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.

I find part of Newmark’s argument in the vid segment to be facile. He initially argues that Verizon’s CEO, Ivan Seidenberg, did a clever/good thing because “…he unloaded these companies before they could go under within Verizon!” This is just plain dumb, because they wouldn’t have failed within Verizon. In the case of Idearc, the business unit was too small to cause the great corporate mother ship to founder, and it’s the Verizon spin-off debt load it was saddled with that caused it to be unable to function in the first place. He misses the point that Verizon took too much money out of the spinoff deals. Those weren’t existing debts associated with those business units prior to their divestment.

These companies wouldn’t have “gone under” within Verizon. It’s possible that if a business unit starts to lose money for a quarter or two, the board would naturally require it to correct itself in some way. But, arguably these companies experienced a much higher degree of financial problems due to the extremely high debt they were required to service subsequent to spinoff. These spinoffs funded Verizon’s FiOS expansion — a gigantic project that was paid for by Verizon offloading the investment costs to the companies it spunoff.

So, this was not at all a normal case of companies failing to survive in the competitive marketplace: they were sandbagged at the outset.

In the video, Berman cogently states that “…it raises the question of what responsibility does a seller have to the health of a buyer’s target afterwards…”.

To this, Newmark responds, “Caveat emptor” (well-known Latin phrase meaning “Let the buyer beware.”). One wonders if Mr. Newmark would be quite so glib if he were on the receiving end of a lemon the next time he purchases an automobile. I think not. This is essentially what I’m stating has happened to stockholders of these Verizon spinoff companies.

Newmark finally, grudgingly, states that because it’s a heavily-regulated company, “…Verizon cannot be doing deals which appear to rip people off…”.

I’d go a bit further and say that if it looks like a rat and smells like a rat, it’s a rat.

It will be interesting to see if the Securities and Exchange Commission gives Verizon a pass on their spinoffs of bankrupt companies as Newmark seems to think reasonable, or if they don’t respond in some way to consumer and state government complaints.

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.

• Following online local searches, consumers most often contact a business over the telephone (39%), visit the business in-person (32%) or contact the business online (12%).
• 1 out of 5 local business searchers with an Internet-accessible cell phone have conducted a local search via the mobile Web.
• Those that own wifi devices (such as the iPhone) are the most likely to conduct local business search via the mobile Web, with more than half of these respondents reporting mobile local business searching.
• 30 percent of respondents still rely on directories as their primary local business research source, despite a 3 percent decline from 2007 to 2008.
• Traditional IYP sites such as Superpages.com, YELLOWPAGES.COM, Yahoo! Yellowpages.com, etc. account for 60 percent of local IYP business searches.
• Local Search sites such as Google Maps, MapQuest, Yahoo! Local, etc. account for 40 percent of local IYP business searches.

Now for the inevitable questions from me: how representative are these findings for overall consumers in the U.S.? As you recall, I recently questioned the accuracy of yellow pages usage statistics from a Yellow Pages Association (YPA) -sponsored study because it failed to include a major, growing demographic: cell phone users who have no landline phones at their residences.

First, this new TMP Directional Marketing & comScore study are possibly not any more representative of overall population than the YPA study, because it was only based upon an “…online survey of 3,000 respondents…” — so, it missed inclusion of stats involving people who do not have internet access — and, that’s likely still a significant percentage, I’d assume.

However, this new study is more believable to me than the earlier YPA study, because the findings fall more in line with what we might reasonably expect. The TMP-comScore study indicates that 30% of respondents rely on print YP for their local biz research sources (compare with the YPA study which states that 87% of the U.S. population used print YP last year). This doesn’t compare apples with apples, I know, but the figures are measuring somewhat similar things, and the TMP/comScore study also indicates that there was a 3% decline from 2007 to 2008, while the YPA study showed no major decline at all — something that seemed odd to me, considering the 7.6% downward slide the year previous.

While conventional wisdom holds that print YP can expect some percentage of usage decline with internet and mobile local search usage increasing, one cannot always trust conventional wisdom — one needs to check assumptions with actual research. In this case, though, the YPA study left out cellphone-only households which could reasonably be expected to use print YP less, and that might explain why that study showed no decrease in overall print YP usage from the year previous. In comparison, the TMP/comScore report likely does include both landlined and cell-only household respondents, and it shows a continued slide in print YP usage.

Do not get me wrong — I believe based on a wide comparison of statistics that print yellow pages remains a very important part of the local search marketing mix, and usage of yellow page directory phonebooks is statistically significant. I’ve mainly been questioning some industry statistics regarding how much overall usage of print YP there is, and it appears questionable when those stats don’t show some ongoing erosion of print usage.

