Yellow Pages slipping

24Feb10

Telstra’s directories unit is up against a formidable foe online, and it doesn’t look good, writes Dominic White from the Australian Financial Review.

Who bothers to dig out the Yellow Pages if they want to find a plumber or order a pizza when they can Google it in seconds on their laptop or iPhone?
It’s a question Telstra shareholders may be asking after the company revealed this monthly the first-half print revenues at the Yellow Pages tumbled by some 8.7 per cent.

Even after adjusting for growth in China, online, currency movements and the loss of Trading Post, revenues at Sensis, the Telstra unit that looks after Yellow Pages, fell 0.1 per cent – the first revenue fall in Sensis’s history.

Until now Sensis have proved remarkably immune to the headwinds that have battered other Yellow Pages businesses across the planet, including rise of Google. Unlike its rivals, which are largely owned by private equity, it doesn’t have debt problems.

But now experts wonder whether the move into negative growth marks a worrying turning point for Sensis, a business that generates almost 10 per cent of Telstra’s total sales.

Sales of offshore print directory businesses fell 15 to 30 per cent in 2009 because of the global financial crisis and the shift of advertising dollars and eyeballs from print to the computer and mobile phone screens.

Christian Guerra at Goldman Sachs JBWere notes that Sensis has been one of the best performing directories businesses in the world. Its Yellow Pages and White Pages print revenues rose 1 per cent and 8 per cent in the year to June 2009.

But he warms that it is now at greater risk that is peers if print’s decline accelerates because the company generates almost two-thirds of revenues from print. that is among the highest percentage of its global peers.

“Quite simply, a rising number of consumers are conducting online searches: one, online or via wireless: and, two, on search engines such as Google or via competing online directory sites,” he wrote in a recent note setting out key trends to watch in the telecommunications market in 2010.

“This, of course, is driving a reduction in usage of print directories.”

Sensis has boosted its online presence in an effort to offset the decline in print, notably through its Chinese investments and via a syndication deal with Google in which Yellow Pages listings have appeared on google Map online searches since the start of 2009.

Steve Power, chief executive of ReachLocal, which advises small businesses on how to reach customers online, says he does not advise clients to advertise with yellowpages.com.au because there is no guarantee their ad will appear high up up on the screen in Google Maps search results.

“Around 97 per cent of all searches are done through Google, Yahoo! and ninemsn, so if you’re a business and want to be found you need to be there, ” he says.

For a huge number of small businesses, however, the Yellow Pages remain a must. Some have no web presence and have limited options when advertising with Google. Latest Australian Bureau of Statistics figures show just 36 per cent of businesses had a web presence as at June 2008, much lower that 55 per cent comparisons for the United States and United Kingdom.

But Guerra says this percentage will rise, and will give small businesses more options for advertising and increase the percentage of Yellow Pages customers that advertise online only and avoid the print product. (That figure now is just 1 per cent, according to Telstra).

He also notes that, “disturbingly”, online revenue growth for traditional directory businesses around the world has slowed.

“We believe it will be more challenging for Sensis to grow its top line at the same rate going forward. . . revenue growth will slow as print directories come under pressure.”

He expects Sensis to invest more in online and digital businesses, to seek new revenue opportunities (such as building and maintaining websites for customers) and to make selective acquisitions in an effort to offset print decline.

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