) Inc. and Yahoo! Inc. (YHOO
) storming into the local advertising market, the telephone companies can't afford to sit still. For decades their Yellow Pages books have dominated the ad game for small businesses, and they simply have too much money at stake. In 2004, SBC Communications Inc. (SBC
) pulled in $2.1 billion in operating income from Yellow Pages, on revenues of $3.8 billion. BellSouth Corp. (BLS
) earned $954 million on $2 billion in revenues.
So the two Bells decided that if anyone was going to take the Yellow Pages online, it had better be them. They pooled their Yellow Pages sites in a joint venture, bought rights to the YellowPages.com name, and tapped 32-year-old BellSouth exec Charles Stubbs as CEO of the Pasadena (Calif.) venture. Now they plan to take on Google and Yahoo for supremacy in the brave new world. "We're going to be just as big as Google Local or Yahoo Local," Stubbs vows.
Easy to say, hard to do. Stubbs's challenge is to take an established business whose 4,000 ad sales reps are mostly union members and make it nimble enough to duel with two of the toughest companies on the Net. To get there, YellowPages.com will have to develop top-notch search capabilities and additional content for researching products and services. Then Stubbs will have to convince consumers that his site is as good as the search engines -- when "to google" has become part of the popular lexicon. The Bells share "a culture that's certainly not accustomed to the accelerated product development on the Internet, and that's a very real barrier," says analyst Greg Sterling of advertising consultant Kelsey Group.
What the phone companies do have in their favor is feet on the street. Their thousands of sales reps pound the pavement in towns where Google and Yahoo merely float in the ether. The reps have such deep relationships with their clients that the renewal rate for Yellow Pages' advertisers is more than 90%.
The pitch to local customers these days is straightforward: Keep it simple and buy all your advertising, online or off, from us. The salespeople can bundle ads in the printed book with ads on the YellowPages.com site. They can buy ads on Google and Yahoo, too, if clients want to use the search engines. That's a comfort for those business people who don't want to spend time learning the complexities of search advertising, in which prices change constantly and bills can spike any time there's a flurry of clicks.
The phone companies are burnishing their own Web site, too. Coming upgrades to YellowPages.com will let consumers sort businesses by factors like what brands of air conditioners they sell, store hours, and the credit cards they take. SBC also has channels about "life change" topics like moving or getting married. Why? Seventy percent of Yellow Pages users use the books to buy products for big events, from wedding gowns to paint, says Neg Norton, president of the Yellow Pages Assn.
The venture also has the muscle of its parent companies behind it. YellowPages.com will be able to send marketing materials, including its Web address, into millions of homes via SBC and BellSouth's phone bills and print Yellow Pages. And since SBC and BellSouth own Cingular Wireless, Stubbs expects to lead the way in sending ads through text messages or video clips to consumers' mobile phones. "Our parents will offer the best one-stop shop for a complete ad campaign," Stubbs says.
Small advertisers seem willing to give him a try. James Cunningham, president of Superior Plumbing in Kennesaw, Ga., advertises with both BellSouth and Yahoo. He says BellSouth's site gives his $6 million a year business twice as many leads as Yahoo, and Verizon's SuperPages.com site beats them both. Cunningham also likes that the online Yellow Pages cost him less than half as much per lead as the printed books. He just added a staffer to figure out how to best spend his online budget. "If I could spend a ton more on the Internet, I would," he says. "It's the future."
Such is the brand-name appeal YellowPages.com is counting on. Although the phone companies face a tough battle against the Net giants, Kelsey Group's Sterling says there may be room for three or four winners in the local advertising market. Stubbs is determined to make YellowPages.com one of them. By Timothy J. Mullaney in New York