Yellow Pages and Wasting Local Business Advertising Dollars

The Yellow Pages have two core advantages that the entire business model is based on.

1) They have consumer behavior that has been continued for decades.

2) They have a sales model where scale matters and one of the only effective channels for selling advertising to millions of merchants.

Both of these advantages are about to break:

Consumer behavior is moving online with an always connected environment. The Local Internet is beginning to deliver as more than a critical mass of Local consumers are on the Local Internet looking for Local Merchants. From SMS search with www.4info.net to local news from www.Topix.net to rich local data from Yahoo Local and Google local, consumers are finding a better experience online---and now that better experience is accessible. Advantage number 1 is about to end.

There is enough money in local advertising on the Local Internet that the industry is looking for an alternative to the "mafia like" tactics of these massive and slow Yellow Pages companies. (most of which are owned by private equity firms trying to extract as much cash as possible out of hard working honest local businesses with little to know results) The tactics the Yellow Pages use are NOT consistent with selling the high performance, inexpensive, and highly effective advertising that the Local Internet delivers. People who sell FEAR like the Yellow Pages can not sell the Hope that the Local Internet delivers. Of course they will try and any major ad network has to look at them as a channel for now because they are the only game in town. (They also have to do things like ride along and sales audits to make sure the Yellow Pages are not ruining the powerful internet brand as the Yellow Pages push to accomplish what so far have been miniscule results in terms of bringing local businesses online to use the Local Internet) A new channel for selling advertising from the Local Internet will be built in the next 5 years. It will be built because a $60B Local Internet advertising market depends on a low cost of acquisition channel for bringing 10M small merchants online. This new channel is going to destroy the second advantage of the Yellow Pages. Building that new channel is what we are working on at www.merchantcircle.com.

With both of these advantages destroyed, the Yellow Pages industry is going to shrink by 90% and in the end they will not be able to afford their sales force. In 10 years, the major ad engines will be selling ads in print yellow pages (because it will be cheaper for them to do it) and the print Yellow Page business will be absorbed by the companies who control the Local Internet Advertising market.



Also check out:
http://www.leverageblog.com/leverage_the_internet/2006/04/the_death_of_th.html#comments
http://battellemedia.com/archives/002524.php#comments

thanks,
Ben

Posh Bagel

Stopped by Posh Bagel in Los Gatos this morning for the Farmers Market and noted they also have a great community bulletin board. We are looking forward to how we will be able to give local businesses and opportunity to express themselves like this on MerchantCircle.

Ben

Why Do Advertisers Hate the Yellow Pages?

After coming back from Casa lupe for lunch; a great little Mexican place where a few of our team members argued over release schedules, we came back to find the Los Altos fire department giving us an inspection. Lucky for us, they did not notice the Cray running in the closet.

When we got back a few of us found a newsletter forward from Dick Larkin who runs an interesting site called YP Commando. He leads work around internet yellow pages and understands what we mean when we talk about the Yellow Pages not delivering for small merchants. We believe in delivering the Local Internet to local merchants because it can deliver a 100 times improvement in the value people get from yellow pages ads. He has a great blog at http://ypcommando.blogspot.com/ but check out his newsletter as well.

Here is an interesting excerpt:

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Tom Morgan*, an HVAC / plumbing contractor in Virginia called me looking for advice for his Yellow Pages advertising. (*name changed)

He was the seventh contractor who had contacted me in as many days.

Tom had cancelled his $127,000 annual Yellow Pages advertising spend. Apparently, Tom cancels every year. The sales manager begs, pleads, threatens and cajoles Tom into renewing for yet another year.

The annual dance was on again as the directory is preparing to go to press. Tom is threatening to bail, but he will probably renew.

Tom is afraid to losethe seniority position at the front of the section, but he knows that his ads are not as effective as they once were.

Sparking his outrage, his first position double-truck ad has been pushed back by a page of leader ads. It's been obscured by a tab, and the price has gone up consistently while usage drops.

His fear of lossis much stronger than his anticipated return on investment.

In this sense, the Yellow Pages model of "substantial penalty for early withdrawal" is amazingly powerful in keeping dissatisfied customers from leaving.

A few independent publishershave taken market share, and Tom has ads in them all, but he continues to put most of his investment in the major utility directory.

Tom's comment to me was, "I can't wait for the Internet to put these Yellow Pages guys out of business." What concerns me is that everywhere I turn, I hear similar comments from other business owners.

Why is this?It makes no sense for a $25 billion advertising medium to have legions of unhappy clients.
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This is exactly what we are finding as we head towards over 5000 merchants from all over the country working with MerchantCircle to get the advertising opportunity from the Local Internet to work for them. They are seeing results from the Local Internet, because it is cost effective and that is where the Local Customer is. Places like Health Logic Wellness or the GPBCC are coming onto MerchantCircle every day looking for ways to capture the opportunity the local internet offers.

thanks,
Ben

Great Deli

We love the American Italian Deli off of Main St. in Los Altos. It's such a great little place, with friendly people, fast service, and of course GREAT food. I'd say between all the people in our office we at least grab lunch there once a week, if not twice. So, if you've never been there yet you should definitely check them out. I personally prefer their "Godfather" sandwich, which is a hefty sub loaded with proscuitto, provolone, coppa, mortadella, and salami on a soft roll; but if that's not your thing they have loads of other stuff ranging from Gelato, to Italian Sodas, Salads, and Pasta.

The American Italian Deli definitely makes a great choice for lunch and is just one of those small local businesses that stick out in the community.

best regards,
Ryan

Spring Break

Well, it is spring break this week and it has been raining for most of it; which it is not supposed to do in Silicon Valley this time of year.

So there were some kids hanging out in the office this week, since coming to work with Dad sounds fun after a few days in the rain. One of our favorite kids has discovered that SATURA CAKES is one of her favorite shops in downtown Los Altos. She also got a chance to visit Adventure Toys. There is nothing like finding a nice local store with tons of unique books and toys when you are at work with Dad.



Back to the folks at Satura Cakes; these guys are master marketers. As we watched them open, we all had our doubts about how this business was going to make it. Well they are doing very well. There are not a lot of bakeries with the average ticket they are seeing or the traffic they are building including selling coffee at a pretty good clip when there is a Starbucks and Pete's coffee within a 100 yards. They do it with great local marketing. MerchantCircle is all about helping small merchants execute great local marketing so you to can do well when even there is a Starbucks, Home Depot, or even worse Walmart close by.

Try our stuff, it is about to get a lot better in the next few weeks and we will help bring the Local Internet and the customers who are on the Local Internet to you....nothing like people in your local community seeing your business 3000 times in a few days...that drives traffic.

thanks,
Ben

New Listing

We had a great new classic local business sign up today in Fairhope Alabama.

Gambinos Restaurant

I have eaten in this place probably 100 times in my life. I remember we used to eat there before we had our pictures taken close by every year. It is just off the beach and always has great Karaoke on the weekend. My son loves the breadsticks. The place represents a lot of what a local place is supposed to: pictures of local people all over the place, pictures of local landmarks from 20 years ago, etc.


Don't forget to check out a few of the other great local businesses in the area too.
Cottage on Mobile Street
Affordable Plumbing Sewer and Drain
Swinson Air Conditioning Company Incorporated
MMC, LLC General Contractors

thanks,
Ben