Tuesday, June 02, 2009

Yellow Pages are now the Red Pages

As in Red Ink:

Major Yellow Page Publisher Files Chap 11

yellow-pagesTraditional marketing avenues continue to take punishment in ways never seen before. Of course, we all know about newspapers and the trouble they are having. Now, it’s time for another stalwart of traditional small and medium business advertising, the Yellow Pages, to take more of a beating.

Amidst news stories about Microsoft actually making search inroads and the “Tastes Great / Less Filling!” wars between Facebook and Twitter is the reality that the old guard is struggling to hold on. Late last week, R.H. Donnelly Corp., a major yellow pages publisher, filed for Chapter 11 bankruptcy protection so it can get out from under a $10 billion (that’s right, with a B) debt load. The Wall Street Journal reports

The Cary, N.C., company sought protection from its creditors in the U.S. Bankruptcy Court in Wilmington, Del., after reaching a deal with a majority in dollar amount of its bondholders to exchange $6 billion in debt for 100% of the equity in the reorganized company and to exchange a $400 million note for a new $300 million note. Holders of most of the company’s $3.5 billion in bank debt have agreed to extend the maturity on the loans to 2014.

Most Internet marketers have been putting the Yellow Pages in the grave for quite some time now. The sales tactics and question of ROI is something that can no longer be swept under the rug in the age of the Internet and social media. While there is arguably a place for Yellow Page products they are no longer viewed as necessities to small businesses. Even the online versions of these offerings are wrought with confusion over their true value. Add to that the continuing murkiness of online yellow page “products” (i.e. buy x amount of clicks per month) and the future seems kind of cloudy as well.

The following three quotes tells the tale very well of R.H. Donnelly and its current state of affairs

In an interview Thursday, R.H. Donnelley Chief Executive David Swanson said the downturn in the U.S. economy and housing market hit the company’s advertising sales, which in turn caused it to run into problems keeping in line with its debt covenants.

R.H. Donnelley racked up billions in debt over the past several years through a series of acquisitions. The company bought Sprint’s directory business for more than $2 billion in 2003 and three years later acquired Dex Media Inc. in a deal worth about $9.5 billion.

Mr. Swanson said R.H. Donnelley entered Chapter 11 to fix its “unhealthy balance sheet” but doesn’t need to address any operational issues while in bankruptcy. “It’s business as usual here,” he said.

For me, the last line says it all. The CEO of a business that has seen shareholder value go to near nothing still says that it’s business as usual. If you were a stockholder in this company that was holding shares in its current state you would be a little ticked at that kind of statement. It’s hard to feel confident that this filing will change anything if the attitude still remains. Oh, as an aside, Mr. Swanson has enjoyed some nice personal compensation over the past few years despite engineering this train right into Bankrupt Station. No wonder it’s business as usual.

Donnelly joins Idearc, who publishes the Verizon Yellow Pages, in Chapter 11. Idearc did so in March of this year.

So are the yellow pages dead? Is the online version still an option if you are an SMB who has been buying from them for years? Which Yellow Pages is the actual real one anyway? While we make this transition from traditional to new media options will this model have a place?

But this is not a surprise. Look at this from last summer: http://blog.jippidy.com/?p=21

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