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WSJ Comments On Idearc Bankruptcy & Verizon Culpability

Verizon & Involvement in Fairpoint Communications & Idearc Bankruptcy FilingsA few days ago, the Wall Street Journal’s Dennis Berman commented in his column entitled “The Two Sides of Verizon’s Deal Making” on whether Verizon might have some responsibility for the bankruptcies of Idearc, Hawaiian Telecom and FairPoint Communications. As you may recall, I posted an op-ed piece on the subject, Idearc’s Bankruptcy – Who’s Really Responsible? at Search Engine Land not long back, and now Berman’s take on the issue appears to hold a lot of sympathy for my position that Verizon caused the yellow pages company to fail shortly after it was spun off by requiring it to do so with an unreasonably high debt load.

Berman states that while the market in 2006 may’ve allowed Verizon to take billions in the deal divesting itself of its directories corporation, Idearc, he further states:

“It took too much.”

Will there be any consequences for Verizon’s throwing off these companies with unserviceably high debt loads? Burman reports:

“These things matter greatly to how state and federal regulators perceive the company. Maine, New Hampshire, Vermont and Hawaii each are in an uproar over the FairPoint divestiture, with much of the ire directed at Verizon.”

In a brief video piece, David Berman debates the issue with Evan Newmark, who takes the opposite viewpoint that Verizon should not be held responsible for the performance of its divested companies. (more…)

Is Verizon Responsible for Idearc’s Bankruptcy?

Idearc's Bankruptcy Caused by Verizon?My op-ed piece, “Idearc’s Chapter 11 Bankruptcy: Who’s Really Responsible?” published today on Search Engine Land, and in it I put forth my position that Verizon is responsible for spinning off the company with an unreasonably huge debt load, and the people ultimately paying the bill are the stockholders.

I describe in the article how Verizon spun off Idearc Media (division which publishes print phone books and operates Superpages.com among other online yellow pages), and set that company up to pay back some billions of dollars for its worth. Verizon then turned around and resold those debt instruments to other companies, fully divesting itself of ownership in the new, standalone company.

This sequence in of itself isn’t remarkable – it’s the normal process a company might go through when spinning-off part of itself to form a new company.

But, my contention is that it was done so in a highly irresponsible manner. Verizon had to know beforehand that print directory business was going into shrinkage mode, and that the debt repayment structure would simply be too much for the new company to be reasonably expected to be able to handle. If so, then this could be expected to be a form of fraudulent conveyance, and Verizon could be culpable.

Is my contention outrageous?

Well, even Idearc’s Chief Executive, Scott Klein, has been paraphrased by the Wall Street Journal as saying “Everyone was aware that ‘$9 billion was really more debt than this business could bear’”. So, Idearc was spun off with a majority of this debt from Verizon from the start – clearly set up to fail.

So far, I’ve seen maybe three different law firms filing class-action lawsuits against Idearc and its executives, based on the premise that the stock tanked due to them secretly changing policies, resulting in inflated-looking sales on the books for businesses with higher likelihoods of not paying for contracted advertising. But, I think the real culprit in all this is likely Verizon – they pushed off a part of the company with an untenable debt load, in large part to pay off debts incurred by Verizon FiOS (Verizon’s fiber optic network) expansion.

New Print Yellow Pages Usage Stats from comScore-TMP Study

Print Yellow PagesTMP Directional Marketing and comScore announced their annual joint “Local Search Usage Study” today, and there were some interesting statistics:

Print Yellow Pages Usage On Decline Or Not?

Walking FingersMy article on how the “Yellow Pages Usage Stats Are Likely Wrong” went up earlier at Search Engine Land, and the details I highlight in it provide some strong circumstantial evidence that this year’s earlier industry statistics stating that print YP book usage hadn’t dropped over the year previous are likely incorrect.

As I point out, those statistics were all based on telephone polling, and those polls missed having representative samples of cell phone only households, according to their published methodology. Various research groups and government agencies have been saying that this is a significant chunk of the population — anywhere from 13.6%, growing to as much as 25% by the end of this year. (more…)

Internet Retailers Finding Growth During The Recession

I earlier wrote about how businesses could take advantage of a recession by swooping in to grab up some marketshare from more fearful businesses who might choose to cut back advertising and expansion during an uncertain period. Now Forrester Research and Shop.org have released some survey results indicating that many online merchants are seeing growth while brick-and-mortar businesses are experiencing reduced sales.

