On Thursday’s earnings call, DexOne (ex-R.H. Donnelley) leaders cautiously projected that the rate of decline in ad sales would improve in 2010, from being down 20 percent in 2009 to down between 12 percent and 15 percent this year. The company made the case to financial analysts that its performance in 2009, while dire, was in line with the overall media landscape.

Most critically, DexOne leaders tried to sell the story line that it has emerged from bankruptcy as a stronger, healthier company that is well-positioned to succeed in the local marketplace. Along with other leading publishers, DexOne is offering its take on the “one stop” model where SMBs can go for a simplified solution that delivers leads from multiple channels, including a mix of proprietary and third-party sources. DexOne CEO Dave Swanson doesn’t even like to refer to the business as a Yellow Pages company, even though the core product remains the primary, if diminishing, source of revenues and leads.

“We have evolved far beyond our Yellow Pages roots,” Swanson said. “Yellow Pages is only one of seven platforms we are using today to drive leads for our customers and revenues for the company.”

For the full year 2009, DexOne posted net revenues of US$2.2 billion, down from US$2.6 billion in 2008, a 16 percent drop. Ad sales reflect the value of ads sold for books published during the year, while net revenues account for dollars amortized during the year, since directory revenues are recorded over a 12-month period to reflect the lifespan of a directory. Ad sales are generally considered a better indicator of how the business is performing.

DexOne CFO Steve Blondy, echoing other industry leaders, described the third and fourth quarters of 2009 as the “bottom” in terms of ad sales declines. Ad sales were down 21.9 percent in Q4 2009.

He added that the company is being cautious in its 2010 guidance because the small-business advertiser is not bouncing back as quickly as larger and national advertisers. And that recovery will continue to lag. “Small businesses are not participating in the recovery consistent with [advertisers in] major media.”

Some other earnings call highlights:

• Swanson described the company as following a “merchant centric strategy.” Essentially this means it is all about aggregating the kind of traffic that drives quality leads to advertisers.
• DexOne reported losing 110,000 advertisers in 2009. Blondy said about two-thirds of the loss was the result of companies going under or being locked out for credit reasons.
• Swanson reiterated the recent announcement that DexOne is aggregating Yelp reviews into its DexKnows platform. BIA/Kelsey originally reported this on the Local Media Blog on Feb. 1.
• There was some back and forth on EBITDA margins. DexOne reported a 52 percent 2009 margin, and margins are expected to decline further in 2010. Pressed on this, Blondy shot back that it is a “business decision” to invest in the customer value proposition. “We are getting a diminishing return from cost savings,” Blondy said. “We can’t save our way to success. Our focus is on growing the top line.”

We’ve been listening to earnings webcasts for the major global directory publishers over the past days, trying to pick up any clues for how publishers see 2010 developing. Most publishers have shortened their guidance horizon or have stopped giving it altogether. In many cases, the banks and hedge fund analysts on the calls are pressing CEOs and CFOs pretty hard for any indication absent of formal guidance of how the year is shaping up.

What we are hearing on these calls is a hint of cautious optimism that the rate of decline in print revenues has bottomed out and in some cases the rate of decline may be slowing.

For example, here is what SuperMedia CFO Dee Jones said on last week’s earnings call:

“From an ad sales perspective we feel that we are in the valley. Our ad sales for the fourth quarter, on top of what we did in the third quarter, indicate to us that we are in the valley. It is too early to tell when we get out of the valley.”

Jones later clarified that he was referring to the rate of decline in ad sales. For the full year 2009, SuperMedia’s ad sales were down by 18.7 percent. SuperMedia, which emerged from bankruptcy on December 31, has stopped breaking out its revenue performance by segment (print, online and other), which it had done through the third quarter of last year.

Here is what Yell Group CEO John Condron said on his company’s Feb. 4 call announcing its third quarter and year to date earnings (the company’s financial year ends March 31):

“We are still experiencing revenue pressure. However, the rate of decline is stabilizing, and there is a significant increase in confidence.”

