It’s Friday. I’m rhyming. Sue me.
Verizon is on its way towards setting free its print and online yellow pages products. The firm announced a filing with the Securities and Exchange Commission today. In a press release, the firm noted it “has not yet made a final decision on whether a spin-off will occur, but the company continues to expect to complete a disposition of its directories publishing operations – which could include the spin-off, a sale or other transaction, or combination of these alternatives – by the end of 2006.” The filing was made by Verizon’s wholly owned subsidiary Directories Disposition Corporation (Directories Corp.). According to the release, the proposed spin-off “would create a new, publicly traded company with management independent from Verizon.”
So, what’s it mean to the online ad biz? I just got off the phone with Kelsey Group analyst Neal Polachek who gave me his two cents. The way he sees it, yellow pages operations have been under the thumbs of their phone company parents for a long time. Now that Verizon, Qwest, Sprint and others are moving into the wireless business, they no longer see YP as strategically compatible with their overall objectives. Both Qwest and Sprint have sold off their YP businesses to YP publisher R.H. Donnelley.
Of course, there’s also the chance that Verizon doesn’t see the YP biz as worthwhile and would rather have the few billion dollars it’s worth to invest in its other operations. “I don’t think they see it as a bad business; they just don’t see it as strategic,” remarked Polachek.
Jettisoning the YP operations, suggested Polachek, will make for “ultimately better businesses.” Plus, he said, since Directories Corp. will have more control over its cash flow now that it no longer has to cough up cash to Verizon, it “will drive efficiencies on the cost side and innovation on the product side for advertisers and consumers.”
Polachek surmises this is the last of the big YP unloads, since AT&T still sees its directories business as strategically important, mainly because it provides ongoing relationships with advertiser clients. He also said a merger of this new spin-off with R.H. Donnelley’s holdings could be in the cards.
Polachek also suggested that Directories Corp. could get in on the online classifieds business in addition to YP listings. As the classifieds industry ebbs and flows, it will be interesting to see how this all plays out, especially as search engines continue to merge yellow pages listings and classifieds in the minds of consumers.
According to Polachek’s Kelsey Group blog post on the filing, the Verizon YP business comprises
“Almost 200,000 ‘electronic’ advertisers,” or 42 percent of its print advertisers. “Revenue split is 90% print YP, 6% online and 4% white pages.”
The Verizon press release states that its consolidated operating revenues (all including YP, I take it) are $90 billion.
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