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The Kelsey Report® White Paper

Tackling Core Product Usage
Bobbi Loy-Luster,Charles Laughlin , 3/17/2004

EXECUTIVE SUMMARY:

Executive Summary

"It seems like broadband penetration and the proliferation of media channels are really changing consumption habits - finally. I feel like 2004 is a turning point year, where we're going to see consumer habits changing because of the level of control they will have over incoming messages."

Carla Hendra, president of OgilvyOne, in Adweek (December 2003)

"People want to find things easily, and going to boot up your computer isn't easy. Maybe with broadband, it will change. But I am not sure that is going to happen, because it means that someone needs to think, and people inherently don't like to think. Therefore, they will take the easiest way."

Burton Michaels, SRI/Knowledge Networks, in an interview with The Kelsey Group (January 2004)

The two statements above reflect some of the fundamental differences in the points of view expressed about the current state and future path of printed Yellow Pages usage. On the one hand, in a view represented by Ms. Hendra, there is the assumption that increasingly capable information-gathering technology namely ubiquitous high-speed Internet is quickly rendering the trusted printed Yellow Pages obsolete. In fairness, Ms. Hendra wasn't talking about Yellow Pages. Yet her view reflects the faith in the power of bandwidth inherent to the pro-technology camp.

The basic premise behind the technology argument is that as access to the Internet becomes faster and more pervasive, particularly in the home, usage will reach a tipping point at which more lookups will occur online than offline. Adding to the inevitability of this tipping point is a generational shift in which younger consumers are raised on Google, instant messaging (IM) and Short Message Service (SMS). To this emerging generation, the printed Yellow Pages is a quaint relic.

The other end of the spectrum, reflected in Mr. Michael's comment, is that technology has yet to create a better alternative to printed Yellow Pages - at least for finding businesses locally. Ingrained consumer behavior is routinely underestimated, and the dot.com bust certainly gave this point of view a powerful argument. What erosion has occurred in printed Yellow Pages usage is the result of structural changes in society and the economy, and the Internet has had relatively little impact. For example, the growth of superstores has reduced the need to look up toys, hardware stores, nurseries and lumber yards. And the growth of physician networks has moved some usage to HMO and PPO directories.

Also supporting the optimistic outlook of print usage is the viewpoint that life events (birth, marriage, home ownership, retirement) drive usage. And as generations age, life events ranging from marriage to childbirth to retirement come up that drive the need for heavy directory usage. This cycle of life events will continue to fuel Yellow Pages usage, and in all likelihood printed usage.

The truth about usage is elusive. But as with most things, it resides in the middle range of this spectrum. There is no disputing that print usage frequency is down in the United States, although reach (the number of people using Yellow Pages during the year) has remained very stable over the years. There is also limited evidence that the Internet has yet had a directly corrosive effect on print usage. However, the growth in the capability and usage of search engines, and the increasing bandwidth and portability of access devices inevitably lead to questions about the future viability of print.

The Kelsey Group (TKG) recently conducted an online survey in cooperation with BizRate.com. It generated 5,582 responses from a pool of Internet users defined as "online shoppers" for having used the Internet as a tool for making or researching a purchase in the past year. Sixty-four percent of these respondents indicated search engines were the "main way" they found information on the Internet. Additionally, 80 percent rated commercial search results as good or excellent, and 44 percent indicated they are performing more online searches than a year ago. The survey sampled attitudes of Internet users, which are only a subset of the population that uses printed Yellow Pages. Nonetheless, the research suggests a growing reliance on search engines in everyday life.

TKG conducted a by-invitation, qualitative online survey among industry thought leaders. We sought a range of data points on usage, from how companies measure usage to how they perceive the impact the Internet has or has not had on usage of their printed product. Survey respondents generally told TKG that usage is under some pressure, but the issue has not yet reached crisis proportions.

The Kelsey Group also conducted a wide range of interviews for this White Paper, and has found varying levels of concern over usage of the printed Yellow Pages. There is a lot of room between panic and complacency. What is clear is that consumers have more information choices, and they are making greater use of these choices. Yellow Pages publishers have a clear obligation to invest in their products in order to retain their place in the pecking order of these information alternatives.

Publishers in developed markets in Europe and the Pacific Rim generally report declines in core product usage. But these same publishers tend to be more confident in their ability to capture the migration of usage through their own non-print products. Smaller, independent publishers in the United States generally expressed optimism over print usage, a reflection of their position as new market entrants. Many larger incumbent publishers concede that competition is having some impact, but not a crippling effect on usage and revenues.

This White Paper will attempt to compile the full range of viewpoints, and supporting evidence, on what is the true future for printed directory usage. TKG offers its own perspective as well, in the form of its usage forecast. We will also attempt to be prescriptive and offer our list of recommendations to publishers hoping to improve or stabilize their core product usage, or successfully convey their value proposition to consumers and advertisers.

Copyright � 2005 The Kelsey Group. All Rights Reserved.
This published material is for internal client use only. It may not be duplicated or distributed in any manner not permitted by contract. Any unauthorized distribution could result in termination of the client relationship, fines and other civil or criminal penalties under Federal law. The Kelsey Group disclaims all warranties regarding the accuracy of the information herein and similarly disclaims any liability for direct, indirect or consequential damages that may result from the use or interpretation of this information.

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