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Yellow Pages: The Literal Doormat of Print Advertising?

Posted by Peter Feld on April 10, 2012 01:14 PM

AT&T has bailed out of the yellow pages market, unloading a majority of its stake to a private equity firm, Cerberus Capital Management, for just under $1 billion. As Ad Age's Bradley Johnson observed:

That AT&T, a powerhouse in mobile phones and high-speed internet services, couldn't find a way to make its yellow-pages unit into one of the dominant, rapid-growth, go-to local-digital plays shows the tough realities of this market.

But while Yellow Pages are shrinking for obvious reasons -- who looks up a number in the phone book anymore? -- it's easy to overlook the underlying economics: revenue last year was $3.3 billion -- a 16-percent decline, to be sure, but still a lot of money, with potential to bottom out at an acceptable level that can be profitable once the private equity types perform their Invasion of the Body Snatchers act on the company.

The toxicity of the Yellow Pages brand -- AT&T, which will continue to hold 47% of the new company (YP Holdings), wrote off $2.9 billion in brand depreciation last year -- reflects an all-digital vision of the future that is closer to the reality of business leaders than to consumers as a whole, mirroring the overly sweeping predictions that audiences would abandon print magazines.

But Moody's does not expect yellow-page advertising to recover as in other sectors of print, and further transformations in the digital landscape may hasten the decline of printed phonebooks. (Seattle and San Francisco have banned unsolicited yellow page deliveries, a trend that could easily catch on in other cities.)

As Bloomberg's Christina Aleci reports, AT&T is being penalized for having held out too long: Verizon, which sold its yellow pages in 2006, was able to exit for six times earnings, or about four times as well as AT&T did in the Cerberus deal.

 

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