Greg Sterling notes that print usage is going to vary by regional area and by business category:

In terms of the outlook for print usage, it’s going to be market by market and category by category. It will be very strong in some markets and categories and quite weak in others. Mobile’s impact is a bit of a wild card at this point: does it cannibalize print, Internet or is it largely “additive” to either or both.

I’d agree with that completely. Some business categories have seen a much more sudden shift from print to internet search as a referral source for their customer base. Variation by market is interesting to consider — I can see that there’s likely a more rapid shift in larger population areas than in small towns — small towns having far fewer businesses to select from and thus consumers there not needing greater research capabilities. There’s also likely difference by regional demographics as well, since more affluent markets might see greater shifts from print to home computers and mobile. Perhaps there’s also some side effect involving communities which are more internet-savvy as well.

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.

When you further realize that this segment is younger, and likely earlier adopters of technology, you can see that there might be a strong reason to believe that their usage profiles probably differ significantly from the land-lined population — they’re probably using print YP less than those who were polled.

This chain of reasoning is an assumption — there’s no absolute evidence to support it. But, the lack of representative sampling in the original polling data leaves us with no alternative but to try to put the findings up against logical reasoning.

It’s hard to monitor and assess usage of offline media, so print yellow pages are not the only ones that struggle sometimes to show value proposition. Print newspapers, magazines, billboards, and others also have similar difficulties in showing how many consumers see them.

Of course, some people have pushed real hard to count offline media — Google has apparently been interested in this Eyebox device which counts when people look at wall ads or billboards.

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.

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.

But, another factor that I think must be involved is Google’s Universal Search which appears to be suggesting Google Maps results more frequently for a variety of search combinations.

They’re undoubtedly keeping searchers more sticky on the Google properties.

Mapquest is still leader among mapping providers. Interestingly, if Mapquest was impacted by Google’s more aggressive retention of map consumers, it was only a fairly negligible impact — Mapquest usage didn’t appear to decrease by the same amount that Google Maps increased, according to the Hitwise graphs. This would suggest to me that Google was perhaps persuading more of their users to visit Google Maps than what would have otherwise happened had they not been so actively promoting their Maps content.

Reportedly, an additional factor pushing up Google Maps usage was the advent of the iPhone.

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 a number of smaller, regional print yellow pages companies have had surprising growth in ad sales over the past year, likely at the expense of the larger yellow pages directory sales. As Greg further points out, some of the smaller, nimble companies like ReachLocal (who are frenemies with the yellow pages industry) may be poised to take over the small business advertiser base as those companies’ agencies of choice if the yellow pages industry cannot retain them. Yellow pages has held a home court advantage with small businesses for a long time, but there are a lot of hungry wolves nipping at their heels, and they will need to retain their advertisers while transitioning them over from print to online advertising in order to retain revenue over the long term.

I’ve suggested before that the concept of “yellow pages” itself might also be endangered in its online incarnation, since specialized directories and local search engines may now be obscuring the need for “traditional” yellow pages websites in the eyes of consumers. Indeed, I see a new generation of young consumers who barely seem to know what “yellow pages” is, and this could explain why fewer and fewer people seem to be trying to find yellow pages in Google:

(click to enlarge)

So, yellow pages companies have some multi-fold challenges to face. They must strive to transform themselves from being only print yellow pages into being a liked/trusted agency that small businesses perceive are vital/useful for getting their ads into multiple sites throughout the internet, and they simultaneously need to transform their traditional yellow pages directory websites into local information portals with broader appeal and compelling stickiness to attract and retain the newer generation of users.

The bigger yellow pages companies are aware of all this, and are not to be counted out of fight yet. Unlike the newspaper industry which has been a little late in adapting to the internet paradigm, yellow pages are adapting themselves to protect their competitiveness in the market, and the analyst warnings are only intensifying their attention and resolve.

(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 variety of Web 2.0 features. Out of Local.com, DexKnows, Yellowpages.com, YellowBook, Citysearch, and Google Maps — none of them have photos + ratings/reviews + “blogs” + user-provided profile data. Only Yahoo Local really approaches this number of user-content features, I believe. Out of all of the top IYP and local search sites, only Yahoo Local and Superpages openly invite any users to supply photos for locations — Google Maps only allows business owners and content partners to supply photos.

