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Yahoo And The Yellow Pages: Co-opt, or Co-opetition?

By - April 28, 2006

 Us.Yimg.Com I Us Cn Lp Lfl Scrn 5Yahoo Local has rolled out an update to its business model for local merchants, and it’s looking a lot like what the Yellow Pages do, only online, self service, cheaper, and, well, what I’ve been on about for a while – a step towards the online version of what the Yellow Pages really need to become.

I spent some time with the Yellow Pages industry earlier this week at their annual conference, and I must say they are pretty tuned in to all of this. They were most interested in whether or not they should work with Google (Verizon just decided to sell AdWords, for example), but I told them in no uncertain terms that they needed to watch Yahoo. Why? Because Yahoo has built in the ability for local merchants to interact directly with the listings, to create contnt for their businesses, and to buy premium listings.

Today Yahoo has moved the needle again, adding Local Featured Listings, a way for merchants to buy placement on results pages – it’s basically sponsored links, but with a twist. I spoke to Paul Levine, who runs Yahoo Local, and he told me that there has been a lot of demand from local merchants to be “at the top of the page” for a given result. Now, for between $20 and $300 a month, they can be.

This reminds me very much of the YP model of paying more or less for size of ad on the page, (they also pay more or less for the headers – ie and ad in Flowers is more expensive than an ad in Scuba Equipment).

Folks are already signing up (see this search for Bike Shop Boulder), and I see this as potentially a significant new revenue stream for Yahoo Local.

But wait, you say, this is just Overture listings, right? No, not in the end. In the end, if Yahoo is smart, this will be where local merchants advertise, not national 800 number chains. Why? Because that’s where the true value is in the YP, and that’s what should be up front. The race to win the online YP will be all about understanding how users actually USE the service. And right now, it’s Yahoo’s to lose.

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15 thoughts on “Yahoo And The Yellow Pages: Co-opt, or Co-opetition?

  1. Yes, yes, yes, I couldn’t agree more. I posted on the “death of the yellow pages” earlier in the month and agree that Yahoo! is in a better position in the local search space than Google. For now.

    As a champion of the SME my thoughts turn to what happens AFTER the business buys their ad in Y! Local Featured Listings. When we see the listing online we want to CLICK, to learn more. The visitor wants to see their website, and so much of the B2B small-medium enterprise still has no (or weak) web presence.

    I bet Y! Local Listings will inspire the SMB to invest in their web site; how else will they differentiate?

  2. John, great post, and I agree. I think economics will drive this as well – local merchants will tend to pay more for some local searches (pizza, dry cleaning, restaurants, etc.) than national/international chains. Great scoop.

  3. Kudos to Y! for upping the ante in Local Search. It’s gonna be fun to watch this space develop. It’s sure looks like Local & Vertical search is the way all search is migrating towards.

  4. Understandably, Yahoo as well as anyone else – MUST make money from this. But, putting Sponsor links on the Top & Bottom just seems inappropriate.

    On the example given, there were only FOUR regular listings – But SEVEN sponsor listings.

    Looking on the bottom there was TEN results pages.

  5. Rob Luskey says:

    I’m curious to see if these slots get filled with the national, non-local businesses like they are the big IYPs (yp.yahoo.com included). Do you know if Y! is restricting the inventory to only allow local businesses? The real trick will be how they reach the truly local small business and convey to them why they need to be there.

  6. Stewart says:

    Hmmm see yell.com

    “MADRID, Yell Group, a publisher of Yellow Pages directories in Britain and the United States, agreed Friday to buy Telefónica Publicidad & Informacion for €3.07 billion to expand in Europe and Latin America.”

    From the herald tribune

    http://www.iht.com/articles/2006/04/28/business/yell.php

  7. Ben says:

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

    1) The 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 enviroment. 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 http://www.4info.net to local news from http://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 accessable. 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 becuase they are the only game in town. (They also have to do things like ride alongs 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 has 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 http://www.merchantcircle.com.

