Yellow Pages see green on the Net

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Imagine a web site where people come just to look at the ads. That's how print Yellow Pages work, and many players hope the idea will pay off even bigger online.

"Yellow Pages is a phenomenally profitable industry," said John Kelsey, president of consultancy Kelsey Group. Print Yellow Pages last year recorded more than $11 billion in revenue, with average profits for publishers exceeding 40%, Mr. Kelsey said.

Related chart:
Online Yellow Pages: A snapshot

Now, dozens of online competitors, ranging from electronic versions of traditional Yellow Pages to aggressive startup companies, are vying for a piece of that pie--or, better yet, to make an even bigger pie.


But like so many other players on the Web, online Yellow Pages are still grappling with how best to generate real revenue.

Will it be display ads, as in print Yellow Pages? What about creating home pages for businesses? Or might online Yellow Pages simply be a loss-leader for other services, such as Internet access?

Kelsey predicts online Yellow Pages will be only a $400 million business by 2000, leaving many pundits predicting a shakeout.

"There is clearly going to be a shakeout in this marketplace over the next 18 to 36 months," said John Joseph, president of Ketchum Directory Advertising, Chicago. "Internet Yellow Pages is a marathon, not a sprint."

All the online directories are counting on at least some income from ad banners. But most see limited revenue potential from them.


"If you sell a regular banner ad [at a] general rate of $20 CPM . . . [and] are doing 3 million [page views a month], that's 60 grand. You're going run a business on that?" asked John Briggs, senior producer of Yahoo! Yellow Pages.

Since launching Yahoo!'s service last June, Mr. Briggs has worried less about revenue than about building traffic. The site now delivers "more than 20 million" page views a month, he said.

"I'm focusing on [reaching] 100 million page views. Then there's some money in it," he said.

Most other Yellow Pages sell custom Web pages to businesses.

BigBook gives away simple "fact-sheet" sites free to any business that fills out a form. So far, more than 30,000 have taken advantage of the offer, all of whom are upsell leads.


For more customized designs, leading national directories including BigBook, SuperPages, BigYellow and WorldPages charge $25 per month or more.

Even at those prices, Yellow Pages will need to convince thousands of businesses to buy Web sites before reaching profitability.

Nynex, which has been working online since the late '80s, has more than 10,000 advertisers on BigYellow, said BigYellow President William Wise. Custom Web sites cost an average of under $50 per month.

GTE Corp. believes in offering its SuperPages directory as just one of a suite of related services, including Net access.

"If you give them a Web presence and you don't give them an e-mail address, it's like giving them a Yellow Pages listing and no phone number," said Pat Marshall, VP of GTE Information Services.

Another class of companies competing in the fray are so-called "private labels," which provide Yellow Pages database and search-engine services for other Web sites to present under their own brand names. Vicinity, for example, provides the actual Yellow Pages service for Yahoo! Yellow Pages.

The Holy Grail for online Yellow Pages may be thoroughly integrated electronic commerce, where a user's search starts with the online directory and ends in an online transaction.

BigYellow, for example, said it's shifting its business model from being a directory to a shopping service. It sells premier positioning to paying retailers.

Ultimately, finding the perfect revenue strategy may be less important at this stage than sheer stamina. In a marathon, the winners aren't always the fastest, but those with the best strategy.

Online Yellow Pages: A snapshot
BigBook BigBook has successfully built brand recognition online and in the press with little advertising. The company has struck several strategic partnerships, including selling an equity stake to American Business Information, which already supplies its massive, nationwide businesses database to almost all of the competing online Yellow Pages. As a result of the equity deal, however, ABI now will promote BigBook's hosted Web sites in regular mailings to its 3 million business customers. BigBook is also in "advanced negotiations" with several RBOCs about co-branded or "private-label" Yellow Pages sites, President Kris Hagerman said.
8.7 million
Financial backing:
Venture capital
Banner ad CPM:
$20 to $200
Site hosting fee:
Free "fact sheet" listings $50/month and up for other features
BigYellow BigYellow is "transitioning from a `commodity directory' to an `electronic shopping service,' " said President William Wise. The first move along those lines is a new service, Shop Here!, a list of the top 50 retail sites on the Web. Eight of those, including L.L. Bean, J.C. Penney & Co. and, have secured top billing in the list and other privileges for signing on as sponsors. Nynex is in the process of merging with Bell Atlantic, which will make it the largest RBOC in the country.
April 1997 page views:
10 million-plus
Financial backing:
Banner ad CPM:
$20 and up
Site hosting fee:
Under $10/month and up
SuperPages GTE is a Yellow Pages goliath, operating print directories in 42 states.Pat Marshall, VP of GTE Information Services, said GTE is ultimately indifferent to whether SuperPages makes money. "The market for long-distance, for example, is infinitely larger than the market for Internet advertising. So, if we can leverage our presence in Internet advertising to maneuver long-distance along and we don't make a nickel on it, we don't care."
April 1997 page views:
4.8 million
Financial backing:
GTE Corp.
Banner ad CPM:
Site hosting fee:
$25 to $750/month
WorldPages WorldPages is allying with the hundreds of loosely affiliated independent Yellow Pages directories across the country, all of whom already have ad sales forces in place. WorldPages President Timothy Dick said such deals are now coming online for 50 cities, with 400 targeted by yearend.
April 1997 page views:
1.2 million
Financial backing:
Venture capital
Banner ad CPM:
$20 to $50
Site hosting fee:
Yahoo! Yellow Pages Yahoo has taken a build-it-and-they-will-come approach to Yellow Pages. In less than a year, the site has managed to command twice the number of page views as its nearest rival. Presently, its only revenue comes from ad banners and bold-face listings, though a new ad strategy will be announced this summer.
April 1997 page views:
20 million-plus
Financial backing:
Banner ad CPM:
Site hosting fee:
Doesn't host sites
Source: Company data

Copyright May 1997, Crain Communications Inc.

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