Last week, YP announced a deal with Yelp in which the Yellow Pages spin-off will sell a stripped down version of Yelp’s branded business listings product to the company’s small business clients. For YP, and its owner Cerberus Capital, the agreement is the culmination of a deeper strategic push and a tacit acknowledgment that its role as leading consumer brand, which defined its print past, might be waning.
The deal follows similar agreements which YP has made with Aol and Yahoo, as well a once-strong-but-atrophying CityGrid, to expand the reach of the company’s marketing products. However, the agreement with Yelp is by far the largest in terms of reach — Yelp draws over 120 million unique visitors a month. And, more importantly, the deal puts a big brand name in the hands of the company’s salespeople as they compete in an increasingly competitive small business marketing landscape.
YP’s transition began nearly two years ago. In April 2012, Cerberus Capital bought a majority stake in AT&T’s yellow pages and digital businesses and began the process of finding a future for a profitable, but quickly depreciating, set of assets. The process has taken time, but in January the company hired a new CMO to sell a new vision, which will transition the company from a consumer brand with a supporting advertising business to a small business marketing services company equipped with an expensive, but potentially beneficial, consumer product.
The shift in emphasis is subtle but important for YP. The decision shapes the strategic roadmap for the company, and changes its competitive set, positioning the firm as a friend to Yelp and Google and foe to GoDaddy, Yodle, and a host of other large companies which are looking to build businesses around existing merchant relationships. The local search and discovery products — the yellow pages books, website, and mobile app which once defined the business — are now a means to an end, not an end in itself.
“For us now, it’s the consumer brand that is driving the ad product,” Darren Clark, chief technology officer at YP, told Street Fight in an interview. “But without [our consumer-facing properties,] we would be another ReachLocal or Yodle — just with more people selling.”
YP is in part responding a changing local search industry. Over the past few years, the value of basic company data, which YP and other listings companies have built businesses around, has declined rapidly as third party data firms have effectively rendered the information a commodity. That commoditization has been compounded by Google, which has made a push to feature its own local information, making it increasingly difficult for these secondary services to sustain traffic.
What’s left is an expensive consumer brand, with solid usage but an increasingly grim competitive outlook. So why hold onto the property? The answer, Clark suggests, is data.
“That first-party data — the information generated from our app — gives us enough insight [into consumer behavior] that we can project with confidence what we want to buy in other media,” said Clark. “By having data like call tracking analytics and even the view of the registered users, we’re starting to get more customer intelligence, which eventually helps improve the targeting.”
One area where first party data plays a particularly important role is mobile. In January, YP acquired Sense Networks, a mobile ad technology startup that strings together instances of a user’s location history to create identities for mobile users. For instance, the company could turn up a series of locations for a user, discover they frequent hotels and airports, and sell that profile as a business traveler to an airline marketer.
Without cookies, mobile lacks the rich behavioral data which marketers have become accustom to on the web. By owning a consumer application, a company like YP gains access to rich, and more importantly, quality location data, which it can use to target users across a variety of media. That’s a critical competitive asset in an increasingly vicious digital marketing industry, and one that many new competitors lack.
Today, the small business marketing industry is on the verge of massive influx of competition, as a range of businesses with historical ties to local merchants look to expand into other services. Legacy media are look looking to make use of their sales forces; web services firms GoDaddy and Wix want to upsell users to marketing services; Yodle and ReachLocal are trying to defend their businesses; and Comcast, the cable king, sits on the edge testing the water.
Steven Jacobs is Street Fight’s deputy editor.