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Yellow Gold: Phone directories prove to be lucrative business
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Published: August 10, 2008
ALBANY, N.Y. -- It's been a fixture on kitchen counters, refrigerator tops and junk drawers for decades.
But today, the Yellow Pages is a bit too ubiquitous for some, with the number of phone books published in the United States each year outnumbering the population by 2-to-1.
Even though the $17 billion-a-year industry is showing remarkable resilience as other advertising-driven businesses suffer, it has become a familiar target in state legislatures, where legislators have tried -- unsuccessfully, so far -- to place limits on the distribution of phone books.
The Yellow Pages Association, an industry trade group, calls 2008 the industry's "most challenging year to date with regard to efforts at the state level to restrict directory publishers' ability to freely deliver phone books." Recent legislation that would give residents the right not to receive phone books has failed or stalled in at least seven states.
The association has paid outside lobbyists about $50,000 so far this year to defend it in communities across the country. Two main points that the group tries to get across are that phone books help promote local businesses, and that they are made almost entirely of wood scraps collected at saw mills and recycled paper.
In Albany, City Councilman Joseph Igoe is trying to build support for a law that would limit the distribution of phone books and require publishers to make it easy for people to stop delivery. Igoe said that the issue came to his attention while he was campaigning door to door last spring and saw phone books wrapped in plastic littering sidewalks, driveways and lawns.
If Igoe succeeds in passing legislation, it will be noteworthy. Proposals have been floated -- without success -- by legislatures in Alaska, Hawaii, Minnesota, New Mexico, New York, North Carolina and Washington state.
Some residents in Seattle and other communities in King County, Wash., receive phone books from as many as four different publishers, said Tom Watson, a waste-prevention specialist for the region.
"There hasn't been a good way to opt out," Watson said.
Phone-book publishers acknowledge that many households and businesses receive more phone directories than they need. But they call it a sign of competition in a healthy business and argue that the marketplace, not the government, should determine the number of phone books distributed.
"The ones that get used will remain, and the ones that don't will go away," said Joe Walsh, the president and chief executive of YellowBook USA Inc., the nation's largest independent Yellow Pages publisher, with a circulation of about 128 million phone books in 48 states.
For years, phone companies dominated the directory business and published the only phone book available in many markets. Federal rules enacted in the late 1990s required phone companies to provide listings to independent publishers at a reasonable cost, and ignited an explosion of competition.
Why?
"Because there's money in those Yellow Pages," said David Goddard, a senior analyst of the Yellow Pages group for Simba Information, a media-research company in Stamford, Conn.
Last year, Yellow Pages publishers logged roughly $16.8 billion in revenue. That figure is on pace to rise to $17.2 billion this year, and $17.6 billion in 2009, according to Simba's projections.
The growth is being driven by independent publishers, Goddard said.
YellowBook, for example, logged $406.1 million in revenue during the three months that ended in June, up 9.3 percent from the same period last year. During the same period, Idearc -- Verizon's former Yellow Pages business which it spun off in 2006 -- reported revenue that fell 5.1 percent to $1.5 billion.
And though other advertising-driven businesses -- particularly newspapers and magazines -- have been struggling as their readers and advertisers migrate to the Internet, the old-fashioned printed copy remains king in the Yellow-Pages business.
A usage study conducted by statistical research firm Knowledge Networks/SRI estimates that Americans referred to print Yellow Pages advertisements 13.4 billion times last year, compared with 3.8 billion online listings.
"They really have to focus on print," Goddard said, noting that online ads make up less than 9 percent of Yellow Pages' revenue.
"The Internet is the sexy new technology out there, but it isn't where most of their money is coming from. It's coming from the mom-and-pop stores that want to be in that Yellow Pages book."
Yellow Pages publishers use surveys and audits in local markets to measure how many people use their books, and many businesses often feel compelled to place ads, even in those with marginal usage, Goddard said.
"If there are three publishers including a small independent that gets maybe 20 percent of the usage, most businesses are going to want to have access to that 20 percent," he said.
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