In 2004 91 percent of Golden Pages’ revenues were from print products and just 9 percent were from digital. Fast forward to 2010 and, through its vertical and digital transformation, revenues have shifted to 70 percent digital and 30 percent from print. Golden Pages identified five consumer needs — reliability, necessity, specialty, affordability and emotional involvement — and created verticals.

The transformation in strategy includes rich content built on its Internet Yellow Pages to deliver a great consumer experience. Lempert offered the example of Zap, Golden Pages’ local shopping and comparison site, which lets consumers shop and then make informed decisions based on local business information and inventory of where to buy the products. Golden Pages took the Zap model and “zapped” its Yellow Pages into verticals.

While avoiding predictions of a full recovery, Dave Swanson, CEO, DexOne (formerly known as R.H. Donnelley), said on this week’s first-quarter 2010 earnings call that the company does expect the rate of decline in ad sales to improve sequentially throughout 2010, ending in the range of a 12 percent to 15 percent decline in ad sales this year, compared with a 20 percent drop in the abyss that was the year 2009. Ad sales for the first-quarter declined 19 percent, a sequential improvement over the 22 percent drop in Q4 2009 ad sales. Reported revenues were down 22 percent

Amid worries that the media landscape has shifted so much that traditional media players will recover little of what they lost because of the downturn, the industry will seize any sign that things have bottomed out and may be on the mend.

Swanson said so far, larger advertisers have come back into the fold faster than smaller accounts. He attributes this to bigger companies having more cash reserves and better access to credit. He cited a recent study from the National Foundation for Independent Businesses showing confidence among SMBs at an all-time low.

Yet looking at number of indicators, Swanson concludes that “conditions seem to have bottomed.”

Among the positive indicators that give DexOne executives hope are improving bad-debt levels among its customers, growing print and IYP usage metrics (citing research commissioned by the Yellow Pages Association and conducted by Burke) and at the macro level, a rise in consumer confidence and spending.

CFO Steve Blondy asserted to the investors on the earnings call that DexOne is a solid “late cycle investment opportunity.”

When asked during questions and answers if the competitive environment has changed, Swanson said digital remains competitive as ever, while print competition has abated somewhat as the economy has “weeded out some of the smaller, less well-capitalized publishers.”

We’ve seen a marked increase in the number of inquiries we’ve been getting from clients regarding the use and implementation of call measurement platforms. We have long believed that the “call” is a critical element of any local search model since so many SMBs place significant value on the phone call.

Here in California, Valley Yellow Pages has been pounding the radio airwaves with a catchy round of advertising with the memorable jingle, “we make the phones ring, we make the phones ring.” Couple the trends we’re seeing among our clients with the news that the YPA recently added an industry expert in the call measurement industry — Bill Dinan, president and CEO of Telmetrics — and you get the sense that a real live transition is under way in terms of the way the directional media industry wants to demonstrate value to its advertising customers.

Where calls are generated is a big question, and our analyst team will be paying close attention to it over the coming years. We’ll also be studying the flow of calls, and will be watching for the tipping point when more calls will be generated via a mobile device than a desktop or laptop computer. When you add the wrinkle of which inbound call is more valuable or more qualified, you begin to see the complexity of the issue. Look for the YPA — with new board member Dinan — to increase the transparency and understanding of this critical element of the local search landscape.

For the past few years, the U.S. Yellow Pages industry has been playing a nationwide version of the arcade game “whack a mole” — beating down one opt-in or opt-out legislative initiative after another with a metaphoric sledgehammer.

For the most part, these efforts have succeeded. Last week was different. A committee of the California state senate passed a very strict White Pages opt-out measure by a 6-4 vote. The Yellow Pages industry (on this one, rival trade groups YPA and ADP are on the same page) doesn’t just fear the consequences in California. What really makes publishers perspire is the idea of copycat legislation — something particularly dangerous when a bill passes in a bellwether state like California.

State and local legislative bodies have targeted directory publishers because directories have become a visible symbol of waste to many, particularly in markets where there are multiple books distributed and in dense urban markets where stacks of phone books are often left uncollected in apartments foyers, photos of which have become the de facto symbols of the opt-out movement. The directory industry has countered that the environmental impact is exaggerated and that it can address any waste problems through self-regulation.

This is how ADP (the group representing smaller, independent directory publishers) President Larry Angove describes the California measure in a letter e-mailed this afternoon to the association membership:

“SB 920 mandates White Pages opt-out, requires independent publishers to honor opt-out requests made directly to the telephone company, establishes virtual lifetime opt-out, stipulates onerous cover language, dictates directory components, requires inclusion of recycling information in a directory, demands publisher participation in a program or organization promoting recycling, insists that publishers comply with state newsprint recycled content law, and criminalizes non-compliance with the law.”

The next step is the Senate Appropriations Committee, which is expected to pass the measure, meaning it’s likely to face a vote by the full senate. The bill was originally written as an opt-in measure, but later amended into an opt-out. However, the industry still sees the measure as unduly harsh.

In his letter, Angove makes clear the importance to publishers of defeating the bill.

“The defeat of SB 920 is critical,” he writes. “If SB 920 passes, copycat legislation across the country is a realistic threat. Prepare for battle!”

