Just saw a note from media analyst Ben Mogil of Westwind Partners that takes issue with the conclusions of a recent report from Veritas suggesting that Yellow Pages Group’s core print directory business is imploding, citing a sharp reduction in page counts in key markets.
Here is my post from last week regarding the hit YPG has taken as a result of the Veritas report.
In his note, Mogil writes that the Veritas analysis ignores YPG’s pricing power and the tradeoff between high ARPA and having a growing number of accounts. He points out that YPG has deliberately sought to cull smaller accounts in favor of larger, more profitable accounts.
We can argue whether it is wise long term to cull small accounts that could become larger down the road, especially in a market that is getting more competitive. But YPG is not alone in this approach. There is also a debate over how aggressively a publisher should use its pricing power, since there is always risk of backlash, again especially in the presence of competition. Nevertheless, it seems the report from Veritas seeks to penalize YPG for actions that are consistent with its strategy.
It is worth noting some of Westwind’s disclosures related to YPG. The company has provided investment banking services for YPG and co-managed public offerings of YPG securities, all within the past 12 months. That said, Mogil makes some good points.
Monster's deal to partner with the new owners of Philadelphia Media Holdings "would work with other newspapers," but probably makes more sense with papers in smaller markets, Monster CEO Andrew McKelvey told Reuters. McKelvey also said the Philadelphia deal was opportunistic and that no other newspapers are waiting in the wings.
"Would we consider a newspaper in California, or a newspaper in the Midwest? Sure," McKelvey told Reuters. But it would more likely be a paper in a small- to mid-sized market, where papers have maintained a commanding lead over Monster and other job portals, but could benefit from their superior technology and national advertising.
"The local marketplace is tough, particularly when you get into C and D markets," said McKelvey. "So what we’re looking at is, would it make sense to partner with some newspapers in those markets, because we’re really not there now."
Four million babies are born in the U.S. every year. Hence the interest of two e-commerce portals in local baby sites. Just last week, UrbanBaby.com, an e-mail-oriented baby-care tip sheet, was sold to CNET, and LilaGuides, a print-oriented local baby guide that features user reviews, was sold to The Knot, the marriage-oriented e-commerce portal.
UrbanBaby is currently in seven markets, with a special emphasis on New York City. But it has plans on the drawing boards to enter 19 more. LilaGuides sells its pocket-sized print guides for 23 markets, and has collected 32,000 Zagat-style reviews in those markets. The guides list for $16.95 but are provided for free in many markets if parents submit 10-plus reviews. While LilaGuides only uses online to collect reviews, it expects to ramp up its online platform.
Both sites feature local content but haven't really established local sales channels. With deeper pockets, and possible integration into existing content — The Knot has city/regional guides in key U.S. markets — we'd expect to see both partner with local media and commerce companies to fully leverage the local component.
The Knot's interest in a baby site makes sense to me. It is a logical extension. What CNET is ultimately going to do with a baby site past tech reviews of baby monitors, however, is kind of confounding.
A report issued July 19 by the stock analysis firm Veritas Investment Research has led to a sharp drop in the unit price for the Yellow Pages Income Fund, which owns Canadian publisher Yellow Pages Group.
According to this article, Veritas analyzed more than 33,000 pages of YPG Yellow Pages ads from 2003 to 2005 and found the publisher is losing ads at a brisk pace in its major markets.
One response we would have is, "So what else is new?" Most, if not all, major incumbent publishers are seeing erosion in their large market ad base, the result of competition from other publishers, the Internet, the economy, demographic trends and so forth. This is not to minimize the issues, since it is one of the most vexing challenges the directory industry faces. However, incumbents often experience the most precipitous erosion among their smallest accounts, which do not always generate as strong a return on investment as larger accounts. This suggests there may be an opportunity for competitors to target these smaller businesses with a product at a lower price point. It does not necessarily mean those advertisers that remain in the book are not getting a good return for their advertising dollar.
Veritas also calls YPG's acquisitions of classified operators and other directory publishers efforts to mask declines in its core business. Another way to look at it is as prudent diversification.
The Veritas report seems to suggest that YPG has gotten an easy ride in Canada, with too few questions being asked about its underlying business because the blue sky story made everyone more money. This may be a fair point. But the suggestion that core market erosion is a huge revelation is, to us, a bit overblown.
As of this writing, the fund’s unit price is C$14.52, still north of the C$13 Veritas says the security is worth.
Just got off the phone with Olivier Vincent, CEO of Canadian Phone Directories. He told me that his company, a competitive publisher backed by HM Capital (formerly Hicks Muse), has just acquired the search engine Yellow.ca to use as a platform for its online strategy.
CPD is taking on Yellow Pages Group, particularly in Western Canada, with a fairly straightforward incumbent strategy — differentiate with price and scoping and put an aggressive sales force on the street. The company is currently selling a new Vancouver book and a re-scoped Calgary book with designs to offer YPG a strong challenge in those two key markets. The publisher has about 3.5 million directories in circulation.
At first, Vincent says, the Internet was not top of mind for his company, but now it believes it must field a credible digital product. "We realized we were leaving a lot of money on the table," he told us.
Yellow.ca is a competitive search and directory product centered in Toronto with a small sales force of about 30 people. Vincent would not give too many details on the transaction, but he did note that the company comes with a few million in established revenues, so it is not simply about buying a platform.
TKG will write in more detail about developments in Canada in an upcoming report.
CNET ran a report stating Google ads are running on a Detroit-based radio station. This is part of the strategy revolving around the dMarc acquisition last year. Other portals and ad networks have not been shy in suggesting that they will also pursue offline ad opportunities. This naturally suggests, given the acquisitive nature of portals, that Spot Runner, Bid4Spots and others will become acquisition targets sooner or later.
Bid4Spots has about 2,200 stations in its network, and it is adding about 30 new ones each week. Spot Runner has been very successful landing partnerships with Cendant (Century 21 and Coldwell Banker) and others.
Generally, online to offline is an interesting trend that we've been following. Insider Pages has its print directory with tracking telephone numbers. Representatives tell TKG they are pleased with the metrics and will drop a second print guide in the Palo Alta area in the next 30 days. LiveDeal and AdStar also have a partnership to push classified content from the Web to print.
Here are a few previous posts on this topic:
Insider Pages
Bid4Spots
AdCenter
LiveDeal and AdStar
The Kelsey Group is preparing a report scheduled for release in September that evaluates the current field of online directory and local search sites.
Part of the process of researching this report involves soliciting the views of the industry on how various products stack up and also what makes for a good online directory/local search product.
If you could, please take a few minutes to complete our 2006 IYP/Local Search Product Survey by clicking here.
The survey will only take a few minutes to complete, and your input is very important to us. If you’ve already filled it out, please accept our thanks and disregard this request.
This is your chance to weigh in on how these products are faring and how this space is developing.
