No post this week

In the last two weeks I have attended two conferences, spend a week in the UK, and lost one of my best friends and our best man to a sudden heart attack. Normal service will be resumed in two weeks.

Comparative: Internet versus Yellow Pages

A month ago I commented on the attempted ban of Yellow Pages in San Francisco.  Last post I talked about resilience and how the local Yellow Pages book reflects, to a great degree, the resilience of a community.  This week I plan to discuss how the vastly different media of Yellow Pages and Internet-only advertising serve different business interests.

Many people thought that the internet would be the great leveler in the advertising world.  Suddenly, a small mom-and-pop store could put up a web site and compete in the global marketplace with the big international conglomerates.   Even today, internet advertising as a stand-alone product is sold with this underlying premise.   

To be fair, the internet had given many entrepreneurs a place to start; the simplicity of setting up an on-line store allowed a new generation to experience running their own business.  From simply selling a few items on Ebay to setting up a dedicated online storefront, the dream of self-determination became attainable for many more people than ever before.  From the quiet confines of a spare bedroom, thousands of individuals pursued their dreams of a better label, that of self-employed businessperson.  Some purchased stock, photographed it, listed it, lovingly packaged and shipped it, all over the country.   Others simply set up fronts for drop-shipping companies and waited for the orders to come flooding in.

Most found out that business was not that simple.  Finding customers - in other words, good business leads - has been the challenge for businesses since the invention of commerce.  Even the best web site is worthless if there are no leads to convert to sales.  

Lucky for the internet startup, there is a not-ostensibly-evil company that loves to connect people looking for products and services with suppliers: Google.  All an entrepreneur has to do is create the perfect site optimized for the search engines like Google, Bing, Yahoo etc, and watch the leads come in.   

As many have found out, this “Search Engine Optimization” (SEO) is not easy. For a start, the rules always change.  Or to put it into technical terms, “Google changes the algorithm.” A site that is top of the page this week may be nowhere to be found by the time the next blog post comes out.  A competitor may design a better site tomorrow, or the parameters may change.  Maybe you have a fast, slick, text heavy site that works well - then next week, video SEO becomes more important in the calculation somewhere in a server farm and, it is back to the web site drawing board.  Well not exactly. Most sites can be improved fairly easily, with good advice from an SEO consultant like Andrew Shortland, or even by following one of the better SEO blogs.

So who has the greatest resources to throw at SEO?  The home business examples outlined above? The Wall-Street backed mega-warehouse set up in a state with no sales tax? The big box stores you find at the local retail park?  Somehow I don’t think the start-up in the spare bedroom has the development resources to take on Target, Walmart, Amazon et al in the SEO arena.

But even without the resources to develop a site that can compete with the big players, the entrepreneur may get lucky in design and get to the top of the SEO rankings.  That does not mean that they are the first result on the page.  That is usually reserved for paid positions, a system called “Search Engine Marketing” (SEM), a placement at the top of the Google search results that varies in cost between ten cents to almost fifty five dollars ($ 54.91) per click (assuming the user thinks that result is relevant and clicks on the link). 

Do a Google search for popular products and you will find results including the regular big box stores like Target, Walmart, Kmart, etc.  Many times you will find the top result is a paid listing from one of the big box stores.  A search for “autumn wear” today will have Nordstrom, Target and TopShop in the paid results.  That is worth thinking about.  Corporations who can afford to have teams of SEO specialists on staff, constantly changing the website to give the maximum positioning, STILL pay to be on the first page of Google results.  SEO in itself is subject to the whims of those who write the formula - those who rely on formula alone are rolling the dice.  The Search Engine businesses like Google and Bing know this and know that businesses will buy that traffic from them.

So it’s pretty obvious that small businesses do not have the resources to compete with the larger, national and international chains in the internet marketplace.  They end up spending money either on the SEM paid listings or using a third party marketplace like Ebay, Amazon, or when the margins get too thin, Craiglist.   Rather than being the great leveling marketplace, the internet gives distinct advantages in retail to large chains over the small, local businesses. 

