Yellow pages yellowing and heading for the recycling bin….?

In most countries, Yellow Pages companies have big chunks of the advertising market and enjoy some of the fattest margins in the media business. Shares in Yell, which owns phone books in Britain, America and Spain, fell by 26% on in May when it announced its results. That was partly due to concerns about slowing economic growth and the company’s debt load, but also because of worries about its long-term future. The firm’s shares have now fallen by 75% in the past 13 months.

A survey by the World Advertising Research Center found that in 2005, 57% of Europeans said they would turn first to the printed yellow pages when seeking goods and services. A year later that number had fallen to 51%, and 24% said they would go online, up from 20% in 2005. Small and medium-sized businesses (SMEs), which make up most of the advertisers in yellow pages, are noticing the shift. The fear is that they will follow the audience and jump ship for the internet.

Yellow-pages firms are moving onto the internet too, but they face intense competition online. In Britain Yell.com attracts fewer visitors than Google Maps, the search giant’s local-search service. Another difficulty in moving online is that directories dare not allow reviews or recommendations, because they earn money from advertising.

Yellow-pages firms have two great strengths which mean that their decline is likely to be gradual. First, the information they offer is still far more extensive and reliable than most of what can be found on the internet. Google acknowledges this, and pays directories firms around the world to use their data. Second, small firms are loyal to phone books, because they get results. One example includes a boat-supplies firm in England which employs six people and has just launched its own website, but plans to stay with the Yellow Pages for the time being. “Lots of people don’t have computers,” explains the accounts manager, “and we don’t want to miss them.”