Through three quarters, Yell Group posted a group revenue decline of 13.3 percent at a constant exchange rate.

Pressed on this point during the questions and answers session, Yell CFO John Davis conceded that “We have a Long way to go. The rates of decline are still in double digits.”

Still, both Condron and Davis continue to argue that the negative performance of directories, print in particular, is largely the result of the brutal 2008-2009 economic environment, and not a long-term secular shift. A recent (unscientific) BIA/Kelsey online survey of industry insiders suggests that many if not most in the industry believe the declines are the result of a combination of secular and cyclical forces.

At this stage of the year at most directory companies, the (calendar) first quarter and much of the second quarter revenue has already been sold.

These comments suggest essentially that the business is stabilizing and no further deterioration from the abyss that was 2009 is expected. Perhaps there may even be a modest improvement in the rate of decline as the year progresses.

BIA/Kelsey expects 2010 to be a year where the directories business stabilizes. The degree to which things improve in 2011 and beyond will be driven in part by the performance of the economy, but perhaps even more so by the directory companies themselves.

The default strategy for many start-ups is to plan to be acquired by Google or Microsoft. But the M&A scene is much more complex than that. Jordan, Edmiston Group Co-President Tolman Geffs, speaking today at IAB’s Annual Leadership Meeting in Carlsbad, California, joked that Google is set to buy Oregon, Washington and Canada “just to mess with Microsoft.”

Speaking more seriously, he noted that “we don’t need Google and Microsoft to buy everything.” Incumbent specialist firms would find higher value in a number of areas. These include marketing analytics, consumer data, cable and entertainment, Web delivery, infrastructure, major agencies, large display ad networks and performance advertising (such as Demand Media).

Geffs noted there is currently a vibrant deal environment, with 178 deals made in the second half of 2009 worth $13.3 billion. This was a major change from a “dead” first half when just 129 deals were completed, he said.

Still, there has only been a “partial recovery from previous levels for online plays. Classifieds is the only sector of advertising that was down,” he said. Especially hot areas include online media, interactive marketing, video and infrastructure plays.

A real “head scratcher” for Geffs is the $1 billion+ committed by Google ($750 million) and Apple ($275 million) for two mobile ad networks: AdMob and Quattro Wireless. “That’s the entire forecast for 2012 mobile ad revenue” he said, noting that the high prices have led to a stunning $211 million worth of investment in nine other mobile ad nets by VCs.

In fact, Geffs questions whether mobile is even a good ad medium. “They help consumers complete tasks,” he noted. But “is this a great promotional medium?”

Geffs, former president of IBS, a TV station Web site builder and advertising provider, is also critical of “vertically integrated” models that rely on content aggregation and search, such as Citysearch and ReachLocal. Costs are too high.

ReachLocal, for instance, is a vertically integrated play that only leaves 7 percent of its revenues to support its product and platform, after spending 55 percent on consumer traffic and 38 percent on sales and marketing.

He’s more excited about local companies that solve a problem and keep content, audience and sales costs low, such as Outside.in, Datasphere, Triton Media, MerchantCircle, Manta, Yelp and Angie’s List. “We are big fans,” he said.

Last week the Australian directory publisher Sensis released its half-year financial results, ended Dec. 31, 2009, which showed pretty strong resilience but nonetheless a meaningful decline in print revenues. For the half-year period, combined print and online Yellow Pages results were down 4.3 percent. Print Yellow Pages declined 8.7 percent. Including White Pages, the print drop was 7 percent. White Pages (print and online) declined 3 percent.

These are declines that would be the envy of most global incumbent publishers, and in fact they are far better than what other traditional media peers have experienced in Australia. Newspapers, for example, declined 18 percent in the same period. But over the past few years, Sensis has been an industry beacon for sustaining print growth while so many other companies were seeing declines ranging well into double digits. The latest results raise the obvious question of whether Sensis is facing the same fate as its peers, albeit delayed a year.

