Tuesday, September 20, 2011

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.        

Tuesday, September 6, 2011


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.)

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