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.