The bulk of the conversation focused around the advertisers, in particular Bochanis, who provided a candid look into the mind-set of a local advertiser. Bochanis is a longtime print Yellow Pages advertiser who graces the back cover of the Embarq (Dex) Las Vegas directory as well as the second page full-page ad in the inch-thick (page-wise) Attorneys heading in the same book. In the tanking Las Vegas economy one of his core areas of focus — workers’ compensation — has taken a hit because of the declining construction industry. However, Bochanis’ mind-set with regard to print Yellow Pages has been to “not to change a thing.” He’s happy he did not make changes to his print strategy so that he did not lose his coveted position in the directory, but also because even with the decline in business he saw from categories like construction accidents, his leads in terms of calls from the book only dropped marginally.

Bochanis, who operates www.lvaccident.com, began using online Yellow Pages about a year or two ago and said it’s not easy to say how it has performed, although he seemed happy with his Web site reporting tools. Another interesting takeaway from Bochanis was that he’s finding his clients are increasingly noting multiple sources when they fill out paperwork to say “how they found out about us.” Increasingly, he says, clients say Yellow Pages/Internet/Word of Mouth. This anecdotal feedback is consistent with BIA/Kelsey’s user view data that show consumers are consulting more and more resources prior to making a local shopping decision.

When asked what he’d like to see from his publisher that would help serve him better he said “monthly reports with as much detailed tracking as possible.” In particular those reports would essentially mimic the data he currently receives from his Web site provider and a firm he works with to optimize his site and search activity. When Laughlin inquired if he’d be interested in having a directory publisher host and essentially control his Web site, Bochanis answered essentially that he didn’t want to lose control of his site and stated, “that wouldn’t be part of the equation for me.”

To kick off the panel, Laughlin presented some thoughts on what the new Yellow Pages organization is all about and spurred thinking about how transformation needs to occur from the core product to a multiproduct environment. Laughlin presented these points:

What is the YP organization all about?
– No longer legacy focused
– Lean and flexible cost structure
– More technological sophistication
– Leadership that spans media and technology
– Faster moving and more risk tolerant

Laughlin also presented some data from BIA/Kelsey’s latest User View study that show consumers are increasingly using more media sources to help them make a local shopping decision. Per our latest research, 7.9 local media sources. Pomeroy picked up on this data point in his comments and noted that to fulfill on “the notion of [the YP sales force] being an advisor we have to be knowledgeable and facile with the 7.9 resources.” Pomeroy continued, “There’s a lot of money being poured into local media right now whether it be from venture capitalists or entrepreneurs. We have something that everyone covets: Access. We are the historical beneficiaries of what we’ve always done. That reality is a coveted asset.”

One key topic during the panel was the transformation of the traditional directory sales force. Akhurst noted that the sales organization needs continual training, but believes that they’re quite adaptable. He believes in the constant investment in the sales force as well as continual training.

Pomeroy too said Berry has made a significant investment in training and that the change from a product mind-set to a service mind-set gives the sales force credibility.

Lewis said Mediatel/EDSA has taken a slightly different stance in that it has started with the marketing first. “Let’s make it as easy as possible. Every one of our packages has three components: print, online and mobile. Start from the marketing and product end and then train them.”

To wrap up the discussion, Laughlin asked the panelists to name one thing that the industry has to change to ensure a sustainable future.

Here are their varied responses:

Lewis: Speed
Pomeroy: Focus on service over products
Akhurst: Fear of failure
Stover: Relationships — meaning leveraging those in the directory space’s unique position in local media

One of the recommendations we have been supporting and talking about over the past year is the need to look at the print directory differently. For the past 100-plus years, the directory has been viewed as a distribution media vehicle — “we deliver to every resident in a city.” In recent years, with distribution declining and local media fragmenting, people in our industry are still hung up on getting more books to more people rather than trying to view a directory as a series of verticals that reach different audiences, with different needs and varying levels of spending power.

Enter Larry Small, research director for the Yellow Pages Association, who supports one of our major views that demographics are an often ignored factor when considering the value of a print directory. While the industry has been concerned with the 18-25 crowd and how directories will adapt to attract and meet the needs of this group, Small points out that the real factor is not only age but disposable income.

He goes on to say: “One other metric to keep in mind is disposable income. The Yellow Pages industry has positioned itself as the best source for generating qualified leads. By definition, a qualified lead is one where people are ready to make a purchase — in other words, they have the need AND the resources to complete the sale.”

Small also shares this chart from CNNMoney.com that shows median net worth of individuals by age group:

With higher usage rates in the 35-65 age groups, the print directory has the capacity to reach more affluent spenders who have high discretionary spending in categories that are meaningful to a directory because of the life stages these age groups are in. Users in these age groups are spending on home renovation, financial services, house wares, cleaning services — all key directory headings. According to BIA/Kelsey’s research and U.S. Census data, those in the 35-65 age groups control nearly 80 percent of spending power in the US.

