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Section 1 Industry Overview |
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Advertisers have a wide range of media options. Among all these options, print yellow pages directories are the fifth most utilized advertising medium in the United States, accounting for about $14 billion in annual advertising revenues. (Source: Bob Coen's Insider's Report, 6/03) Internet yellow pages currently account for about $600 million in annual advertising revenues. (Source: Ad Age, 1/6/03) |
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The long-term outlook for both types of yellow pages appears sound. Within the next four years U. S. print directory revenues are estimated to grow to about $16.4 billion while Internet yellow pages revenues are estimated to dramatically increase to about $4.9 billion. (Source: eMarketer, "Strong Future for Yellow Pages Advertising," 11/03)
Types of Advertisers
Yellow pages print directory advertising revenues come from about 3.6 million national and local advertisers.
National advertisers account for about 15% of print directory advertising revenues. The table below lists the leading national yellow pages advertisers.
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Three types of national advertisers are represented in the table.
- Advertisers like Sears, Chrysler and Ford use a broad range of media, including the yellow pages, to reach their target audience. Sears, for example, allocates about 5% of its media expenditures to the yellow pages. While this level of allocation makes Sears a large yellow pages advertiser, the yellow pages' share of Sears overall budget is nevertheless relatively low.
- Advertisers such as State Farm have relatively balanced media allocations, with a significant portion of the overall budget allocated to the yellow pages. State Farm, for example, allocates the majority of its spending in broadcast (36%), magazines (28%) and yellow pages (16%).
- Advertisers such as U-Haul, Roto Rooter and the moving companies concentrate almost all of their advertising in the yellow pages.
National advertisers who use multiple media typically take great care to ensure that their yellow pages advertising is coordinated with their advertising placed in other media. Yellow pages advertising for these businesses, while responding to directory users' need for information, still carry through the feel and key copy elements of advertising placed in other media. This can easily be seen in the Enterprise yellow pages print directory ad below, which utilizes the visuals and copy from Enterprise's print and television advertising.
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Advertiser Decisions
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Print yellow pages directories are organized alphabetically by heading. In a typical week about half of all consumers refer to at least one of the headings, resulting in about 15 billion print directory references per year. All 15 billion references are not evenly distributed across headings, however. Individual headings within a print directory differ with respect to how often they are referenced. The most referenced headings are shown in the table on the right. As you can see, three types of references (health care, automotive and restaurants/pizza/caterers) account for nearly 40% of all print directory references. (Source: YPA Industry Usage Study: Trends in Heading Segment Shares, 2002) |
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As an aside, a look at headings usage provides insights into social and
market changes occurring over the past several years (Source Knowledge
Networks/SRI and CRM Associates). The headings with the greatest change
in the number of references are:
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Given the organization of print directories, a directory advertiser must first decide in which heading to place his/her advertising. For many advertisers the decision is straightforward. A lawyer, for example, would advertise in the "Attorney" heading and a florist would advertise in the "Florist" heading. For other advertisers the choice may not be quite so simple. Where, for example, should Sears advertise? Under the "Siding" heading? What about "Appliance-Repair," "Auto Repair" or "Tires?"
The 7,000 different directories published nationwide every year give both national and local advertisers a wide range of options for where they place their ads once they have decided on which heading or headings to use. Directory options can be viewed from three perspectives: type of publisher, directory area of distribution and type of directory.
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Type of publisher. Publishers of yellow pages print directories fall into two groups: "telephone company related" and "nontelephone company related." Telephone company related publishers are those directly associated with telephone service providers, such as SBC and BellSouth. Nontelephone company related publishers, such as Valley Yellow Pages and Yellow Book, act independently, producing directories tailored for specific market segments.
- Directory area of coverage. Different directories have different areas of distribution and, as a result, cover relatively larger or smaller geographic areas. "Suburban" or "Neighborhood" directories cover smaller, more finely targeted geographic areas. "Area wide" (also known as "overlay") directories combine the areas covered by suburban or neighborhood directories into a single, larger directory.