Not all internet advertising is dominated by national players, though.  The service industry, by its nature, tends to be more localized.  So let’s pick the fourth most expensive search terms and look at how the internet stands up:  Attorney.

If an individual in San Francisco needs an Attorney and goes to the internet, searches for one, and clicks on the top result, then that business lead may very well have cost the partnership $ 47.00.  That’s the price Google is currently charging to direct a person searching for an attorney to their web site. That's just for the click-through to the website.  At this point the person searching is just looking around, seeing if this business might meet their needs. On average, maybe one in twenty will pick up the phone or send an email.  So for each phone call or email the attorney received, it is likely to have cost him or her more than nine hundred dollars.   

If a person had picked up a Yellow Pages, the cost of displaying that ad was around 10 cents per issue for the largest, full color page!  Okay, that’s only potential customers, though, not everyone who received a Yellow Pages will need a lawyer, even in San Francisco.  Luckily, the Yellow Pages industry has a way of tracking usage:  We pick a test case, put a different number in the book, and forward telephone calls on from that number to the regular business number.  Thus we know exactly how many business leads an advert of a particular size generates in a market.  So how many business leads would the most expensive Yellow Pages Advertising create, and what is the cost per qualified lead?  Examples over the last couple of years shows that a full page package under Attorney can bring in upwards of 1200 leads at around $ 30.00 a phone call to the attorney in San Francisco. 

Yellow Pages, an industry that creates the artwork, proofs it, modifies it, gets customer approval, then prints a physical product and distributes it to over 600,000 places in the city, can do so on two-thirds of the cost per lead of what it takes to get Google to provide a simple link.  The sales, production and distribution of the Yellow Pages also provides many jobs for the residents of the city.  It provides a local search function that does not externalize the costs onto the public and the industry goes out of its way to be sustainable, both as a product and as a business model in the community.  Internet-only models externalize costs while charging far more providing nothing of resilience. 

More importantly, the Attorney in this example who is advertising in the local book is likely to be living in San Francisco, paying local state and city taxes, contributing to the local community and has an interest in the well-being of his or her community. 

Now there will be other categories of business that Google can provide leads to that are cheaper than Yellow Pages.  Those cheaper leads, however, are being chased by the same national and international players. In the same way as the economies of scale of national chains can use the availability of cheap energy to undercut the prices of locally owned businesses, Google has the ability to give big SEM spenders (those with large internet advertising budgets) a competitive advantage that drains money out of local communities into Wall Street.

Of course, the internet should have a place in the advertising strategy of any business today.  However, it does not have to be costly or paid for at the expense of more traditional and time-proven media.  To work effectively, local businesses need to work together, to network in a way that leverages the local aspect of their markets, and to promote their common, local interest.  That’s what the Yellow Pages have always done, sharing the production and distribution costs of the original Search Engine between all the advertisers contained therein. 

Next blog post, I’ll bring the conversation back to peak oil and how these models will stand up to the challenges we face in the twilight of the oil age.        

Resilience

Recently I had the pleasure of attending the kick-off of the 2012 San Francisco sales campaign for Valley Yellow Pages.  It certainly made life in the back office of the corporate headquarters appear quiet in comparison.  The Regional Vice President gave away the secret of the success of his region: LSD.

At this point I really knew for certain that this was more interesting than life in the Information Systems department!  He went on, however, to explain further.  LSD stood for "Laughing," "Singing," "Dancing;" the importance of a good, positive attitude.  Not just a forced smile but the act of remembering to take joy in life.

Why is it important to tell people what should be self evident?  Because it takes a certain type of individual to be a good “outside sales person,” particularly in today’s uncertain economy.  For those who are unfamiliar with the term, an outside sales person is one who conducts his sales meeting outside his office – usually at the client’s place of business.  In British parlance, it’s like the “off in “off licence” but with less moral hazard.   