Now, I can see that they may still be working a few of the kinks out in these new services, and the display of this new content seems a little bit siloed or distanced from the business’s profile page, requiring a click to see it. But, I expect these are things which will evolve and expand as they get more content added in. There’s always something of a chicken-or-egg dilemma when adding new content like this to sites — stuff can look a little sad when there’s little content, but it’s hard to get content without making the features really visually apparent.

But, critique of the implementation aside, Superpages appears to be keeping a ahead of the game by striving to differentiate themselves from the competition in terms of these new user features, along with the robust data sources and diverse ad products they already had.

You may recall that Superpages recently brought their video ads out of beta release, and they also acquired Switchboard.com and announced plans to deploy local content through Microsoft Windows Live Messenger via a partnership with Multiplied Media. Just before that, Idearc acquired the LocalSearch.com domain name along with some portion of ownership of AmericanTowns.com (a company which has substantial local information sites and content).

There’s an arms race that’s been going on for quite some time in the local space wherein the yellow pages directory sites and local search engines have all been seeking to outpace each other by ramping up on product features and richness of data. With the recent flurry of multiple announcements and deployments of new functionality and distribution channels, you can see that Superpages is aggressively working to outpace the competition and make it challenging for others to match their suite of features. The programming for such stuff is relatively easy in some cases, but the logistics involved in managing quality issues can be expensive — you don’t want people adding malicious or obscene images to businesses, so it requires human auditing to keep the quality up.

I think these recent changes may begin to transform their info pages from being the traditional business profiles into something more like dynamic information clusters around businesses.

The strategy could be worth it in terms of driving user loyalty and in helping to differentiate from the competition. The interest and adoption of sites like Yelp.com have demonstrated that user communities can effectively be built around directory information sites, so user-generated content could be the next frontier for IYP, if it can be done in an affordable manner that doesn’t degrade quality.

Obviously, a prime motivating factor behind all this pumping of investment capital into Superpages.com is Idearc’s expectation that revenues on the legacy print side of the house may continue to decline. In the recent figures from Idearc’s third-quarter financials, Idearc’s stock took a heavy beating, in part because of a 3% fall in print revenue. Lehman Brothers analyst Anthony DiClemente stated:

“I think the concern from investors is that you are seeing the transition of the business to electronic from print faster than expected.”

Hmmm…. it sounds a bit like my theory that Google Trends could be indicating a pretty fast slump for traditional yellow pages usage might actually have some basis. But, I digress.

Idearc’s not taking the paradigm shift laying down — the cagey adoption of Web 2.0 hallmarks on top of the solidly-performing product will help them keep ahead in the local search game.

(Disclosure: I used to work for Idearc Superpages.com and you can reasonably consider that I might still hold stock and/or options from them. Despite this, I do try to write objectively about them and the local search industry in general. Heck, I’ve even been accused recently of being biased against yellow pages for stuff I write. Even so, I just want to state for the record that this article is an opinion piece by me with no intention of influencing stock prices, and you shouldn’t be basing stock purchase decisions on me anyway. After all, I’m *still* stinging a bit from my stock losses suffered during the dot-com bust!)

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?

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.

(I confess, I’m actually pretty flattered to’ve received the treatment of the Bogatin rapier-pen, since I’m now in the august company of others who’ve also enjoyed it, including Jeremy Zawodny, Michael Arrington, Eric Schmidt, and others. Actually, I’d guess that my association with Danny Sullivan and Chris Sherman probably are more responsible for attracting Bogatin’s attention than any online presence I might have. While I might disagree with Bogatin on some conclusions she makes at times, she’s always had an eye for expressing or questioning what others might want to know, and I’ve frequently read her stuff.)

First in the headline of my article: yes, it’s a bit on the sensationalist or dramatic end of the spectrum. While my editors helped improve the title to make it more attention-grabbing (I’ve specifically asked them to do that, because they’re better at it than I), I think it pretty accurately conveyed the article content and I was satisfied with it. Yet, even if it was a bit dramatic, the article contents qualified it and put it in context, and headlines are supposed to get attention while accurately communicating what the article is about. The one downside of trying to keep the headline short and to the point was that a few folx misunderstood and thought I was referring to print yellow pages while the article was intended to be only about viability of traditional online yellow pages sites.

Donna attempts to dissect my motives in writing the article, suggesting that I intend to influence businesses to ditch purchasing yellow pages advertising in favor of using my firm, Netconcepts, to rank well in the search engines. If she had read my article on my blog just yesterday on SEO through Yellow Pages, she would’ve seen that I heartily recommend using yellow pages to drive traffic to local businesses. Further, my article was qualified — I didn’t predict outright extinction of local information companies, just that the way user behavior is changing would impact sites set up on traditional IYP format, reducing traffic to them over time until they’re nonviable in the “classic” YP format.