We spoke yesterday with Sensis CEO Bruce Akhurst, who doesn’t believe the declines reflect a sudden secular shift, and he expects to see “a more stable selling environment” in 2010 than in 2009. Akhurst offered several explanations for the 1H 2009-10 drop, and for why he is confident that print will rebound.

Akhurst noted that the first half of Sensis’ July-June financial year features all its largest markets (including Sydney and Melbourne), which as in other global markets have often substantially weaker print performances than small town and rural directories. Second, Akhurst pointed out that sales canvasses for these books took place in the early part of 2009, when worry over the global financial crisis was at its peak.

Akhurst also cited cause for hope. “Our customer base has remained intact,” he said, adding that most of the decline came from advertisers pulling back, or failing to expand into new books and categories as in the past. In general, customers did not abandon the category. Akhust says Sensis has 600,000 advertisers.

Also, Akhurst said that while the financial crisis created an overhang of fear, the actual economy has not suffered very much, with unemployment around 4 percent. He believes an improving economy plus loyal customers suggests a rebound in White and Yellow print.

“The next canvasses will be very important to us,” Akhurst says.

Still, the company is making changes. First it is moving significantly this year from a product based to a “network based” sales approach, meaning Sensis will focus its sales messaging around lead-generation and ROI metrics, across channels. The company will still sell on a pay for inclusion basis. Akhurst does not see pay for performance or performance guarantees anytime soon.

“It’s a continuation of a journey we’ve been on,” he said, noting for example the company’s dramatic increase in its commitment to call measurement a few years ago. The completion of the journey to the “network” approach depended on launching a new generation Amdocs publishing system, which went live in October.

IAC’s ServiceMagic reported today that it saw a 51 percent boost in 4Q revenues, growing from $25.3 million in 2008 to $38.2 million in 2009. The boost was accompanied by 21 percent growth in the number of home and trade providers that pay for its leads and a 46 percent gain in service requests. The addition of revenues from two new units — ServiceMagic International and Market Hardware, a search and Web site provider for verticals — also increased the pot.

Profits, however, were low at $1.2 million. They were held down by increased marketing efforts, including an expanded sales force and a major advertising campaign. Losses caused by the rapid expansion of the company’s international unit also held profits down.

ServiceMagic CEO Craig Smith is keynoting at Marketplaces 2010, March 22-24 in San Diego.

Less than a month after its peer company Idearc Media emerged from bankruptcy with a new name (SuperMedia) and a new lease on life, R.H. Donnelley has done the same thing. Freshly out of bankruptcy and US$6 billion lighter on its balance sheet, RHD has shed its historic corporate name in favor of DexOne, which will trade on the NYSE as DEXO.

We spoke with DexOne CEO Dave Swanson this morning about the name change, the company’s going forward strategy and the outlook for the small-business economy in 2010.

Right out of the gate the new company is making changes. Besides a new name and a new board of directors, it is also forming new partnerships. Swanson told us DexOne has inked a deal with Yelp to incorporate Yelp reviews into the DexKnows.com IYP.

Swanson told us the name change had several purposes. The first was that the name R.H. Donnelley, for all its history, is too closely tied with the print Yellow Pages business. And Swanson made it clear that, “Strategically our business is no longer Yellow Pages. It is marketing services.”

He added that because the company is the product of so many acquisitions (Sprint, Quest Dex, Business.com), it made sense to get the whole company behind a single name. And finally, the “One” in DexOne is meant to invoke the idea that DexOne is a one-stop solution for small-business advertisers.

The DexOne vision for a sustainable future is similar to what other companies are trying to execute — provide local advertisers with a mixture of advertising and service products that help them drive and manage new business leads.

This means selling everything from print Yellow Pages to its own IYP to others’ IYPs (Yellowpages.com and SuperMedia) to voice, online video, SEM and so on. Then, DexOne takes the complex melange of lead sources and boils it down into simple packages, or “matrixed pricing.” Swanson compares this approach to how cars are sold — there is a base model, a mid-range model and luxury model.

