Published 15th December
In 2007, co-founder of Microsoft, Bill Gates said yellow-pages use among people under 50 would drop to zero in five years.
The trend in the decline in usage of paper directories certainly suggests this is going to be a reality, potentially even quicker than Gates suggested.
Visit any apartment building or business centre lobby the sight is common, unclaimed directories piling up. This spells trouble for publishers like Seat Pagine Gialle, Yell and Pages Jaunes; it shows advertisers that fewer people use them. Many consumers have not opened a directory in years; others that have use them as door stops or monitor stands.
Publishers Seat Pagine Gialle in Italy, the U.K.’s Yell and France’s Pages Jaunes are struggling to boost sales as users and advertisers ditch their printed directories for online searches. While the companies have beefed up their own Internet-based offerings, they still depend on published books for most of their revenue, and their online growth has yet to compensate for the drop in print-based sales.
“Online is growing fast but not enough to offset the print decline,” said Lorna Tilbian, an analyst at Numis Securities Ltd. in London. “Someday there will be a tipping point.” Printed directories account for more than two-thirds of revenue for Seat and Yell and half for Pages Jaunes.
Seat and Yell posted their first losses in five years in the last full-year periods. Yell’s U.K. print business fell 20 percent in the six months through Sept. 30 while online sales rose 8.7 percent. Print revenue at Seat’s Italian unit dropped 14 percent in the first nine months, while Internet sales jumped 30 percent. In the first nine months, print sales at Pages Jaunes slid 5.4 percent, while online revenue rose 9.5 percent.
Yell shares have tumbled 18 percent in London in the past year, while Seat has plunged 65 percent in Milan. Of the 15 analysts who cover Seat, only two rate it a “buy.”
Ask both companies they state the need to develop both their print and online directories to grow. Yet print has not shown any sign of positive growth for the past few years for either publisher, nor does it going forward. Are they right to continue to bet on the recovery of print?
Analyst Fabio Iannelli of Kepler Capital Markets suggests otherwise; “While the recession can be blamed for a drop in print advertising, the declining sales reflect a broader trend”, He goes on to say “It is not simply a matter of a weak economic outlook,” said Iannelli, whose price estimate for Seat’s stock is zero. “We guess the print business would continue to be lacklustre even with positive GDP growth. Print business is a mature media and has been, and will continue to be, crowded out by the Internet to a higher extent than any other media.”
Seat is training its sales agents to focus on multimedia and is adding online content and tools to increase client visibility on the Web. Yell has been hiring Internet specialists and developing applications to access data on mobile devices. Seat and Yell both signed accords to sell Google Inc.’s AdWords service in Italy and the U.K., respectively.
But for both their online services are a mess. There is no clear competitive position and both fail to recognise that there are numerous competitive services out there that should represent a benchmark, none more so than Google. Pages Jaunes is offering slightly more than just phone numbers and addresses online but still does not go far enough. The challenge for all is to recognise the new environment that they need to operate and get moving.
The printed directory “business is in a structural decline, which may be mitigated by the ability to offset print with online revenue,” said Daniel Ek, an analyst at HQ AB in Stockholm.
Some companies say the writing’s on the wall for publishers of directories. Eniro AB, the biggest Nordic yellow-pages publisher, is betting on the online business, whose sales it says will exceed the print unit’s as early as next year.
The big question remains. Can the likes of Seat, Yell and Pages Jaunes react sufficiently quickly to transform their businesses to outlive Bill Gates’ prediction of a dead printed product by 2012? The jury is firmly out.