I don’t tout “free” natural search traffic over paid traffic. I’ve said a few times in various articles that I think a holistic approach of both paid and natural is likely best for most businesses. In fact, just in the past month I highlighted this in a post entitled “Should you buy search ads for your brand keywords?”

I did expect the article to potentially generate some level of controversy, because I was fully aware of how I was relating disparate pieces of information to come to a controversial conclusion. In fact, I acknowledged how loosely I was connecting dots in the article itself. But Bogatin’s criticism was based more on trying to interpret my motives and Search Engine Land’s motives as being suspect rather than posing any alternate theories as to what the declining numbers of searches for “yellow pages” might mean. She did criticize the basis of Google Trends data itself a bit, but only by quoting their legal disclaimer about accuracy of data.

I was rather hoping someone would focus more on the whole premise of whether a trend in Google searches for “yellow pages” should be taken as a trend in usage of IYPs. That’s the shaky piece of my article. The main supporting evidence I provided for that premise was a Hitwise blurb from the Spring which says “Over the past year, the market share of US visits to the top 5 yellow pages sites has declined by 7%, while visits to the next-generation local search sites have increased…”

So, the trendline in Google seems be showing the same decline as actual usage of IYP sites, according to Hitwise analytics. Also, various reports show that Google has the bulk of search traffic, and, usage patterns in Google searches sometimes reflect overall societal trends to some degree.

As for being “Google-centric” and “Google-serving”, I’m on the record as criticizing Google a number of times, and I also have written glowingly of some of their stuff at other times. Search Engine Land overall does, too. We write on Google frequently, but that’s because there’s high traffic and high interest in Google. In fact, if writing about something “Google-Centric” is an indicator of a bias in favor of Google, Bogatin is far more of a shill than I am.

Are we trying to promote the SMX Local & Mobile Conference in the next week? Certainly, but that alone didn’t cause me to write the article. We have weekly articles on local-oriented internet marketing, and this was just another one of those. IYP is a big piece of online local business, so it’s natural to address them from time to time.

I saw this very interesting trend in “yellow pages” searches, and the trend is undeniably downward. I’ve also observed user behavior patterns over time, and the improvements at all the top search engines, particularly Google, have seemed to encourage users to believe they can get just what they want from a single search box. As Google and the others push more of their own listing data into the search results pages, there’s maybe less reason for a user to go over to various speciality sites to search and find the same info. These were the primary drivers for my addressing this subject.

This article had been on my “ideas list” for a few months, and I only just got to it. Strictly coincidental timing, believe it or not. The guys at Search Engine Land had nothing to do with the subject matter I chose and didn’t have a clue what I was writing about until Sunday night. So, leave them out of it — there’s no big conspiracy involved. Our special weeks covering Local and Mobile in lead-up to the conference ended last Friday.

My work with Netconcepts as an SEO and software product manager do mean that I have a desire to promote our services, but neither my company nor I desire to provide any recommendations that would be inaccurate nor damaging to businesses. I think it would be irresponsible to recommend blanket-ditching of IYP and YP advertising in favor of natural search optimization. When I write articles, I aim for being accurate, logical, and objective.

I think it’s great to question and debate ideas based on their merits or evidence, rather than attempting to try to ignore possibly valid points by short-circuiting the discussion to construing motives not in evidence. That’s the disappointing part of Bogatin’s critique.

At Netconcepts, we’ve actually been recommending placement in yellow pages directories as a part of some of our clients’ search optimization programs. So, no big hidden motive to steal money from IYPs. The majority of our clients don’t even have local outlets.

Sebastien Provencher also took exception to the article’s title, refering to it as “Traditional Media Bashing…” and “alarmist”. I think he’s right to some degree on those points — the title is undeniably dramatic.

But, I think he also underscores some of my reasoning by saying “…consumers search patterns are evolving and they are using these specific keywords less often. They might in fact be doing more precise local searches (plumbers new york, restaurants chicago, etc.) instead of generic ones…”. This is exactly what I’m talking about. Users are doing that, and they’re doing it in search engines. Some of those users then click through to yellow pages, but they’re not going directly to yellow pages as much as they used to be, and I think the Google Trend line is indicating this.

The title is dramatic, but so is the trend line:

(click to enlarge)

If you project it out like I did, it smashes against the zero line within just a few years. I can indeed see a few other ways to interpret that trendline outside of my admittedly opinionated conclusion. What are some of the alternate interpretations that you see for it?