The Yellow Pages’ Financial Problem in a Nutshell

This table from Idearc Media’s Q4 2008 quarterly report explains the challenges the yellow pages industry faces in a nutshell:

Extrapolated Revenue Based on 2008's Gains /  Losses

Yes, they have been growing the online sides of their business while the print sides have been sliding. However, when you look at the actual dollars involved (those are $ millions), the online businesses don’t come close to making up for the losses in print.

While bringing in almost $3m in new revenues through online efforts in a tough market should be applauded, they lost almost a million a week in revenues on the print side of their business. Ouch.

I decided to extrapolate out the rate of losses and gains from 2008 at Idearc Media over the 40 years to see what that would look like. This is in no way a prediction of how things will go down but a mental exercise into how print and online media are related. It’s very similar to what we’re seeing with newspapers these days (click the image for a larger version):

Extrapolated Revenue Based on Q4 Year over Year Gains / Losses

Under this extremely oversimplified model, revenues from online efforts wouldn’t surpass print until 2025 and that would only be because print declined enough to catch online on the way up. And online revenues wouldn’t reach today’s actual print levels until 2052.

My guess is that this model will miss for a couple reasons: Print will likely decrease at an increasing rate as businesses abandon it for other more efficient ad models, including direct communication with customers. Online will likely grow faster than this model predicts as YP companies figure the web out in order to survive. At some point well before 2052, most yellow pages will be killed because they’ll no longer bring in enough revenue to justify printing and distributing.

The chart above in based on 2008 revenues at Idearc Media. I put together the same chart based on year over year gains & losses in Q4 2008 where things were worse than earlier in the year. Here is how that works out:

Extrapolated Revenue Based on Q4 Gains / Losses

I often encounter people who continue to dismiss the value of online advertising vs print based on the ratio of money spent on the two. The mistaken assumption is that a dollar goes just as far whether it’s spent in online or print advertising. That’s simply not the case. A huge portion of an offline dollar is spent on trees, ink, gas, and labor in order to get an ad (potentially) in front of a prospective customer. Online efficiencies allow people to do more with less.

It’s going to be interesting to watch how companies that were built on print models with near market exclusivity will be able to transform themselves fast enough to survive. From what I understand, they have plenty of employees who see the light on this stuff, but they tend not to be the ones calling the shots.

Note: I updated the units on the charts. Had billions instead of millions for units.

5 thoughts on “The Yellow Pages’ Financial Problem in a Nutshell”

  1. The premise that dex online services have immense value is lacking. Adwords (google) is far cheaper per month and works, whereas dex just recently started buying adwords ads to direct to random subject-related dex pages (ie: you don’t even get impressions on search pages, dex gets those). I know someone in a small business paying $70/month for some sort of dex services, online their presence doesn’t even show up. We did a bit of work to get adwords going correctly and spend less than $50/month to get far more exposure.

  2. As I tried to comment earlier but couldn’t due to your Strib-u-fresh experiment, my restaurant client was contacted regarding the Mpls book recently. 18-year sales vet calling on Saturday and totally non-high pressure. Very cool to deal with other than pretending DEX Online has value. She also didn’t seem to care how long we talked even though I had just slashed a display ad to a bold faced listing.

    The assholes are gone, and DEX is just cleaning up what’s left on their plate. I give them two years tops and what remains after that will be a very skinny, very useless book, if anything. Can DEX Online save them? Not so long as you only get paid advertisers when you do a query. After this book comes out, DEX Online fans will probably be shocked to find that there are suddenly only 3 Thai restaurants left in town, and all three of them will be shaky because of YP expenses.

  3. Fun graphs, but it’s not realistic (or scientific) to use one year’s growth/shrink rate to predict the next 40 years. I can’t believe they put that top chart in their annual report! Bunch of frickin financial geniuses.

    Still, with short-term growth rates anything like 2008’s, this business is doomed.

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