Phone books rip each other with ad claims

By Tom McGhee
Denver Post Staff Writer

Sunday, July 04, 2004 -

Arapahoe County-based Dex Media and rival Yellow Book are bludgeoning each other with blunt advertising typically seen in political campaigns.

Dex billboards in the metro area show the Dex directory topped by the word "official" and a much smaller Yellow Book directory with the word "superficial."

And in a local newspaper ad, Yellow Book, which entered the Denver market last year, accused Dex of counting directories twice in reporting a circulation of 2.7 million for the Denver region.

Dex denies the allegation.

It isn't the first time that Yellow Book, a division of United Kingdom-based Yell Group Plc, has riled a competitor. Last year, Dallas-based Verizon Information Services sued the company in New York, charging Yellow Book with making false advertising claims.

Yellow Book's rivals are showing their fear of competition, said Steve Topping, a Yellow Book regional vice president for sales in Denver. "When you have two utilities that are losing market share, there is going to be a battle."

The $14 billion phone directory market is brutally competitive, said Christopher Bacey, a spokesman for the Yellow Pages Integrated Media Association, a trade group. His organization has 200 members producing everything from directories that serve major population centers to niche publications aimed at ethnic communities.

The directory business was once the dominion of regional Bell companies that owned both a phone network and a directory service. Ten years ago, the Bells accounted for about 96 percent of yellow-pages revenue.

BellSouth, Verizon and SBC all continue to own directory businesses.

In 2000, Qwest acquired US West, a Baby Bell, along with its phone directory business. Qwest sold Dex for $7.1 billion in 2003 to a group of leveraged buyout firms.

Meanwhile, competitive directories such as Yellow Book have proliferated.

The incumbents' share has dwindled to about 85 percent, said Charles Laughlin, program director for the Princeton, N.J.-based Kelsey Group.

In that same time period, Yellow Book USA has grown from a small local directory service to a publisher distributing 72 million directories in 42 states. It ranks right behind Dex in revenues. The Uniondale, N.Y.-based division of Yellow Book generated about $1 billion in revenues last year and is nipping at the heels of its larger rivals, Laughlin said.

Dex is the fourth-largest directory business in the country after SBC, Verizon and BellSouth.

But Dex, which once held a virtual monopoly in Qwest's 14-state region, is slugging it out with challengers. Dex, which employs 3,000 people - 1,100 in Colorado - faces two or three competitors in many of its markets, according to Securities and Exchange Commission documents.

The biggest threats looming are Yellow Book and Verizon SuperPages, both available in Denver, Dex said in its SEC filings.

Yellow Book's low advertising prices have fueled its surge to success, Bacey said.

But price isn't the only thing important to advertisers who look to high circulation numbers to maximize the number of potential customers viewing their ads.

In claiming that "Denver chooses Dex 86 percent of the time" in its ads, Dex relies on research by an independent research firm, Knowledge Networks/SRI.

Most directory businesses use research firms to determine circulation, Laughlin said.

But companies rely on varying circulation data to reach results, making head-to-head comparisons impossible.

"The information is proprietary, so it depends on who you believe," he said.

Yellow Book claims that Dex pads circulation numbers by counting both yellow and white pages it sends to the same address as separate volumes.

Dex claims a circulation of 2.7 million in the Denver market. Yellow Book, which says it distributes to the same businesses and homes, claims a circulation of 1.1 million, based on in-house research.

Dex spokeswoman Pat Nichols denies that the company inflates circulation, saying Dex counts both books as one volume.

Yellow Book started an ad war with its televised claim that consumers use Yellow Book more than the "other book," she said.

Yellow Book challenges its larger rivals in similar ads throughout the country.

Dex has responded to Yellow Book's challenge with billboards, newspaper and radio advertising in Boulder; Colorado Springs; Des Moines, Iowa; and Phoenix, Nichols said.

Earlier this year, Dex ran a similar campaign in Minneapolis. Dex also has an Internet site devoted to debunking Yellow Book's claims - yellowpages truth.com

The campaign is being played out as Dex prepares to go public, seeking to raise $352 million by selling stock.

Nichols said the ads have nothing to do with the pending initial public offering.

But companies entering the public market have an incentive to buff the public's perception of their brand, said Tom Duncan, director of the Integrated Marketing Communication graduate program at the University of Denver's Daniels College of Business.

"People buy stocks with both their head and their heart," he said. "You ask, "What is the future of this brand, and how do I feel about the ability of this brand to survive in a competitive market?"'

Staff writer Tom McGhee can be reached at 303-820-1671 or tmcghee@denverpost.com .