It is not an easy job.  The salesperson faces multiple rejections every single day, sometimes a polite “no thank you” but often a lot ruder, up to profanity and abuse.  Businesses are struggling in an uncertain economy, tempers are short and often those business owners make the mistake of perceiving Yellow Pages as an expense instead of an investment.  Their frustration with the world may cause them to lash out at an unwanted telephone call or personal visit.  The Yellow Pages salesperson has to shrug that abuse off, put on a genuine smile, and go see the next potential customer.  Setbacks are a daily fact of life, the best laid plans and presentations mean nothing if the decision maker does not stop and listen to what our company can do for them.  A Yellow Pages salesperson needs an attribute that is sorely lacking in society today:  Resilience.  

Resilience is the ability to recover from shock, injury or disturbance.  It is a term that can be applied to an individual, a group, a business, a community and even a nation.  For a business, or even a business sector, resilience is the ability to weather shock in the supply chain.  For example, the lack of resiliency in the automotive manufacturing sector was highlighted when the Japan earthquake earlier this year resulted in factories shutting down due to lack of components.    In business, the opposite of resilience is “Just In Time” (JIT) provisioning.  People should be familiar with it.  When you go to the supermarket, the good on the shelves were probably delivered within the last three days - “just in time” for you to buy them.  That is not very resilient.  Ask anyone who tried to get food and water during the aftermath of a serious earthquake, flood or hurricane.  JIT means having all your eggs in someone else’s basket and relying on them to deliver them on time.  One setback and things grind to a halt. That’s what happened to everyone whose eggs happened to be laid in northern Japan earlier this year.

Resilience means redundancy in the critical infrastructure. For a community, that means having more than one source of each product and service.  Just as importantly, it means that those competing businesses need to have diverse suppliers.  For a community to have resilience, it must have a vibrant, healthy business economy with connections to that local community.  A big box superstore that ships in goods and ships out profits using the JIT model neither contributes much to the local economy nor to its resilience.       

Want to know how resilient your community is?  Pick up the phone book.  It is a snapshot of the health of your local business community.  Forget the massaged statistics of the government’s Bureau of Labor Statistics or the older models of economic factors maintained by Shadow Stats - did you know that to keep down the official rate of inflation and unemployment and to boost the appearance of continual growth, the government, regardless of political party, changes the rules on a regular basis? 

There is not a better gauge of your local economy than your Yellow Pages book.  Advertising is purchased for a year with those orders often placed months in advance.  It is an indicator of the confidence of a business owner that they will keep their doors open long term.  For you the consumer, that’s a vital factor if the goods or services you purchase come with a guarantee or warranty.  Is the business confident enough to invest in advertising that will bring in business for another year? Or are they pulling back, only spending money in short-term advertising campaigns?

Oil spikes are a major threat to JIT delivery models.  If your community gets all of its vital supplies trucked in from hundreds of miles away, then when gas prices go up, so does everything you buy. When political or geological factors reduce or stop that oil from flowing freely, those goods and services will no longer be available.  The big chains will close their doors indefinitely, laying off all the local workers, while the shareholders and decision makers pull back to the communities they are invested in.  Big box stores are not invested in your community.  Developers built the infrastructure of the retail parks with taxpayer money, either in grants, tax breaks or other ‘incentives” to entice the development to that location.  Those giant buildings were then leased to the big box store, who would not think twice about defaulting on the lease if they felt it served their fiduciary responsibility to their shareholders.

There is another group of very resilient individuals who know what it is like to get up every day, go out and see what they can offer in the way of help to businesses, only to face “no” after “no” after “no.”  They know what it is like to have the door slammed in the face, only to put on a genuine smile and move on to the next business with the important question:  “What can I do today to help your business do better?”

Those people are the unemployed. 

