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.
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Filed under: General, Local Search, Market Data, News, Online Directories, Yellow Pages bankruptcy, chapter 11, directories, idearc, idearc bankruptcy, idearc chapter 11, Idearc-Media, iyp, Phone-Books, superpages, telco, telecomm, Verizon, Yellow Pages
TMP Directional Marketing and comScore announced their annual joint “Local Search Usage Study” today, and there were some interesting statistics:
- 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. (more…)
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I was noticing that Paul Haahr, an engineer I met at Google Dance last September, mentioned on his blog in January that he doesn’t like traditional print yellow pages. He consideres them to be something of a dinosaur, and his attitude is clearly communicated by his habit of leaving them to be turned into a pile of gray sludge by the rain on his doorstep when they’re delivered to his neighborhood. (I’m okay with him neglecting his directory in this way, since it’s an AT&T phone book.)
As a longtime employee of Verizon’s yellow pages directory company, I probably should act completely horrified at Paul’s disparagement of the well-established printed books, but I have to agree with his take on the matter. Print yellow pages don’t give me all the info I’m wanting any more, and the book has become something of an annoyance. It takes up space in my house, and it seems like the new replacement is always showing up about the time that I’ve only just gotten around to shelving the previous one. Online yellow pages and internet search sites have given me everything that I need.
Paul’s take on the matter is so amusing to me because it strikes a resonance with my own feelings about the whole thing. It’s a bit ironic to me (and it feels slightly disloyal!), because when I started at SuperPages nine years ago, I couldn’t really conceive of throwing away my phone books. Back then, we almost couldn’t imagine people choosing to use our online YP, because it was faster to look stuff up in the books rather than trying to use our online service!
But, stuff’s changed a whole lot. People have continuous and speedy connections to the internet, and our site responds back to queries a lot faster than in the old days. I can’t even hope to find everything I want in the print directory any more — it can’t tell me what theatre, store, restaurant, etc. is closest to my home or office. Since I live in the Dallas/Fort Worth Metroplex, I’d likely have to page through about 10 small city directories and perform distance interpolation on a map to figure out which businesses were closest to me! Fun (and geeky!) exercise, but I don’t have time for that.
Considering all this, why haven’t print yellow pages disappeared altogether? For that reason, why do merchants still spend significant amounts of their advertising budgets to have presence in the books? Are the printed books still a good business proposition? Surprisingly, they are indeed still worthwhile — read on and I’ll explain.
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