” Hardware became a low margin business; software became a very high margin business.”

    I think this concept has direct applicability here. If the effective cost of leads for merchants is going down what are they going to spend their marketing budgets on instead?

    Cheers,
    Eric

  3. Chris Silver Smith Says:

    Hobbs, I believe the previous figures cited were 13.4 billion print yellow pages references, not 17.4. Even the 13.4 billion references number is open to question, of course, since print YP usage has been showing some decline in recent years.

    However, there is definitely a large and substantial amount of usage of print directories, even if overall usage may be declining as many analysts have seen. Wall Street valuation of YP companies has fallen much faster than the rate of usage erosion.

    Greg’s right that Wall Street is apparently missing a bit of the value proposition of YPs — the deep relationships with small businesses and the fact that leads from YPs tend to be more valuable than most other sources since consumers referred from YP tend to convert at much higher rates due to their being further along on the buying process.

    YP Companies’ two biggest problems are:

    1- Navigating the transition from revenue dependency on a fast-eroding product: print yellow pages. (While increasing revenues from new media, of course.)

    2- Public Relations – the industry’s slowness to acknowledge consumer trends and effectively lead the conversation so that negative PR doesn’t undercut them.

  4. Greg Says:

    Eric:

    That money might simply go “off the table” for marketing purposes among selected SMBs.

  5. Andrew Shotland Says:

    I am going to dispute “the audience for online yellow pages is relatively small” as off the mark. The size of the audience for local search is what they should be talking about. In my experience that audience is large and getting larger by the day.

  6. Eric Fredine Says:

    Greg,

    I’d agree that some of that money might disappear, but I also think a lot is going to go in to services to help an SMB get FOUND – a decent website, SEO, SEM, reputation mangement, blogging, getting their inventory online, etc. These services will probably continue to be delivered by a fairly diverse range of providers ranging from independent, home-based consultants to specialized local providers and specialized vertical service providers.

    To accelerate this trend, these providers will have to get a lot better at presenting solutions in ways that make sense to business owners – who probably could care less about the alphabet soup of search technologies. This is one thing the IYP’s have always done very well – sell things in a way that makes sense to the business owner. Of course, the IYP’s could go there as well – but I’m thinking in much broader terms than just selling an SEM package.

    Cheers,
    Eric

  7. Greg Sterling Says:

    Agree that there’s a lot more to spend money on than just SEM.

  8. Greg Sterling Says:

    Agree and some of that will translate/transfer into mobile, which the YPs will be facilitating for SMBs as well.

  9. Paul Jahn Says:

    Although declining in usage, I don’t believe that print books are going away at all.

    Personally, I haven’t had a single use for the print book since at least 2004, but probably longer than that. I’m also not a fan of multiple print books being placed in front of homes that won’t get used, especially abandoned homes.

    SHobbs would call me a “misguided cynic”. I’m ok with that. If the print YPs change to an opt-in format, I’ll be a big fan.

  10. Tracy Manning Says:

    In my humble opinion, Ms. Steel is failing to consider a few critical things:

    1) Fragmentation has been a bear for ALL traditional media, making each and every one of them at least a little less effective than they were previously — but at the same time, making it impossible for emerging media to corner the market either. As one of my favorite co-horts who works in another traditional media industry likes to say, “Fragmentation is a bitch for us all!” Pardon my French, but I think that says it perfectly. Whether you’re on the client or the agency side of things, the rapidly changing media landscape has turned advertising as we know it on it’s head. There are no silver bullets anymore, and the answer for a long time won’t be “either/or”, but rather, “and”. The key will be getting the mix right, and both print and internet yellow pages will have a place in that mix.

    2) Not all leads are created equal. The “Google Effect” has gotten all businesses accustomed to looking at ROI on a cost per impression, cost per call or cost per click basis, but are any of those really the end-all-be-all measures? At the end of the day, it comes down to how those leads CONVERT, what the AVO is, whether buyers from a particular lead source tend to be more susceptible to an upsell conversion on the call, etc. Many of the more in-depth studies I’ve been involved with across many categories have proven over and over again that a print YP lead is the richest, highest converting lead you can get. We need to continue to do more of that work, and until that story changes, fight the hype with the facts to defend Yellow Pages position in the media mix.

    3) The “bones” Yellow Pages are built on are VERY solid. When I say this, I mean the local sales force and the local listings databases. What Google or Yahoo wouldn’t do to get their hands on those, eh? Let’s face it, there’s a reason that when you do a local search on Google (i.e. auto repair, st. charles, IL) that several of the top listings on the page are actually IYPs, right? I say this to remind us about that foundation as we’re thinking about new technology that is emerging rapidly: mobile, IPTV, even other new in-home devices that will allow Yellow Pages to become a “changling” if you will — to merge into other more technology-forward, updatable, and user-friendly forms. Take, for instance, AT&T’s new Home Manager product. Already you can access your yellow pages there in the markets where it’s been introduced, putting a virtual copy of the yellow pages a touch-screen away from the consumer in several rooms of their home. Or the iPhone … you all know that story. For the consumer, it’s all about ease of use and convenience, not necessarily platform. And I guess I can think of a YP company or two who are well-positioned to leverage technology and the strong “bones” of the current YP product to meet that demand.

    In short, I urge us all to step away from the hype and look hard at the facts … to stop pretending that all of us who blog on forums represent the average individual. I for one have been a DSL/Broadband customer since 1999, went wireless-only in my home in 2001 and have had a wireless home network since that same year. I am the epitome of an early adopter. I am not my mother or my grandmother, and neither are any of you. But guess what … when it’s most convenient for me — when they can answer my question more quickly or thoroughly — I still use print and internet YP. And I suspect there are more of us out there (not to mention those like my mother and grandmother). :-)

    • SEO Specialist Says:

      Tracy your response hits right on target. Yellow Pages are nothing to hide from or sell an advertiser away from. Your response is truth and I love it! Go over to search engine land and post your stuff….Those guys spread all kinds of crap. I can’t believe it.

  11. jk Says:

    Tracy, you bring up a lot of excellent points. Print and internet in combination works for me and a lot of people I know. The particular companies mentioned in the article are saddled with debt and in trouble, but that doesn’t reflect the industy as a whole. I think the headline for the article is rather misleading.

  12. SEO Specialist Says:

    http://askmeaboutyp.wordpress.com/

    Check this out for a reality check on how Print yellow pages is really effected. Most that make negative comments have no idea about what they are talking about. Search Engine Land is a prime example of BS on the web. When I ask for hard local proven facts that print is not performing I sure can’t find it, but I can find multiple examples of how it costs alot more to generate a lead from SEM than traditional print. The point is I live it every day and have both both print and internet advertising for small business. Here is the truth- #1 a proper media mix is the best and for some small and medium business the print yellow pages is king and will be long in the future. Check out the other blog if you want some truthful info. Don’t get sucked into the web BS that floats around and do what is best for your business or customer base!

  13. Seo Specialist Says:

    Google local is taking away the need for yellow page type directories. If you are listed in the 7 pack of listings your click through rate is much higher tham through a directory listing and it’s free to boot.

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