The maps below illustrate the difference between these two types of directories. The map on the left shows the area-wide directory's coverage area (shown in bright yellow). This directory covers all of the northwest portion of the city. The map on the right shows the coverage area of three neighborhood directories (shown in blue). Each neighborhood directory targets only a small portion of the area covered by the area wide directory.
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Type of directory. Beyond the standard directory, advertisers also have the option of using specialized directories to reach their target audience. Specialized consumer directories include foreign language directories, bilingual directories, ethnic directories (e.g., Hispanic, African-American), and situation-based directories (e.g., university directories, driver's directories). Business-to-business directories are available in some markets for advertisers who primarily sell to businesses rather than consumers.
Recent Developments
Two types of recent developments characterize the print directory marketplace: new directory introductions and changes in industry structure.
New Directory Introductions
You might think that nothing is really happening with regard to directory competition or new directory introductions because the number of directory titles has increased just slightly over the past five years. That is, you might think that the same directories must appear year after year in the same markets without change or challenge. This is not, however, the situation at all.
While the absolute number of directories has remained relatively constant, there has been significant change from year to year in the specific directories published. Print directory publishers are constantly examining markets to determine opportunities for entirely new directories or for circumstances in which currently published directories might be vulnerable to competitive challenge.
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New Types of Directories. Publishers seek to initiate or extend their presence in a marketplace through the introduction of new directory titles. These new titles may target specific groups of individuals (for example, the introduction of a bilingual Tucson Metro Yellow Pages) or may be created to serve newly designed geographic areas.
- Competitive
Challenge. Publishers introduce directories in markets where they
perceive a potential weakness in the market's current directory publisher(s),
for example...
"Verizon Information Services is in the final stages of launching a rival yellow pages ... Like BellSouth's books, the Verizon SuperPages will have saturation delivery ... every home and business will receive a book." (Source: The South Florida Business Journal, 10/13/03)
Yellow Book is introducing directories in Fredricksburg (Virginia) that will be in direct competition with Verizon's Superpages.
Verizon is introducing directories in the Twin Cities (Minnesota) that directly compete with Dex Media's yellow pages.
Once new directory introductions are complete, residents in Lexington (Kentucky) will receive printed yellow pages directories from four different publishers.
Changes in Industry Structure
The past several years saw important ownership changes in the print directory business. The largest sale (in terms of absolute dollars) saw Quest Communications sell its yellow page directory business to a consortium of private investors for about $7 billion. But this was not the only major sale.- R. H. Donnelley purchased Sprint's yellow pages business for $2.2 billion.
- Yell group purchased McLeodUSA's directories for $600 million.
Ad Age (1/6/2003) notes that there are two complementary reasons for this activity.
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Sellers are "phone companies struggling with debt, overcapacity and slumping prices for telecom services" and, as a result, are selling their yellow pages publishing businesses as "part of a strategy to raise cash and focus on core businesses."
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Buyers "see yellow pages as a steady, high-margin business that generates cash to support leveraged deals."
Kevin Ryan (imediaconnection: "Search for the Rest of Us: Yellow Pages") describes the rise of Internet yellow pages:
"Way back in the online marketing Stone Age (1995) search marketing meant engineering a Website to be 'seen' by automated search robots or submitting a laundry list of URLs to human compiled directories for a nominal fee. Long before Paid Search became the 'Yellow Pages of the Web,' telephone directory publishers began placing local business listings in Internet Yellow Pages, or IYPs. Shortly thereafter, said phone book publishers began to charge established businesses for premium placement in those searchable directories.
Today, Internet Yellow Pages [IYP] directories are playing a pivotal role in providing the consuming public access to everything from where to buy a pizza or how to find a qualified plumber in a pinch ... [According to Knowledge Networks/SRI] of those referencing an IYP, 59% made a contact and 60% made a purchase or intended to do so ...
Internet Yellow Pages directories are the overlooked stepchildren of online advertising. They are the providers of local ads for movers in need. They are the purveyors of accurate business information. Users click and buy with them at unprecedented rates. They are local, relevant, and functional. They are the search sites in Yellow."
It seems clear that Internet yellow pages are meeting consumers' needs. In 2002, there were more than 1.5 billion references to Internet yellow pages.
