A couple of industry forecasts have been floating around lately. One that was working its way across the wires today got my attention. It suggests that the U.S. Yellow Pages market will contract by a mere 0.5 percent in 2009. This figure is quite a bit different from the 13 percent 2009 decline that The Kelsey Group forecast in March. As an author of TKG’s annual Global Yellow Pages forecast, I am reluctant to nitpick someone else’s view of the market, but the difference here is so big that I feel compelled to make a few observations.
While there are many different players in the Yellow Pages market with different growth characteristics, the four largest publishers, AT&T, Idearc, RHD and Yellowbook, drive a substantial share of total revenues, and collectively, it is not a stretch to expect double-digit declines this year from this group of publishers. This alone seems to support our view that 2009 will be a very difficult year, particularly for print Yellow Pages. Many of the publishers we spoke with in the course of building our forecast shared this view with us.
And it has to be said that we do not believe the large incumbent publishers will be the only ones feeling the pain in 2009. While many independent publishers continue to grow nicely through this difficult economy, others are struggling, and some have begun discontinuing non-performing books. A few have ceased operations. This is the natural order of things when a competitive marketplace runs face first into a deep recession.
Part of the process of putting together our biannual Global Yellow Pages report is to talk to industry leaders about where the business is heading; John Kelsey and I have been conducting interviews with industry leaders over the past several weeks. While we’ve come across some strong diversity of views, some things have been pretty consistent. Publishers all love print, but at some level most of them get that their future business will treat print as just one of many sources of leads that they will deliver to their customers. Print will be part of the future, but its importance will diminish, in some cases gradually, in others more rapidly. Publishers have also been pretty forthright about how tough the business is now, for print in particular. And many leaders do not believe this recession will be like those in the past, where print Yellow Pages roars back once the economy improves.
One thing I have felt in the past several months is a newfound appreciation for candor and honest self-assessment in this business. Yes, there is some backlash against “pessimism” and some very legitimate frustration with the negative tone of press and blog coverage of this industry. The snarky tone and assumption that no one uses Yellow Pages that is so prevalent in coverage is annoying because it reflects arrogance and laziness. But we also know deep down that bad press is one of the industry’s problems. It isn’t THE problem.
In the process of building our forecast and stress testing it with industry insiders, and in researching our Global Yellow Pages report, we have gained a pretty good understanding of the levers that will guide this business over the next several years. And we also feel like we have a very realistic view of what the numbers will look like (this is not a claim of perfection by any means). There is plenty of reason for hope for those that prepare. The industry still has lots of opportunity. It is also safe to say, however, that most in the U.S. directory business would be very pleased with a 0.5 percent decline this year. I just don’t know anyone who believes the industry will get off that easily.