If you have what it takes to get up, day after day, to keep approaching business after business, not taking that "no" as the final answer that will define your life, if you know, deep down in your heart you have something valuable to offer if you can get a few minutes time in front of the decision maker - then you know you are resilient.  In which case, have you considered a job in Yellow Pages?  Don’t take no for an answer.  Keep going back to the recruiting manager.  Show them by your resilience that you have what it takes to help our Yellow Pages industry keep our local communities strong by promoting a healthy, vibrant local business community.  Tell them I referred you.  (Disclaimer: I am the Information System Manager at Valley Yellow Pages and have no influence of hiring of salespeople; - I only influence electrons.)

No trees were harmed in the creation of this Blog.  However, quite a bit of coal was dug out of the ground, burned, and used to generate electricity to power the servers, the internet, and your computer or tablet. 

Who does a Yellow Pages Ban serve? Who profits?

Last post I highlighted the assault on the Yellow Pages industry currently underway in the city of San Francisco and the connection its main advocate, David Chiu, has with rival media, that being a possible factor in his desire to use policy to favor one advertising medium over the other.

I do not know President Chiu’s motivations.  I make no claims of any psychic powers.  It is commonly believed that he hopes to run for Mayer of San Francisco and I believe this legislation is an attempt to influence the less educated members of the environmental lobby.  A cynical attempt at manipulation or not, this blog will highlight how Yellow Pages stacks up against the competition when it comes to serving not just the advertising media itself, but the environment, the advertisers, and also the local community.  It will show that, contrary to popular misconceptions, Yellow Pages is far better for the environment than many of its competitors.  I’m not going to go into usage statistics, or conversion rates of various industries.  This is not a blog to promote Yellow Pages but rather to discuss it in the context of declining energy availability. 

A term I want to introduce to readers who may not be familiar with it is “externalizing costs.”  When a cost is externalized it means that the corporation is no longer footing that bill. Instead it falls on either the consumer or, more often, on society in general.  The most prevalent example of externalized costs is the banking industry, which made billions gambling on the markets, and when they lost money, came to the taxpayer, who bailed them out with trillions of dollars borrowed from the future earnings of American workers.  The oil industry also externalizes costs; gas prices would be significantly higher if the American military were not deployed in the gulf to protect our business interests.  From the rising cost of insurance against maritime piracy to the sale of discounted military hardware to Saudi Arabia to the industry subsidies from the government, the cost of oil is far more than what we pay at the pump.

Externalizing costs also happens on smaller scales, often without people realizing. Who pays for the delivery of the advertising  you see each day?  In a number of cases, you as the consumer pay the bulk of delivery cost.  Some forms of media share the costs between advertiser and consumer and a few forms of advertising expect the seller to pay the total cost of distribution.  

Online advertising is one of the mediums where the majority of the cost of delivery is placed on the consumer.  In this case, the cost is externalized on the person paying for the internet connection.   If you do not have an internet connection or cannot afford one, then you are excluded as a customer. 

Online advertisers will not reach you unless you pay for the internet connection so that advertising can be delivered to your computer, your tablet, or your phone.   While it may not be obvious, when you see an advertisement digitally, (be it a website, a banner ad or a spam email in your inbox) you as a consumer subsidized the delivery of that advert. 

This is not a new model. Newspapers and magazines have long charged readers as well as subsidizing the production and distribution costs with advertising rates.  Even television and radio cost the consumer the price of the equipment and the power to run it.  Unsolicited mail is perhaps the closest distribution model to Yellow Pages.  Paper, delivered to the door, is free of direct costs to the user but the public still pays for distribution in the form of subsidies to the post office.

Yellow Page is a medium that is wholly paid for by the advertiser.  It does not cost the consumer anything for production or the delivery of the product.  The publisher pays for the delivery.  It is free to everyone who has not ‘opted out’ of delivery.   Every other media externalizes some or all of the costs onto the public or the taxpayer.  So who benefits from banning the Yellow Pages?  Certainly not the consumers or the taxpayers.  The only ones who benefit are the other advertising mediums who, we have shown, are subsidized one way or another.