Characteristics of Internet Yellow Pages
In their most basic form, Internet yellow pages provide names, addresses and telephone numbers for local and national businesses. An individual comes to one of the Internet yellow pages sites (Superpages.com or Switchboard.com, for example), types in a business category or specific business name, and the site then provides business information. The types of search results provided by an Internet yellow pages directory reflect the searcher's level of specificity when initiating the search. When a business category is the basis of the search, the Internet directory provides a listing of all businesses that fit the search criteria. However, when a specific name is the basis of the search, then the results page provides only the information relevant to the target business.
Basic listings which provide just name, address and telephone number are given at no cost to businesses by the directory publisher. Similar to the print directory, however, Internet yellow pages permit businesses to expand their basic listing. While specific expansion options differ across Internet yellow pages sites, common additions to a basic listing include: additional lines for advertising, links to e-mail, maps and additional information, links to the businesses web site, and additional space for graphics and logos.
 (Clicking on the image will open the actual guide in a new window.) |
Internet yellow pages sites realize that some consumers who come to the site have multiple needs. A young mother, for example, might need to find businesses that provide child care, children's clothing and child health services. Performing a search for each of these business types would be quite time consuming. As a result, many Internet yellow pages sites have created "Guides," an organized collection of resources, information and direct-by-topic yellow pages searches. Smartpages.com, for example, has developed shopping guides for autos, classifieds, entertainment, family, fashion, flowers and gifts, health, home and garden, real estate, technology and travel. In addition, they have developed guides for business as well as important life events such as anniversary, new baby, getting in shape and dealing with loss. |
Similar to the print yellow pages directory, all Internet yellow pages allow advertising. While advertising options differ across sites, the most common options include home page advertising and within and around the search results (right illustration, below). In some Internet yellow pages directories, advertisers also have the option of having their ad displayed before consumers actually begin to browse through their search results. Here, the ad may be displayed on an intermediary search page (left illustration, below).
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Section 3 discusses advertising options in greater detail.
Most Popular Internet Yellow Pages
Internet yellow pages sites fall into three distinct categories:
- those built by publishers who also sell ads in phone books, for example, Verizon's SuperPages.Com and SBC's SmartPages.Com.
- those provided by Web brands such as AOL Yellow Pages and Yahoo Yellow Pages.
- those that are strictly yellow pages brands such as Yellow Pages.com.
According to Nielsen//NetRatings, the the leading Internet Yellow Pages sites (based on unduplicated audience reach) are:
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Where Listings Come From
Listings shown on Internet yellow pages sites typically come from one of two sources. Web sites owned by print directory publishers generally display listings created by the site's owner. Other yellow pages directory sites (such as AOL and Yahoo! yellow pages) generally license their listings data base from one of the print directory publishers. Switchboard, for example, maintains and customizes AOL's yellow pages database. (Source: PR Newswire, 10/16/03).
Recent Developments
Recent developments in Internet yellow pages can be placed in the context of the product life cycle - the stages through which individual products or services pass over time. The product life cycle has four stages: Introduction, Growth, Maturity and Decline.
The Introduction Stage is where a new product or service first enters the marketplace. Here consumers become aware of and focus on the benefits of the product category as a whole rather than the unique benefits of individual product or service options within the category. Because products in this stage are relatively undifferentiated from each other, the primary marketing goal is to establish a market and build demand for the product category. Once consumers understand why the product category is important to them, they next decide which specific product delivers the desired category benefit.
The Growth Stage is characterized by rapid growth in sales and profits, by increasing numbers of users moving into the product category, and as a result, by significant competition for brand share. It is in this stage that marketers aim to attract, and hold, as large a percentage as possible of the growing category user base. Reflecting the fight for share dominance, products begin to innovate in an attempt to differentiate themselves from the competition by adding new features or benefits or by revising the product's initial characteristics.
The Maturity Stage is marked by slowed growth in the number of new category users. Brands and products in this stage therefore fight for share of current users. Leading brands attempt to keep their share while secondary brands attempt to convert competitive users to their brands.
The Decline Stage is marked by a shrinking consumer base and slowing sales. At this stage brands may be left on the market (typically without advertising support) or discontinued.