Given the obvious effort to distance his company from the traditional Yellow Pages label, we asked Swanson where traditional Yellow Pages fits into DexOne’s long term plans. He says print YP remains the predominant source of leads for most top categories, but each year, that becomes slightly less so.

“If all a company does is sell Yellow Pages, it will be difficult to grow over the next 10 to 15 years,” Swanson said. “The product is in slow secular decline. But that doesn’t mean our business has to be in slow secular decline.” Still, while conceding a secular decline, Swanson says he believes print will be relevant for at least another 20 years.

As for the cyclical element, Swanson see only modest improvement in 2010 over 2009.

“The local business economy is not recovering at the rate that financial services and some other segments are recovering,” he says. “And as goes the local business economy, so goes our business.”

AT&T released its full-year 2009 earnings today, and its Advertising Solutions unit, which includes print Yellow Pages and Yellowpages.com, posted total revenues of US$4.8 billion, a 12.6 percent decline.

AT&T online directories unit Yellowpages.com grew 12.7 percent in Q4, compared with Q3 growth of 20.7 percent. Total online revenues for the year were US$884 million, which accounts for about 18 percent of total Advertising Solutions revenues. This puts AT&T at the high end of North American publishers in terms of share of revenues from online.

Margins took a hit in 2009, not a surprise given the grim economic environment. BIA/Kelsey calculates the Advertising Solutions 2009 margin at 39.2 percent, compared with 45.5 percent in 2008.

One avenue that AT&T will pursue this year to shore up its position online — increasingly critical to restoring the business to growth — is the launch of social media site Buzz.com, currently in invitation-only “alpha” phase.

This article from Forbes yesterday outlines the new product — widely reported to be in the works for some time. Yellowpages.com President David Krantz is interviewed in the piece. While the site draws immediate comparisons to newly flush Yelp, there are some key differences, notably the choice of a “favorites” option over the use of full user-generated reviews.

Buzz.com will be a critical test case for how traditional directory publishers (a label AT&T Ad Solutions no doubt will increasingly resist) can pivot their approach to business into social media. Other directory publishers actively involved in social media include Eniro, European Directories and Truvo.

Venture capital king Frank Quattrone (the banker behind Amazon, Netscape and Cisco) has a message: IPOs have gotten too big, innovation is being stifled, exits are being delayed and firms need straight-forward advice, not Wall Street “casinos.”

“Wall Street no longer knows how to value,” he complained, during a breakfast talk before 500+  VCs and entrepreneurs at the San Diego Venture Group.

Over the past ten years, the average IPOs is 40 percent below its rollout price, noted Quattrone.  Part of this failure is because of unsustainable trends driven by banker greed. This forces companies to artificially drive big profits and assemble “vertical stacks of technology” instead of focusing on what they might do really well. Citing Oracle’s acquisition of Sun as an example, he said “we’re going back to a world where companies want to do everything.”

It’s a far cry from the 1980s, when a focused company like Adobe could do well with a $5 million IPO handled by small banks such as Hambrecht & Quist. While all the big IPOs are being handled by monster banks today, there’s nothing wrong with using small banks, Quattrone added. “It’s like saying that if you don’t get into Harvard or Stanford, you are going to work in the coal mines.” In fact, he says, there are “plenty of great institutions.”

Quattrone, who recently overturned a conviction for interfering with a government probe into IPO allocation, said he’s through with banking and its broken system and wants t ore-enter the builder class. ”I’ve always been more of an entrepreneur than a banker,” he said (although there are few bankers in Quattrone’s $160 Million per year category).

His new 23 person firm, Qatalyst, will advise firms, including VC backed startups and “tweeners” earning between $1 billion and $1.5 billion per year. His hopes are to build stable relationships with the investment community, rather than the get rich quick mentality of recent years – and ultimately achieve a better track record of successful IPOs.

