On search engines & Yellow Pages

Yellow_pages Interesting (though far from surprising) news yesterday from Yahoo! on evolving Yahoo Local into a de-facto Yellow Pages platform. Original announcement here, coverage by TechCrunch here, and by John Battelle here.

This reminded me of a an email I sent to a colleague last year. The background was a growing number of requests from Yellow Pages (YP) companies to use our services to expose their specific YP listings on the major search engines[1]. My email below (slightly edited to maintain  confidentiality, etc) was part of the discussion around this direction. You can substitute the name I chose (YP-Co.) for mostly any traditional yellow pages player out there as anecdotal evidence suggests that mostly all of them are either considering or already feeding their listings into the major search engines:

From a strategic point of view, I think YP-Co is going to do a big mistake by feeding their listings into Google. The way I see it, they’re digging their own grave, for the sake of short term benefits. Here’s why:

Google is quickly taking over YP-Co’s market, and YP-Co is lending them a generous hand. By feeding their listings to Google, Google gets the local coverage they badly need, while building their own advertiser base in parallel. For Google this just primes their real future business and makes it easier for them to conquer the local space directly; for YP-Co this is a good way to get a temporary spike in traffic and then slowly decline as Google builds more and more direct relationships. I can’t see any long term strategic value for YP-Co coming from this deal. I also can’t see them sustaining a long term business where they’re an expensive middle-man that essentially provides a dumbed-down version of what Google offers.

In addition, YP-Co are essentially starting to flood the search engines with advertisers competing with YP-Co on the same keywords and inflating YP-Co’s own marketing expenses. At the end of the day, a click going to a YP-Co plumber page is 10x more valuable to them than a click going directly to a random plumber. The YP-Co click has residual value and over time gets people to understand there’s value in searching for services within YP-Co. With every click going directly to a random plumber, they’re enforcing the perception that Google is actually THE go-to place for service providers, and further obscuring YP-Co. So not only are they hurting themselves by obscuring their brand value, in the process of doing that they’re inflating their marketing budgets on very important channels (push even as little as 2-3 advertisers on a category, and the YP-Co ads are either going away, or will cost them a shitload of money… )

eBay is a good example for getting this – They spend tons of money on SEM (probably the biggest spender in the world), but always promote only their category pages and never ever ever promote a specific seller page. They seem to be extremely strict about this policy, as they understand that 10x value thing between their own page and a random seller’s page. YP-Co’s case is even more extreme, as the ‘random seller’s’  page on eBay is at least under the eBay brand and within their framework… with YP-Co the links just go off to an external random site.

In short, it seems to me like YP-Co is in a lame dog chase after Google, while trying to convince themselves that they’re making smart moves ahead of the curve.

This is of course a classic example of companies caught in the eye of the Aggregation Paradox. Unfortunately, most companies blinded by the chase after next quarter’s numbers fall right into the Aggregation Paradox trap. And that’s what makes the companies that get it (Google, Yahoo, etc) such wonderful businesses.

[1] Disclosures, disclaimers, clarifications and other vegetables:
A distinction should be made between two cases of promoting yellow pages (YP) content on search engines:

  1. Promoting of the YP category pages on the search engines. Example here.
  2. Promoting of specific listings (or – businesses) that are listed within the YP database.

While I sound skeptical about the 2nd type of SEM, I applaud YP companies for being smart and practicing the 1st type.

Beyond the obvious fact that this attracts highly qualified traffic, the 1st type of SEM actually increases the YP’s brand and the importance of their site. A user reaching a category page on a YP site must still engage with the site (drill down, search, browse, whatever) in order to see the business listings. Next time s/he is looking for a business there are higher chances of him/her going directly to the YP site and skipping the (now) redundant search engines step. That is great for the YP and helps maintain a sustainable and even growing business.

It’s the other type of promotion, that of specific business listings within the YP, that I am referring to in my mail and which I think is a slippery slope in the long term.

And to the disclosure – My company is involved in different ways in both flavors of YP promotion on search engines.


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