Internet yellow pages are now in the growth phase of the product life cycle where there is about 25% annual growth in the number of references and an increasing number of consumers making these references. As a result, Internet yellow pages sites have focused their energy to attract and then hold the greatest number of consumers, that is, to maintain and grow their share of market.
At this stage, Internet yellow pages directories are attempting to differentiate themselves, and thereby attract and hold users, in two main ways: usability and product offerings. (Note: Source for the following discussion is The Kelsey Group, Searching For Profits, 2003).
Usability
Usability refers to the overall experience a consumer has on an Internet yellow pages site and encompasses:
Site "look and feel": Is information organized and presented in both an aesthetically and logically acceptable way?
Navigation: How easy is it to get to the desired information and how many ways can one get there?
Content: What is the quality, utility, and breadth of provided information?
Speed: How long does it take to obtain desired information?
Internet yellow pages sites conduct ongoing research to monitor consumer reactions to these usability criteria and then, based on the research, revise the site to better respond to consumers' usability needs and preferences (and as a consequence, build and maintain share).
You can compare different Internet yellow pages directories on these usability criteria by conducting the same search (for example, movers in Manhattan) in each site's search engines.
Product Offerings
A second way that Internet yellow pages directories attempt to differentiate themselves is through their product offerings as different directories provide different informational resources. The table below summarizes the key features of some of the leading Internet yellow pages directories. (Keep in mind that while several directories may offer City Guides, the content and approach of these guides may be very different across sites.)
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The appearance of Internet yellow pages caused quite a bit of speculation within the yellow pages industry. While all acknowledged that Internet yellow pages would change the dynamics of the yellow pages industry, some thought that Internet yellow pages would replace the print product, while others believed that print and Internet options would complement one another. Recent research indicates that the latter perspective may be correct.
Consumers are using Internet yellow pages with increasing frequency, but for reasons different from their use of print directories.
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Slightly more than one third (36%) of Internet yellow pages references are related to travel, restaurants, florists/books, computers and office supplies. These same categories account for just 14.7% of all print yellow pages searches.
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Slightly more than one third (34.2%) of print yellow pages references are related to automotive, health care, pizza, pet care and appliance/repair. These same categories account for just 11.4% of all Internet yellow pages searches
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It seems, therefore, that Internet yellow pages users are more likely to make reference to categories that relate to travel or business and/or where close proximity to home is not required. On the other hand, print directory users are more likely to turn to the print directory to meet immediate needs from a business/service that is close to home. (Source: Knowledge Networks/SRI, 2002)
Given the complementary relationship between print and Internet yellow pages, it is not surprising that there is significant overlap between the demographics and behaviors of print and Internet yellow pages users.
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The demographic profiles of both groups are similar. They tend to be younger, well educated and living in households with higher annual incomes.
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Frequent users of the print directory are also frequent Internet users. People that subscribe to online services use Yellow Pages 23% more than people who do not subscribe to online services. In addition, frequent yellow pages print directory users are 18% more likely to have made purchases on the Internet and 27% more likely to have spent over $1000 on Internet purchases. (Source: CRM Associates)
Local advertisers, such as your local furniture dealer, typically deal directly with media outlets to place their advertising. The same is true with the yellow pages. Local yellow pages advertisers place their advertising with representatives of the directory publisher or place their ads directly with an Internet yellow pages site.
National advertisers such as McDonald's, Gap and Ford do not interact with media outlets directly. Each of these companies has an agency that acts on their behalf to create media plans and work with media outlets such as television stations and magazines to place their advertising. In order to maintain synergy and consistency across media, these same agencies typically are also involved with the advertiser's online advertising. The same is true for national yellow pages advertisers.
National yellow pages advertisers use CMRs - Certified Marketing Representatives - to develop creative plans, media strategy and execute media placement for their print and Internet directory advertising, All of the same functions provided by traditional advertising agencies.
Beyond their planning and support functions, CMRs are a necessity for national advertisers because of the complexity of yellow pages directory media placement and buying. CMRs seamlessly execute media plans for national yellow pages advertisers in spite of different print and Internet publishers' pricing plans, different closing dates, different ad specifications, multiple billing sources and multiple publisher representatives.
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