Beyond the question of who pays, let us take a look at the wider environmental impact of the various media.  Most people in the delivery areas for our book, the Valley Yellow Pages (Disclosure:  I am the Information Systems Manager for this publisher) get their electricity from Pacific Gas and Electric (PG&E).  The current rate for electricity varies depending on use, but most consumers end up being billed at the highest rate (the lowest rate will not cover the cost of running a fridge and a couple of  light bulbs for a month)  which currently is 40 cents a kilowatt hour. 

PG&E, like many companies, also externalize costs.  Power stations produce a massive amount of pollution.  More often than not, it is the public who pay the cost of dealing with that pollution, because power corporations have the resources to lobby to limit any regulations that would require them deal with the pollution themselves.  Every time a consumer requires electrical power to search for a product or service they need, they have added to the environmental impact of the power generation. 

The power is not only used by the consumer switching on their computer or charging their phones and tablets.  One of the biggest users of power today is the internet itself.  In fact, the internet uses more power than all but the five biggest countries use, far more than even India or Germany uses.   Google and other providers consume huge amounts of electrical power to run their data centers, executing more than a billion searches each day; and each search engages around a thousand servers as it scans its various data centers for the information you are looking for.  Google uses so much energy that it tries to keep the exact amount a secret.  

The switches and other parts of the infrastructure, invisible and rarely thought of by most internet users, also consume power. From the advertiser going online to select his Google Adwords to the users searching for what they want, the power companies are an additional winner when a city bans the phone book.

I’m not going to talk about the actual production of the Yellow Pages beyond saying that it is printed on paper made from recycled materials and wood chips from the lumber industry.  Not a single tree is cut down to produce the Yellow Pages.  Almost every publisher has adopted the use of recycled materials, often at a higher cost than ‘virgin’ paper.   The inks, glue, etc used in the book are biodegradable and free of toxins.  More information on how green the Yellow Pages is can be found here.

Let us return to oil, this being a blog that merges Yellow Pages with the impact that Peak Oil is having -  and will have  - over the coming decades.  The telephone book is delivered once a year by a private distribution company.  The number of books delivered is well known and publically available since advertising costs are predicated on the number of consumers the book reaches.  In the past there have  been challenges to the delivery numbers and the industry responded by taking part in independent audits – validating the value of the Yellow Pages long before the internet became a part of our everyday life.

Delivery of the book does take energy, in the form of gas used to deliver the printed books to the doorstep of everyone who wants one.  That delivery occurs once per year, on routes that are designed for both efficiency and energy savings; after all, the delivery company wants to save costs just as much as we consumers do.  Compare that with unsolicited mail the post office delivers to our doors six days a week.  While the routes are equally optimized by the post office, you, the consumer, subsidize the cheaper bulk mail rate with higher costs on first class stamps and public bailouts of the postal service.  

Next post, I will deal with other ‘green’ aspects of the Yellow Pages,  how Yellow Pages plays a part in sustainable and resilient communities and give some insider secrets on how the industry is changing to meet the demands of resource depletion.

A return to blogging

When I began this blog I expected to post at least twice a month.  After a couple of weeks however, my employer announced they were going to release a “Social Media” policy to offer guidelines to people talking about our industry.  I thought it a good idea to wait for this, so I did not inadvertently violate a policy that wasn’t written yet.   Not for fear of upsetting my employer - they are the most reasonable company I have worked for in the United States.  Rather it was the factor that guided the company to actually develop the social media policy that made me want to wait:  Fairness. 

