Tuesday, August 23, 2011

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.

Tuesday, August 16, 2011

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.