KEY POINTS:
What were those Canadian teachers thinking when they forked out their share of $2.24 billion for our Yellow Pages?
Telecom's directory business has ambitious online growth plans, but are they realistic, given the world of internet search is dominated by global giants like Google and Yahoo!?
While yellowpages.co.nz may be a top-10 performer in terms of generating local internet traffic, its visitor stats - like those of all other New Zealand sites - look small compared with Trade Me, which has a seemingly unassailable lead.
So how can Yellow Pages Group, which admits its current web search offering is pretty ordinary, grow its revenue using online?
According to YPG general manager Dudley Enoka, the online value new owners CCMP Capital and Teachers' Private Capital see in the business relates to the difference between two type of internet searching: Google-style "global search" and Yellow Pages-style "local find-it".
"A number of people look at our business and say 'how are you going to compete with these global search engines?'," says Enoka.
"We don't intend competing.
"We believe that if local find-it is about local content and personalised information, we have that sitting within our business today, and the global search engines can help people get to it."
YPG is banking on the strength of its brand and its existing relationship with, and database of, 200,000 local businesses to keep it positioned as the search vehicle people automatically turn to when they want to find local products or services.
"Sixty-eight per cent of the people who look in our print product [the directory books] end up buying as a result, which is quite a compelling proposition when you think about differentiators for advertisers.
"What the direction of our business is about is leveraging off this print strength and making sure we repurpose the content to allow people to come and find advertisers online, or through voice mechanisms [the 018 service] or even through wireless [search via mobile phone].
"The winners in this space, we are confident, will be the organisations that put New Zealand businesses in front of New Zealanders in the way that Kiwis actually want it."
YPG has been quietly building up its database on businesses, adding in information such as opening hours and credit card facilities.
This information will be used to launch a swept-up, location-based "Yellow" website next month which Enoka says will offer a vastly superior search experience for users over the existing Yellow Pages site.
And rather than worrying that global heavyweights like Google might eventually muscle in on its local database turf, YPG is instead talking up the potential of partnering with global search engines, a happy symbiotic relationship it says is working in other markets.
"The likelihood that Google is going to put three or four hundred people on the street to gather the information that we gather is pretty minimal," says YPG head of marketing Blair Glubb.
Enoka says Google drives about 40 per cent of visitors to the Yellow Pages site. He sees that level of traffic direction remaining, with interesting implications for how online advertising may work in future.
"Because we've got relationships with New Zealand businesses it could well be that our advertising consultant, as part of the relationship with the business customer, has a discussion about advertising on Google rather than advertising on one of our products - that is a possibility that we would consider in the future."
Another possibility is moving into "Web 2.0" user interactivity - letting customers post their assessments of a business's performance.
Fears that ratings would be a big turnoff for the company's clients - the business that pay for listings - are unfounded, says Glubb.
"A lot of the research we see suggests up to 85 per cent of advertisers think it's a great thing ... most people shouldn't be that scared about what people think about their business or they shouldn't be in business."
With the YPG sale price equating to more than $10,000 per business advertiser the new owners will certainly be looking for innovative ways to at least maintain the group's recent annual growth performance of between 7per cent and 8 per cent.
The core print business remains strong but the high-growth opportunities are happening online.
How those opportunities are managed will determine whether Yellow turns into gold or a lemon.
* simon@businesswriter.co.nz