The telephone directory represents one of the most level playing fields in advertising.  Delivered freely to every household that wants one, it expresses our advertisers messages as they want to be expressed, as large or as small, in color or in the traditional black and yellow.  Side by side, page by page, the information a consumer wants is available when they want it, without influence from the media and it leaves the decision to the consumer.   Yellow Pages publishers do not play favorites; generally in the industry, the order of advertising is governed by strict rules based on size and when the advertising was purchased.   Every business is a region is contacted to see if how much representation the advertiser wants in the book and even if they choose to not spend a cent on advertising, we still include basic information.  Independent Yellow Pages, like Valley Yellow Pages (whom I work for,) pride themselves on being as inclusive as possible.  

Since before I joined the company, there were rules prohibiting employees from endorsing an advertiser; it is not our place to promote one advertiser over another.  In the last century, it took quite a bit of effort to endorse the product or supplier, but that changed with social marketing.  Now, a person can endorse a supplier via an on-line review in a matter of minutes.  The possibility of a conflict of interest is much higher now.  For example, if an advertiser reduced the size of his or her advertising and then got a negative review from an employee, they might feel that the review was retaliatory. Yell have been accused of similar unethical behavior in the past, with some of their clients accusing them of manipulating reviews to pressure advertisers to subscribe to costly services.  We are proud of our independence and neutrality of our product and trust the public to make informed decision with the information they are given.  This contrasts with other media like radio, who often have advertisements in the form of endorsements from the presenters. 

So now the policy is in place and I must govern my online behavior by its contents.  That means whenever I talk about the Yellow Pages industry, I am required to explicitly disclose my connection:  I am the Information System Manager for Valley Yellow Pages.  I am expected to conduct myself with due order and propriety since my actions can reflect on the company.  I am expected to make it clear that what I write (like this) is my own opinion and not that of the company.  I cannot criticize the products and services of the company, our competitors or even the industry in general.  It remains to be seen if I get my hand slapped for violating this last one, as I favor honesty above all else.     

Nine and a half months after Valley Yellow Pages began the process of writing a Social Media Policy, it was finally released.  Why did it take longer to produce a 717 word document than it will take our departmental assistant to have her baby?    

It comes down to one word: Priorities.

When free speech, access to free information and the environment are at stake, then those topics take priority over minor internal matters.  I’m talking about the assault on these principles that are currently underway in the city of San Francisco.  I believe our company, along with the industry in general, is committed to those principles and to challenging what we see as an unconstitutional assault on one specific business sector.

In February of this year, the Board of Supervisors in San Francisco, headed by its president, David Chiu, sought to impose restrictions on the delivery of the Yellow Pages that amount to a de facto ban.  Phrased as an “opt in” proposal it sounds like it is offering choice while restricting waste.  Nothing could be further from the truth.

The Yellow Pages Industry is one that has made great strides in the last decades to minimize its impact to the environment, driven not by political mandates but by a desire to do the right thing.  Few people know that it is more expensive to print directories on mainly recycled paper, that toxin-free ink and glue costs more than the alternatives on the market, that environmental concerns often trump the bottom line.  Of course, the Yellow Pages are not the only paper advertising media delivered to households all over the country.  Junk mail is a far larger use of paper and ink, 15 times more based on the volume delivered to me a few years ago.  Yet junk mail, supported by a powerful Postal union, is left untouched.  “Saving the trees” is a straw man argument against the Yellow Pages industry.

So who benefits from a de facto ban on Yellow Pages in San Francisco?  The main benefactor will be other media types who are not discriminated against in this legislation.  The most prominent, and the most outspoken at the hearing in San Francisco, were the internet advertising and internet communications companies who would be the beneficiaries of those advertising dollars were a ban to be implemented.  I suppose I should not be surprised by this; David Chiu’s biography makes it clear his internet industry connections:

“Before joining the Board, David was a founder and Chief Operating Officer of Grassroots Enterprise, an online communications technology company.”   

In my next blog post, I will expound on the reason why online advertising is worse for the environment than Yellow Pages, worse for the consumer, worse for the advertiser and favors the big international corporations over the small businesses that are the heart of our communities.