At Chilli Chocolate Marketing we - like most Internet and media observers - have watched the performance of Yellow Pages/Sensis with a mixture of frustration, pity, and amusement. (See "Sensis, White & Yellow Pages - still dying", "Directory advertising in White and Yellow Pages", "How to cancel White and Yellow Pages book deliveries", "Sensis lays off workers as print-directory business collapses")
John Rice and Nigel Martin write in The Conversation:
Yellow Pages directories have been appearing on doorsteps across Australia in recent weeks. As often as not, they go straight into the recycling bin. In the world of the internet and e-commerce, the very notion of a book the size of two bricks being the source of valuable purchasing information seems plain silly.
Once directories like the Yellow Pages served a valuable need in most developed economies. They provided basic and inexpensive local advertising, especially for small businesses.
As the internet emerged as the preferred means of accessing such information, the potential for directory owners like Telstra to translate directory information into a valuable online business opportunity seemed promising. As is often the case in the unpredictable world of the internet, it was not quite so simple.
In January 2014, Telstra sold a 70% share of Sensis, its directories subsidiary, to a US hedge fund for A$454 million, only 2.4 times projected 2014 earnings. This is quite a turnaround from the A$12 billion value suggested to Telstra’s Board in 2005. At the time, Telstra’s chief executive Sol Trujillo declined to spin-off the business, suggesting Sensis (Telstra’s directory business) would be “bigger than Google”.
Laughable then, laughable now. So how did this come to pass?
Better information, less asymmetry
The steep decline in the generic, supplier-provided data that is the essence of Yellow Pages has been driven by a set of related phenomena.
First, sites like TripAdvisor have emerged to provide detailed and generally reliable information on services including hotels, tourist attractions, restaurants and the like. Importantly for Yellow Pages, sites such as these are becoming the first place for buyers to visit. As the quantity of collected reviews increase, the value of such sites increases greatly, as they provide a level of information on sellers that static directories cannot match.
Second, the costs of “searching” for information is in steep and terminal decline. Once, buying a set of golf clubs for the best price, for example, required a multitude of phone calls or, worse still, visits to stores with pushy salespeople. Now, finding the best price in the market is a few keystrokes away through Google.
The authors conclude:
Too late for Sensis?
This begs the question – can the Yellow Pages reinvent itself to be a new portal for information on sellers that will be valuable for buyers, and thus continue to attract advertisers? The answer is probably not. As a late mover into such information provision, it will have an almost insurmountable challenge to build an equivalent body of information in comparison to its competitors. More so, it will be a generalist in an industry full of specialists, the last site visited by buyers and thus the least valuable site for sellers to direct their advertising dollars to.
This makes the 2.4 times 2014 earnings paid in January for Sensis seem about right. Such a multiple suggests that this year’s Yellow Pages might be the last one to lob onto Australia’s front porches. If this is bad news for Sensis, it is good news for the millions of trees that will be saved!
In the meantime you can cancel your dead-tree deliveries from Sensis at www.directoryselect.com.au.
