Posted by: hdemott | March 29, 2010

Whatever The Slope Of Decline – Yelp Just Helped

IT is taken as a universal truth that old yellow pages companies are doomed to a horrible death.

Already Supermedia (formerly Idearc)  and Dex (formerly RH Donnelley) have gone through the bankruptcy courts only to come out still levered and still with declining revenues and cash flows. In my opinion, it is only a matter of time before these come crashing down again.

As an investor the only question has been what the slope of the revenue decline curve is – and how much cash could be harvested from these businesses before the inevitable happened.

Well, whatever you thought about that decline curve – Yelp just helped.

In a lawsuit that has been reasonably well publicized (not just online, but written about in all the major papers), merchants – the bread and butter of the yellow page companies – are suing Yelp, contending that Yelp is extorting them by pushing bad reviews to the top of their pages unless they advertise. I have no opinion on the matter whatsoever, but I can guarantee you that local business owners who look at this will think twice about dealing with Yelp – which means that they will likely renew again with the yellow pages guys for another year.

Whatever you thought the slope of the decline at the yellow pages was – it just got a little better.

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Responses

  1. That’s an interesting perspective. Of course, the only reason people would bother to sue Yelp is because they consider the site and the reviews it contains to be valuable. And, unlike the Yellow Pages, who’s perfectly comfortable putting the least responsible businesses first (as long as they’re willing to pay) businesses feel that they have some say in how they’re represented on Yelp.

  2. I don’t disagree in the least. It baffles me to think that the Yellow Pages guys have not become fast followers and attacked these markets – since they already have relationships with a ton of the businesses – but that is why they are in decline. Good point on the value of Yelp – thus the suits. All that said, if I were running the Yellow Pages companies right now, I would arm my sales force with copies of all of these suits as well as links to discussions about Yelps business practice. It won’t save these guys – but it will allow them to linger for a little while longer.

  3. Considering the amount of fake and negative reviews ( it is obvious that smbs influence reviews and negative is much more likely to occur since negative experience are more “worth talking about:) that exist, I am not that disturbed by YELPs (a listing site keep in mind) actions.

    This does very little to help the IYP companies.

    The future of local search is about traffic and service. IYP companies are losing traffic and provide horrible service compared to integrated media marketing companies.

    Like they say, just because your business was relevent yesterday does not mean it will be relevent tomorrow.


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