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.