CRM Trends, which tracks changes in demographic trends points out: “Compared with the big-spending Baby Boom generation, these new spenders (18-30) will be less attractive as fewer will have reached their big-spending life stages. They will not only have less buying power, they will also be more fragmented into niche interest markets and will demand more personalization and be harder to reach with conventional marketing.”

Because a directory is essentially made up of a series of verticals, directory publishers would be well advised to look at these categories to determine if they have the appropriate content, editorial support and navigation for the age demographic the category attracts. Taking this approach might signal the need to redevelop different sections of the book rather than the entire directory, integrating more print to mobile or online products like SMS codes or QR Codes, rethinking distribution, or adding more unique/relevant content not generally found elsewhere or found in one location.

Freeing up the minds of print product managers to think in new ways about the directory and its varying target markets may indeed create greater innovation and product reconfigurations rather than simply offering more cosmetic changes.

Leaders of the U.S. independent directory publishing industry were passionate in their defense of print media at this morning’s opening session of the Association of Directory Publishers meeting outside Houston, Texas. Jim Hail, the outgoing chair and head of Idaho-based Hagadone Directories, declared “Print is not dead!” He argued that the industry has become too apologetic about print and should take a much bolder posture in defending it in the media, where it continues to take a pretty vicious beating.

To bolster his point, Hail held up a recent Wall Street Journal article that details an effort by the magazine industry to embrace the “power of print.” Rather than accept its demise to digital, the magazine industry decided to run a campaign that basically says, at least where magazines are concerned, the print experience is superior. One tagline example, “The Internet is fleeting. Magazines are immersive.”

Hail was not impressed so much by the “esoteric” messaging but by the gumption the magazine industry has shown by saying, in effect, our old product is awesome, so deal with it. He wants the Yellow Pages industry to do the same thing.

“We need a consortium of publishers for an ad campaign … to tout the inherent strength of our medium,” Hail said.

Of course, Hail is aware that this call has been made many times before and never executed successfully. Joe Walsh, speaking after Hail, offered a somewhat different take. He said that while he has always favored a Yellow Pages version of the “Got Milk” campaign, he thinks it is “too late now” for any such effort to be effective.

He says the sense of print Yellow Pages as a passe medium has been fully baked into the public consciousness, “and we may not be able to reverse it.” Plus, he says there is no appetite among the major publishers to fund any such effort.

That said, Walsh sees some modest signs of improvement in the performance of Yellow Pages. He says his internal metrics show growing print usage, which he ascribes to an improving economy.

He also said a couple of things that were kind of interesting. He made a distinction not based on big versus small markets, but rather coastal versus heartland. Asked if phone books would still be around in five years, he said “Yes,” but added that in some coastal markets, the migration from print to digital usage might be completed within five years. In smaller markets in South Dakota, Mississippi and so on, print is strong today and will likely still be strong in five years. And when asked what his biggest seller is today, his answer without hesitation was “Web sites.” Click here or on the image below to watch the interview in its entirety.

It’s nearing the end of earnings season for the global Yellow Pages industry, and my program, The Kelsey Report, will soon issue a detailed roundup of 2009 results across all the companies that report publicly.

In general, the news has been grim for print Yellow Pages, though some publishers have given faint glimmers of hope that print will stabilize this year, meaning a slowing rate of decline. Others are projecting an accelerating decline.

A recent (unscientific) Kelsey Report online survey of global YP industry insiders suggests that most in the industry see a strong secular component in recent revenue performance. Probably the most telling messages that has come out of some recent conversations I have had with leaders in the industry is that the continuing, if waning, effectiveness of print is an increasingly irrelevant point. The energy it takes to overcome objections to print can be more effectively directed to selling digital or a product bundle that emphasizes digital.

Ironically, I am hearing more and more that print may be necessary to making the bundle effective because it still drives leads, but it is poisonous to the messaging because no one believes it works. I am hearing more and more about strategies that essentially engineer a faster print-to-online shift because the investment story for a company focused on the local online opportunity is so much more compelling than a traditional media story.

So the big question is, does the industry have a viable plan to become a growing, profitable business in a post-print world? And how will organizations need to change to make economic sense in a world where the product mix is substantially different from what it is today?

These are some of the questions we’ll take a whack at in a workshop we’ll be conducting at the Yellow Pages Association’s conference next month in Las Vegas, and in much greater depth at BIA/Kelsey’s Directional Media Strategies conference in Dallas, Sept. 14-16. The workshop at the YPA event is titled, perhaps hopefully, “Built to Last: The new Yellow Pages Organization.”

My colleague Mike Boland will also have a prominent role at the YPA event, moderating a panel on “Monetizing Mobile Yellow Pages,” which is also the topic of an upcoming joint report from BIA/Kelsey’s Mobile Local Media and Kelsey Report advisory services. Mobile is increasingly seen as key to the future of the business, and arguably, because of its inherent emphasis on calls over clicks as the currency of leads, a place where directories have a more level playing field.

Next week I will be traveling to the Association of Directory Publishers meeting in Houston, where I’ll be very interested in talking to smaller market publishers about the environment they are experiencing. At the last ADP event I attended, it was clear the economy had taken a toll on many publishers, but there wasn’t much talk of a secular decline. I’ll be interested in hearing how the mood and message have changed since the last gathering.