A lot has been said about how newspapers and magazines are struggling to adapt to new patterns of reader and advertiser behavior related to the Web.
There’s been a lot less coverage of the challenges faced by another type of print publisher: business directories or yellow pages. One reason for the lack of coverage is obvious: business directories have no reporters and editors who are going to write about the problems their industry faces. But another is that the metrics one might use to assess the strength of the print yellow pages business aren’t as readily accessible as the circulation figures and financial performance data available for publicly traded newspaper companies.
Last week’s disclosure by Verizon Communications that it is considering spinning off its directory business (print and online) is yielding some interesting insights into how business directories are doing these days.
I haven’t had time to read through that company’s 103-page filing with the U.S. Securities and Exchange Commission. But the Times of London published a nice summary. Here I learned that:
- Verizon’s Superpages.com is the leading online business directory, capturing 22.6 percent of local business searches, but that the site generates just six percent of the company’s directory revenues. (Actually, 90 percent comes from print yellow pages advertising, and four percent from print white pages advertising.)
- Revenue for the company’s directory business (print plus online) fell almost three percent from 2004 to 2005. But by cutting expenses, Verizon was able to increase the profitability of the directory business — from a 45 percent operating margin in 2004 to 48 percent in 2005.
It’s stunning how similar this looks to the newspaper business. Both industries have been trying to integrate their print and online publishing
operations. Both make relatively little money, at least so far, from online operations (for instance, a few weeks ago, Tribune Co. said online operations were generating the same six percent of operating revenue). And both have been cutting expenses to preserve or enhance profitability.
I had thought that the directory companies might be doing a better job than newspapers of migrating their advertisers (and ad revenue) to the Web, but that does not appear to be the case for Verizon.
