The Reach Of The Yellow Pages

American Demographics, Nov 1, 2002 by Sandra Yin

Byline: SANDRA YIN

They are decidedly unglamorous. The big, bulky Yellow Pages are the directories most commonly hidden in drawers, tucked away in closets and tossed under sofas. Sometimes they even double as booster seats for children too small to sit at the dining room table.

We take them for granted - after all, they've been around forever (the first one was published in 1876). Some might even think that online directories have made them obsolete. Yet those familiar sunny pages are actually one of the best ways to reach the majority of adults ages 18 and over (57 percent) - some 119 million people - who turn to the publication at least once a week. In fact, 90 percent of adults in the U.S. use the Yellow Pages (YP) in any given year, and 76 percent refer to them at least once a month, according to Knowledge Networks/SRI, a Westfield, N.J.-based research and consulting firm.

Although many consider YP publishing to be a mature industry with little potential for growth, this old ad medium has managed to survive in an era of new technology and is even undergoing a makeover to ensure that it becomes more relevant. Some publishers are increasing type size, offering popular mini versions of the directories and presenting more in-depth information for shoppers. These efforts have helped keep usage and ad sales revenue steady in recent years while other forms of advertising have suffered significant losses. According to Ken Ray, vice president of marketing for BellSouth Advertising and Publishing, the big book has "unlimited potential."

What makes YP users especially valuable as potential customers is their mind-set: They're ready to spend. No other ad medium can claim that 9 in 10 customers who see its ads ultimately make a purchase, according to New York City-based Simmons Market Research Bureau. YP users spend 25 percent more per year than the average consumer, reports CRM Associates, a Boulder, Colo.-based market analysis firm that conducts research for the YP industry. And those who let their fingers do the walking are more likely than the average consumer to pay full price for a product or service, because their spending is driven by need, not by discounts or special offers they saw in other media. It's therefore not surprising that profit margins on YP users tend to be higher than those on customers attracted by sales markdowns.

And the directories deliver: The typical YP display ad for an attorney pulls in an average of 900 calls per year and generates $17 in sales per ad dollar spent (bankruptcy lawyers generate an average of $31 in sales per dollar spent), according to CRM Associates. Restaurants take in $3.50 in sales per dollar spent, and at the higher end of the spectrum, car dealers and car services average $280 in sales per ad dollar. "During more than 20 years of cyclical advertising peaks and valleys, the Yellow Pages have offered advertisers and businesses an extremely strong and steady return on investment in a medium they can count on - providing a direct, measurable, cost-efficient vehicle for their marketing expenditures," says John Greco, president and CEO of the Yellow Pages Integrated Media Association.

The YP trade is something of an anomaly in the advertising industry. The YP business has been plodding along as more nimble media leapt ahead. Between 1991 and 2001, the YP industry grew by 48 percent, though cable TV and radio grew by 394 percent and 111 percent, respectively, according to estimates from Robert Coen, director of forecasting for Universal McCann, the global media services operation of McCann-Erickson WorldGroup. Yet the industry is also less volatile in a down economy. Between 2000 and 2001, the YP posted an estimated ad revenue gain of 3 percent, whereas almost all other media saw losses. For example, broadcast TV, the Internet and consumer magazines fell 13 percent, 12 percent and 10 percent, respectively. "They're almost recession-proof," says Gabe Samuels, director of member services at the New York-based Advertising Research Foundation, referring to the YP.

Still, annual revenue growth for the industry has been slowing, dropping to a projected 1.5 percent in 2002 from 7.1 percent in 1999, according to American Demographics' sister publication group, Simba Information, which publishes a newsletter and annual market forecast on the industry. The drop, according to Simba's analysis, reflects an economy still weakened by the Sept. 11 terrorist attacks and continuing fallout in the corporate sector.

However, the fallout has not hurt all YP publishers equally. Approximately 240 publishing companies produce some 7,270 different YP directories in the U.S. each year, with a total circulation of more than 530 million. Total circulation for the four Bell regional directory publishers, which accounted for 83 percent of YP ad sales last year, was flat, at 373 million, compared with the previous year's circulation. However, independent publishers - those not affiliated with any telephone company - are a growing presence in the industry. Revenues at nine leading independent YP publishers increased 12.4 percent in 2001; their total revenue was $1.09 billion, up from $972 million in 2000. Yellow Book USA, the leading independent publisher, generated estimated revenues of $530 million in 2001, a 27.7 percent increase over 2000, according to Simba.