The one cautionary note a Forrester analyst added to the release was that many retailers are apparently planning to advertise more in social networking sites like MySpace and Facebook, even though it’s “still unproven how such sites might build direct revenue for retailers” (paraphrased).

I’d note that many of us in internet marketing have identified fairly significant promotional potential in social media sites, and that some degrees of integration with them are possible in many cases without incurring advertising costs — so, it may be that judicious campaigns should still be attempted, even if there is not a lot of research evidence indicating good ROI. Just as with any promotional campaigns, it’s important to try to measure results as you go, and adjust as indicated.

Google Sending More Traffic To Google Maps

The New York Times today reported on a recent Hitwise post by Heather Hopkins highlighting that Google was now sending about three times as many of their users over to Google Maps comparing a week ending January 6th with a year ago.

This is apparently due in part to Google recommending Google Maps instead of recommending other mapping providers in addition as it had been doing early last year. (more…)

The Kelsey Group Puts Print Yellow Pages On Notice

Walking FingersOver at Media Post, The Kelsey Group is quoted today saying that the erosion in usage of print yellow pages is likely to fall off at a higher rate this year — by 10% this year, compared with only 2% to 3% erosion in recent years.

They state that a combination of factors such as more users going to internet yellow pages and local search engines combined with a recession are propelling the rapid erosion. Concerningly, one can extrapolate that if print YP usage is dropping, advertiser dollars might also follow the herd.

As Greg Sterling points out, The Kelsey Group has historically been a very staunch defender of the print YP industry, so this article is a bit of a gut-punch to people in the legacy print business, even though anyone watching the trends over the last few years won’t find it all that surprising.

One thing the Media Post article doesn’t mention is how (more…)

Superpages.com Adds More User-Generated Content to the Local Mix

About a week ago, Idearc announced that Superpages.com had introduced more user-content features.

Superpages adds Web 2.0 Features
(click to enlarge)

Previously, the primary component of user content on the site was limited to user ratings and reviews associated with business listings.

Some of the new features this recent upgrade added include allowing all users to enhance basic biz profile information, uploading pictures of organizations, wiki-like biz listing “blog” features which could allow simplistic blogging by businesses and/or could be used as a consumer comment or Q/A zone for each business since any user could submit info to them.

Of all the top online yellow pages and local search sites, I believe that Superpages may now have the distinction of having the greatest (more…)

Is InfoSpace Cashing Out?

First it was announced that InfoSpace was selling Switchboard and other directory properties of theirs to Idearc for $225 million. Today InfoSpace announces that they’re selling off their mobile services business for $135 million.

Infospace

InfoSpace’s release says that they’re selling off the mobile services “…to focus on online search”. They’re apparently going to also give a chunk of this change back to their shareholders in a dividend.

This just makes me wonder, is Infospace cashing out?

Local search has been one of Infospace’s strengths over time — they even changed their core website a few years ago to focus on local search & yellow pages more — prior to that they’d been a more general search engine (they still own general meta search engines like Dogpile.com).

Also, this mobile service sale seems odd since the rest of the internet marketing industry is starting to hyper-focus on mobile search and services.

Even though “yellow pages” directories are not exactly the same thing as local search, you’d expect for InfoSpace to hold onto the assets (and hold onto the mobile services), or to sell the assets to use the money to capitalize on the search areas where they want to focus. So, why are they doing this?

Am I an SEO Dog? More On Toasting of Internet Yellow Pages

Donna Bogatin apparently disagreed with my article at SEL entitled “Google Trends: Yellow Pages Will Be Toast in Four Years“, posting a bit of a lurid headline herself: “Yellow Pages Trash Talking: The SEO Dog in the Google Local Fight“.

I didn’t really think that my article was quite “trash talk“, and I’m assuming from the article content that the “SEO Dog” referred to was perhaps myself, or perhaps the “dog” is my article conclusions, fighting for the ostensibly narrow viewpoint of all SEOs. Aside from the somewhat scathing disembowelment attempted, I thought it’d be informative for me to address some of the logic-faulty conclusions that were drawn.

(more…)

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