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overview
This note considers the 'yellow pages' telephone directories
and online search business.
It covers -
It
supplements discussion elsewhere on this site regarding
telecommunications, privacy,
the IPND in Australia
and online search.
introduction
The yellow pages sector is of interest as an offshoot of
- and often a major revenue earner for - traditional telephone
companies such as Telstra, BT and Verizon and independent
publishers such as VNU, Mediaset and Hearst.
It is of interest as an illustration of change and continuity
in information seeking and publishing. Some observers for
example claim that the major directories are doomed. Others
argue that they will compete effectively with global/regional
online search services such as Google and Yahoo! for years
to come.
The sector is also of interest as an illustration of tensions
within national intellectual property policymaking, with
the US for example (in the 1988 Feist decision)
giving significantly less protection for directories than
is available under Australian law (eg in the 2002 Desktop
Marketing Systems case).
Printed 'Yellow Pages' directories (and their online extension)
feature categorised telephone and address information about
businesses and other organisations within a particular geographical
area.
The categorisation is typically by subject. That subject
classification generally does not use industry/functional
codes established by government statistical agencies or
industry organisations. Geographical coverage typically,
but not necessarily, reflects a telecommunications service
area. Examples include cities and regions.
The directories are commercial services, with revenue generated
through payment for the inclusion of contact information
rather than by selling copies of the directory to consumers
or charging consumers for electronic access (on a subscription
or sessional search basis). Many directories provide contributors
with opportunities to place advertisements, of differing
sizes/formats, in addition to the ordinary contact information.
Such advertisements may feature an organisation's logo,
other graphics and additional text. Most publishers publish
directories annually, with free distribution on the basis
of a copy per fixed phone line.
Yellow pages, which often are not printed on yellow paper
(eg are in fact green or pink pages), are thus distinct
from 'white pages' telephone directories, which generally
comprise all 'listed' telephone numbers for a particular
service area in a standard format and alphabetical order
rather than by subject.
Categorised 'trade' directories of organisations predate
the telegraph and the telephone, reflecting the preparedness
of businesses to pay for inclusion in a published listing
and/or for consumers to pay for a copy of that listing.
That is unsurprising for readers of Coase
and Chandler about
information/search costs. German and English trade directories
from before the French Revolution included guides to shipping
and insurance brokers and to establishments of ill repute.
Contemporary yellow pages directories are an extension of
those trade listings, leveraging information that is maintained
by telephone network operators in the course of their business
or that is independently collected by publishers from individual
organisations.
the market
Although directory publishing - and directory printing -
have a lower profile than the production of books, magazines
and newspapers they comprise an industry with substantial
revenue.
Simba Information for example claimed in 2005 that the global
yellow pages market grew 3.5% to US$30.41 billion in 2004,
with telephone directory advertising revenues in 27 leading
countries accounting for an estimated US$28.74 billion of
that figure.
The top ten nations (US, Japan, UK, Italy, Australia, Canada,
France, Germany, the Netherlands and Spain) accounted for
85.9% of the global market. The US alone, with revenue of
US$15.49 billion, accounted for 50.9% of the global yellow
pages advertising market in 2004. Australia was supposedly
the fastest growing market (with revenue up by 11.2%), followed
by France (up 7.1%) and by New Zealand and Peru (6.8% each).
The Kelsey Report estimated global revenue for 2004 at US$28.9
billion, claiming that the industry employed over 73,000
people worldwide. In 2003 Kelsey suggested that the industry
"remains tremendously profitable", generating
an estimated US$10 billion in earnings before interest,
taxes, depreciation and amortisation (EBITDA) on US$25.4
billion revenue.
Revenue growth appears to reflect the capacity for publishers
to increase charges rather than fundamental growth in the
size of readership or more intensive use of the printed
pages.
Inclusion in yellow pages directories has been a major (indeed
often the only) advertising mechanism for many small and
medium-sized enterprises that draw most of their custom
from a particular region and that might not be readily identified
through the white pages. That has meant the directory sector
has often been less affected by economic downturns than
other media, with publishers enjoying economies of scale,
repeat business and perceptions among advertisers that inclusion
in a particular directory is essential.
The 2004 Competition & Price Discrimination in Yellow
Pages Advertising paper (PDF)
by Meghan Busse & Marc Rysman notes that US local businesses
value yellow pages advertising
because
customers are exposed to it at exactly the time they are
poised to buy. Size, color, placement, and graphic design
all contribute to the effectiveness of a Yellow Pages
ad, although industry participants disagree over which
elements generate the greatest return on investment for
advertisers
the industry
The yellow pages sector encompasses independent publishers,
which often operate in several regions and countries, and
telephone companies. The latter restrict their directory
publishing to locations served by their networks.
In Australia, for example,
Telstra dominates the market with yellow pages produced
by its Sensis subsidiary. In Britain the market is contested
by specialist directory publisher Yell - which originated
as a spin off from British Telecom (BT) and has expanded
internationally - and by other entities, including BT's
new directory arm. In the US there is competition between
independent publishers, the heirs of AT&T (such as Qwest
and Verizon) and telephone service providers that are not
affiliated with an RBOC. The independent publishers include
companies whose operations were spun off from or sold by
network operators or that launched competing directories,
particularly after Feist confirmed perceptions
that the market was open.
Several of the telco and independent publishers have expanded
internationally. Most, as discussed below, are offering
online versions of their directories.
Two examples are VNU and Eniro; others are highlighted in
the following page of this note, which discusses recent
churn and consolidation across the sector.
Netherlands-based publishing giant VNU, prior to late 2004,
was the largest yellow pages publisher in Europe. It was
active in the Netherlands, Belgium, Portugal, Eire, Romania,
Puerto Rico and South Africa with over 115 telephone directories.
It enjoyed a market share of over 50% in the Netherlands
and around 90% in Belgium, Portugal, Ireland, South Africa
and Puerto Rico. In September 2004 VNU sold its VNU World
Directories arm to Apax Partners and Cinven for €2.1
billion.
Eniro, a spin off from Telia (the Swedish counterpart of
Telstra) published around 750 directory titles in 2004,
operating in 22 countries. It boasts that Gula Sidorna,
Sweden's dominant yellow pages print directory and online
service, is used by 97% of the population.
Expansion across regions reflects consolidation with the
network industry, with the US RBOCs for example progressively
engulfing each other. It also reflects economies of scale
and ready access to funding, consistent with perceptions
that publishers will continue to enjoy strong cash flows
and that ongoing investment requirements are low once a
market entrant has surmounted substantial initial barriers
(eg brandbuilding, distribution and data gathering).
Busse & Rysman note that in the US the 'median person'
is served by two directories from two separate publishers,
with over 15% of consumers being served by three or more
publishers. The US telco directories - like the Telstra
yellow pages - typically dominate their markets (with higher
prices and sale of higher numbers of pages).
Australia
The Australian yellow pages market has been dominated by
Telstra, most recently through publishing by its Sensis
subsidiary, although a range of businesses publish competing
local trade guides.
In 2005 Sensis announced plans to double its revenues within
five years to around $3 billion without sacrificing margins.
At that time the Yellow Pages accounted for 60%
of Sensis revenues; the aim is to reduce print revenue to
40% through a "diversified digital portfolio"
that includes eBay-style transactions.
Sensis had accordingly acquired Universal Publishers (responsible
for the UBD and Gregory's printed street map directories
used by many Australian motorists) and expanded into online
recruitment. In 2002 revenues rose 2% to $1.7 billion and
contributed around 10% to Telstra's earnings before interest
and tax.
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