Friday, September 03, 2004

Why Newspapers and Directories Just Don't Mix

This interesting report from InfoCommerce. I should
point out that my company has purchased a number of
directories from newspaper publishers such as the New
York Times. Also, Hearst has had a successful, albeit
very regional success with their ownership of
Associated Publishing in west Texas.

Here's the article . . .

Just weeks after noting the newspaper industry's
on-again off-again love affair with yellow pages, I
see an announcement by Hearst that it's acquiring
White Directories, one of the nation's largest
independent yellow pages publishers, and that White
will become part of the Hearst newspaper group.

Is this a case of another newspaper publisher getting
an expensive and painful lesson that local ad sales
expertise and local directory ad sales expertise are
not synonymous? Perhaps not. I spent some time
flipping between a list of markets served by White and
markets served by the Hearst newspapers, and found
very little overlap. What we probably have here is
Hearst making an investment in a growing and
dependable stream of profits, just like the bevy of
private equity funds that have discovered the yellow
pages industry over the past few years.

So why don't newspapers and directories mix?

The primary problem is that directory salespeople
aren't like other salespeople, and I offer that
observation as high praise. There was a time when it
was widely believed that yellow pages salespeople,
particularly those with the benefit of Donnelley sales
training, were among the best salespeople in the media
business. But that's not the same as saying they could
sell any medium equally well. Directory salespeople
are indeed a breed apart, and the general experience
to date is that they don't do well selling other forms
of media. It's not for lack of yellow pages publishers
trying to make it so. Part of this is a natural
salesperson's tendency to focus on what they know best
and are making money at today.

But the larger issue is that the directory sale is
almost totally opposite to the sale of most other
media. With yellow pages you sell retention,
discovery, saturation distribution and response. Add
in an annual frequency and rates so high they have to
be expressed in terms of the monthly cost, and you can
start to see the challenge. Yellow pages salespeople
can't sell newspaper ads, and newspaper people can't
sell yellow pages ads. That's why the potential sales
synergy that looks good on paper has never worked in

Consider too the cultural divide. Newspapers provide
important news and have a strong and proud
journalistic tradition. They sell subscriptions and
they sell advertising. Yellow pages sell advertising
and give their publications away. In the yellow pages
business, the advertising is the content. That's
simple to say, but hard to absorb, particularly if you
grew up in the newspaper business. Add into the mix
that yellow pages and newspapers have different
pre-press needs, are manufactured differently and
distributed differently, and you knock out loads more
potential synergy.

Finally, there is the "grass is greener" issue. When
newspapers look enviously at yellow pages, they look
at the market leaders, the Verizons of the world. But
when they finally take the plunge and buy yellow
pages, they buy independent publishers, the scrappy
competitors, the "we try harder" publishers. Nothing
wrong with that, as these independents can be both
large and profitable. But what it does mean is an even
greater emphasis on advertising sales in a highly
competitive, take no prisoners environment. That can
be a real eye-opener for newspapers, many of which
operate with effectively no competition.

Do yellow pages publishers make great media investment
vehicles? Yes. Should they be acquired by newspapers
to build "a highly synergistic, integrated local media
advertising platform" (I just made this up, but
doesn't it sound so ... plausible?). No.


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