When eight of ten IPOs can be counted as successful, average financial advisers will be able to recommend them again, he said.  “That’s the key for fund manager influence.” For now, they don’t go near them.

And yes, Quattrone is unrepentant: he still believes that technologically sophisticated bankers should get rewarded for their insights and perseverance with higher shares of IPO allocation than “know nothing” hedge funds.  “Don’t be democratic in your allocations,” he said.

Idearc Media, which exited bankruptcy on Dec. 31, has changed its name to SuperMedia LLC, as part of an effort to start on a fresh course post-bankruptcy. The restructured company now trades on the NASDAQ Global Market under the symbol SPMD.

In a recent briefing with BIA/Kelsey analysts, SuperMedia CEO Scott Klein talked about how the business has changed over the past 12 to 18 months and how the company plans to use the opportunity bankruptcy has provided — it has US$7 billion less debt than before it filed — to build a sustainable local media business.

Here are some highlights from our call with Klein, which we will address in greater detail this week in a Kelsey Report Advisory:

• Shifting to a consumer-orientation has been key to the turnaround strategy. By doing so, Klein believes SuperMedia will drive more advertiser value.
• Klein believes there is a strong foundation for print usage. He concedes a shift to online, but believes it is mostly new users, while existing traditional users remain loyal to the book.
• The Super Guarantee has been successful in driving consumer engagement with the SuperPages brand. How that translates into sales will not be known until this year.
• In order to improve online sales results, SuperMedia has shifted to a fixed fee plus guaranteed results pricing model. The previous approach, which emphasized pay for performance, did not work. Klein says pay for performance is appropriate only for  about 15 percent to 20 percent of the customer base.
• When asked about ReachLocal in light of that company’s recent IPO announcement, Klein said his view has changed. “If you asked me that 18 months ago, I would have said they were a competitor.” Now, Klein believes ReachLocal is a strong potential partner to resell SuperMedia products.
• SuperMedia has high hopes that its EveryCarListed auto vertical will help it re-engage with the auto category, which Klein concedes has “all but abandoned the Yellow Pages.”
• Print direct marketing is a core focus of SuperMedia’s business. However, Klein said there is a limit to the number of products the company will put into its sales reps’ bag. For this reason, he was lukewarm at best on e-mail marketing as a product extension.

New Zealand’s Yellow Pages Group posted a net loss after tax of NZ$338 million for the financial year ended June 30, but much of the loss resulted from one-time items. The company actually managed to grow revenues 1.4 percent to NZ$297 million, with print dropping 1.6 percent (a modest decline to say the least compared with other global publishers), while growing online revenues a whopping 43.9 percent. Online still accounts for a comparatively small piece of YPG-NZ’s revenues at 9.5 percent.

One of YPG-NZ’s primary concerns is its debt. The company was acquired by a private equity consortium in May 2007 at the peak of selling multiples for directories firms, at 13 times EBITDA, leveraging it to 10X to make the deal. The company was worth about NZ$2.3 billion when it was bought and perhaps a billion less today.

In a breakfast I had with CEO Bruce Cotterill recently in Milan (where he was speaking at the Yellow Pages Today conference), he described his job as helping the owners earn back the money they’ve lost since the sale. To do this, Cotterill is focused on costs, execution and making his company more focused on customer satisfaction, among other things. He said in the nine months since he’s come on, he’s personally phoned every unhappy customer who has come to his attention.

He also understands that he needs to grow revenues. He believes much of the recent softness in print is related to the economy and poor execution, though he concedes a longer term trend away from print. He believes strongly that YPG-NZ can still benefit from investing in print, while the company also needs a new online platform as well as a new publishing platform.

In his presentation at YPT, Cotterill listed a set of nine areas of near-term focus for his company. They were: optimizing the sales force; meeting financial obligations and opportunities; becoming “content rich”; establishing brand leadership in NZ; re-enabling business systems; aggressively growing digital; providing outstanding customer service; attracting, developing and growing great people; and, finally, defending and growing print revenues.