    With both of these advantages destroyed, the Yellow Pages industy is going to shrink by 90% and in the end they will not be able to afford thier salesforces. 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.

  8. AhmedF says:

    You still can’t discount the massive YP brand. According to the Overture Suggestion tool, it has a massive 166,055.

    Then again, I’m really happy with what we are doing, so we will see ;)

  9. Jeb says:

    So what happens when a customer posts a highly negative (but not defamatory) review of a business on Yahoo Local?

    Will Yahoo just delete the negative review to appease the advertiser?

    Won’t they just be stealing from Paul (users) to pay Paul (advertisers)?

  10. Bob Chandra says:

    John,

    This is a sign of progress on the business end of local search. However, on the consumer end, it seems to me that there is still the dilemma for the end-user in being able to search local businesses and have the results ordered by quality. Yahoo and others use a “brute force” method of ranking that relies heavily on users explicitly ranking and reviewing businesses. Consequently, outside a few popular categories (ie: resturants), the average number of reviews per business tends to be small. Back in the late 90′s, web search engines like InfoSeek relied on a “brute force” method to index the web: people would manually enter URLs and descriptions. That model never scaled. But yet this is what we’re doing today with Local Search. No company has yet introduced the equivalent of PageRank for local search. This is exactly the problem that the company I’m involved in (called grayboxx), is attempting to solve.

    Cheers,
    Bob

  11. Keith Cash says:

    In the yellow pages, once they are printed you keep the same spot in the book for 1 year. Now with the internet, could there be bidding on who will be first in a catagory, to be the first the internet customer will see. I see some greed on the YP Interent publishers on this one.

  12. Adrian says:

    For a long time I’ve felt that the killer app for yellowpages is recommendation – every time I’ve used Yellowpages (print or online) to find a service or product (particularly a service), I’ve always wondered if I will have a bad or good experience when I call up and arrange for the plumber/mechanic/pest exterminator etc to help me.

    If only I could look online and see that “19 out of 20 people who used this service rated Joe’s Garage as ‘Excellent’, one person out of 20 rated Joe’s Garage as ‘Shifty’”. The problem for YP is of course that many of their advertisers would run screaming from the prospect of customers rating them. Still, it’s nice to dream…

    Another big problem for YP is how to ensure some kind of ‘fairness’ or moderately-equal opportunity for their advertisers. If the top 20 results in a heading (e.g. Florist) are all bought, that means advertisers who bought the cheaper heading styles (silver vs gold in the Australian yellowpages.com.au) get pushed further and further back despite still paying significant amounts of money. Those results are effectively hidden – no other serarch engine gets to scrape them, and there’s not enough content on the cheaper listings (in fact even on the most expensive listings) to justify users hunting through page after page when the only information that differentiates one adverstiser from another is their name and phone number.

    So if you don’t want to pay large amounts to yellowpages.com.au you need to have your own website and investigate other options. At least Google/Yahoo/etc will still index your website and if you’ve made it useful and relevant enough return you in the top listings without you paying a cent.

    At the moment YP is lucky that there are large numbers of small businesses out there still haven’t really got their heads around building an online presence and maximising the opportunities afforded by the various tools.

  13. Everette says:

    The search engines, Internet, and a technologically advanced younger generation will be the death of the printed Yellow Pages. The cost for ads and the knowledge that they are static and cannot be changed for one year will be a huge hindrance. Yahoo and Google are primed to capture the advertising dollars. Do not downplay the “going green” movement. This is something the Yellow Page industry downplays and stresses that they are green because they recycle. But how many of the 500 million printed books are thrown in the trash? Too many. Local governments have started to pass laws to stop the delivery of telephone books to people that do not want them. An “opt out” application has been developed at http://www.YellowPagesGoesGreen.org. The industry has to change are they will be dead.

  14. sabaisabai sukhunvit says:

    Yahoo Engine is not fair for add.

    Cheap HD PVR

  15. the printed yellow pages are dead. i hope the yellow pages are moving away from print and spending more money on the ‘net.