AT&T and BellSouth is a $67 billion telecom rollup, but local advertising is involved too. The telcos’ respective Yellow Pages will be impacted by the rollup, as well as their ties with Yahoo, vendors and the Yellow Pages trade associations.
For starters, the deal makes the selloff/spinoff of the Yellow Pages units all-but-inevitable. The telcos needs tens of billions to install fiber-to-the-curb for IPTV, and it has made sense to sell off the YPs to produce some of the revenue. But this seals the deal. Given the choice of owning slow growth but highly-valued YPs, or fast-growing IPTV, Wall Street has been very clear on priorities. (Verizon, for sure, is under the same pressure, and is also likely to spin off its YPs).
In any case, such a spinoff/selloff won’t be hard for AT&T and BellSouth. The AT&T- and BellSouth Yellow Pages are already teamed up on YellowPages.com (and on Cingular, the mobile phone service).
The Yellowpages.com efforts were begun last year after they paid $98 million for the URL and a couple of minor items. Since then, the combined, 4,000 person strong sales staff has begun working on the same page for IYP sales.
Will the telcos miss owning the YPs? I think they will. For me, there is great irony here. Just as the telcos sell off their YPs, they have genuine synergies with them for the first time. Previously, it was suggested that the telco Yellow Pages got a lot of value from their telecom ties, because small businesses like the comfort and stability of dealing with one-bill telecom provider for all their marketing needs. But with hindsight, the value of the bundle was over-hyped.
The current explosion of wireless directory assistance, and geo-targeted capabilities via cell phones, WiFi and eventually IPTV, however, suggests that a telecom provider is foolish to let go of their primary sales channel. There is a definite reason why Google is dying to get into the WiFi space. But will anyone notice? Not for years.
Fallout With Yahoo?
As for side effects of the deal, some fallout is likely at Yahoo. Both companies sell for Yahoo Yellow Pages and Yahoo Local. And in return, Yahoo doesn’t sell against them. But maybe the arrangement has run its course.
When first introduced a few years ago, the deals –especially on the BellSouth side — got Yahoo going on a local basis and were very helpful to the company. But going forward, it isn’t really clear whether the value is still there. Yahoo has to give the telcos a really high commission, and I suspect it has been locked out of local sales in order to protect the telco sales forces.
Up to now, Yahoo hasn’t dared mess with the telco arrangements. They are so strategic, the orders probably came from Terry Semel’s office. It has a very lucrative deal with the telcos’ DSL portal services, and the Yellow Pages have been just a fringe part of it all.
Will this change if the Yellow Pages are separated out from DSL? Given the maturation of the marketplace, and Yahoo’s ability to do more with self-serve and alternative sales channels, I think it will. Give it a year or two.
Who Will Speak for ‘The Industry’?
Other impacts of the deal are likely to be felt by vendors and the trade associations. The Yellow Pages Association, in particular, has been highly dependent on dues of “the big four” players. But with Dex being bought by RHD, that shrunk the count by one. Now, with AT&T and BellSouth tying the knot, that’s another one down. The potential sale of Verizon Yellow Pages also puts its membership at risk.
The Yellow Pages Association has acted, with some reluctance, as an industry voice in establishing the Yellow Pages relevance in an age of search. (Full Disclose: I’ve worked with YPA on the initial rollout of its Local Search Guide). It isn’t really clear how it can continue to be the industry’s voice if it gets overly-dominated by one or two players.