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The Kelsey Report® White Paper

Reinventing Online Yellow Pages
Charles Laughlin,Neal Polachek , 2/6/2002

EXECUTIVE SUMMARY:

0.0 Executive Summary

The online Yellow Pages business model has fallen short of expectations. Looking at any of a number of metrics advertiser penetration, revenue per advertiser, user experience, EBITDA Internet or online Yellow Pages have consumed more resources and management attention than its performance would appear to warrant.

TKG believes that a new way of looking at the IYP model can help publishers shift away from the current high-cost/low-performance mire into an attractive and necessary opportunity for Yellow Pages and online Yellow Pages publishers.

There are two elements to this new approach: building a compelling sales proposition for both SMEs and the local sales channel; and driving technology solutions that are scalable, cost-effective, extensible and media agnostic.

To this end, TKG has developed a metric called "first page views" that roughly equates an online directory lookup with a print Yellow Pages reference. Currently, IYPs account for about 1.5 billion first page views, compared with 14 billion print references. By 2006, IYP references could total nearly five billion - perhaps even more with wide-scale adoption of always-on, high-speed Internet access.

TKG has also estimated the comparative economic value derived from print and online Yellow Pages. The story that emerges is that online Yellow Pages generate significant revenues for local businesses on a per reference basis, and as the quality of the user experience begins to equal or surpass that of print, the print and online products will approach parity. This is the story publishers need to build on.

TKG believes a single close for print and IYP advertising is critical to sales success in the IYP space. This requires the IYP product to evolve into something that more closely resembles the print Yellow Pages. This points to a pricing structure in which advertisers pay for IYP advertising based on the number of factors such as copy points, graphic treatment, seniority and overall spending similar factors that drive the value of print Yellow Pages.

On the technology side of the equation, TKG believes most publishers are better served by focusing on core competencies such as sales and sales management. Most publishers should turn to third parties for technology platforms that integrate the best practices of the print Yellow Pages with online Yellow Pages, rather than struggle to maintain such platforms themselves. The current IYP cost structure is a barrier to positive EBITDA, especially at current price points.

TKG believes that if there is a shift in the way IYPs are managed and positioned, Internet Yellow Pages will be a $6 billion business in five years, rather than the $2 billion business that is currently forecast.

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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Copyright© 2006 The Kelsey Group. All Rights Reserved.