Category: Archive

In phone book battle, he won’t turn yellow

February 16, 2011

By Staff Reporter

Chances are that you’ve consulted the yellow pages at least once in the last year, if not for any of the above. Ninety percent of American adults have. Industry analysts say that there are 15 billion business-directory references annually.
“It’s an American tradition to use the yellow pages,” said Joseph Walsh, CEO of the Uniondale, L.I.-based Yellow Book USA.
Indeed, Yellow Book was founded back in 1930. But the once one-market firm is shaking things up in 42 states, taking on the directories of the regional phone giants, the Baby Bells, that were created when AT&T was broken up in 1984.
Back in 1995, the phone companies had 96 percent of the business-directory industry; this year their share has fallen below 82 percent, according to Larry Angove, president and CEO of the Association of Directory Publishers, the trade body for the “independents.”
Walsh, now 41, was chairman of the association from 2000-02.
“The same intelligence, vision and integrity with which he built Yellow Book to a $1 billion company was mirrored in his extraordinary leadership of the association,” Angove said. “He was 10 years on committees before he was ever elected chairman.”
Yellow Book, a unit of Yell Book PLC, which is quoted on the London Stock Exchange, is loosening what its CEO called the “stranglehold” of the phone companies in the market with innovations and competitive pricing for mom and pop stores
But the phone companies are prepared to fight further inroads by the independents because yellow pages directories are a particularly lucrative part of their business.
The battle has reached the front pages and the courts.
The Denver Post, for example, said recently that Yellow Book and its rival in that market “are bludgeoning each other with blunt advertising typically seen in political campaigns.”
Meanwhile, a Verizon suit against Yellow Book that began in federal court in New York last month alleges that Walsh’s national ad campaign, “Yellow Book. Not the other book,” is guilty of false advertising.
The Yellow Book boss said that Verizon has huge resources and is using the legal system to intimidate its rivals.
Walsh, one of four sons born to a mailman and a telephone company worker, grew up in Potomac, Md., a suburb of Washington, D.C. He traces his Irish roots, at least in part, back to James Walsh, who disembarked at the port of Baltimore in the 1820s and worked there as a rigger. Three generations of Irish cops followed down to his grandfather, who was an accountant.
Walsh said the other main ethnic component in his background is Welsh, on his mother’s side.
He said his parents, still Maryland residents, were “worker bees” in their companies.
“They were not as focused on career and economic success as having a happy family life,” he said.
Walsh, though, caught the entrepreneurial bug early on. When he launched his own yellow-pages company at age 19, it was already his third business.
The business took off and he’d no time to complete college.
A few years on, he sold his company to a larger one. In 1987, he moved to Yellow Book, finally becoming CEO in 1993.
The company, which had $20 million in revenues when he joined it, has been bought and refinanced a half dozen times since.
“When I was making my way through the business, I was making it up as I went along,” he recalled
He continued to educate himself by reading books and listening to tapes. He was particularly interested in the subject of achievement.
“I was interested in what things lasted over time and what didn’t, really trying to understand the historical perspective,” said Walsh, who’s married and has three sons, ages 11, 9 and 5.
Walsh read the biographies of great men and women, among them leaders of countries and companies, as well as the stories of great sports teams
“What I learned was that every great artist, every great thinker, every great achiever at some point studied at the feet of the master and learned,” he said. “And typically their approach was marked by a dedication to a core set of principles and values or a framework that they operated by. So that was a big part of my thinking.”
Walsh considers himself fortunate to have worked under the man who owned Yellow Book for 40 years — Charles Levien. “He was just the most high-integrity guy,” Walsh said.
He regards Levien, who still consults for Yellow Book, as his mentor.
Walsh added: “I unearthed the core values and principles that the business was operated by. They weren’t really written down anywhere or talked about.”
But identifying them and effectively communicating them, he believes, has allowed him build Yellow Book to a $1.1 billion company.
“We’ve gone from a one-market company to the 580-plus directories we have across the country now,” he said. They distribute a total of 70 million volumes nationally.
The independents were helped by the Telecommunications Act of 1996, which said that the phone companies should be required to provide listings at a reasonable rate. That was set at about 4 cents per name.
The Baby Bells were bound to face stiffer competition given that 90 percent of consumers who open a business directory are ready to buy, compared to 25 percent of those who enter a store.
But Yellow Book emerged as the highest-profile independent. It incorporated new features in its directories, such as cross street locators (in the case of Manhattan), menus and coupons.
“They’ve copied most of these innovations,” he said of his rivals. “But what they haven’t copied is the fact that we charge a third and a half of what they charge.”
A full-page Verizon ad in Manhattan costs $80,000, twice that of Yellow Book.
But key to Yellow Book’s success, Walsh contended, are the more competitive rates available for small businesses.
“They’ve very aggressively raised the prices that small business have to pay for an ad in these books, bearing no relation to what the cost in providing the book is,” he said of the phone companies.
“The prices that we charge co-relate directly with what it costs to print a higher-quality book, distribute so that everybody gets it, and back it up with a media campaign to promote the usage of it,” Walsh said. “In their case they’re just charging what the traffic will bear.”
Walsh claimed the Yellow Book product is “higher quality, more comprehensive, more complete, usually with larger type in the books, so it’s easier to read.”
The geography might be different, too, with more and less of an area than its rivals, which also provides choice.
“I enjoy the battle of ideas; I really don’t like the bullying tactics,” he said, referring to the suit by Verizon.
Walsh argued that his rivals don’t have much of a case in the courts and he was clear about the reason for the action. “Because we have been very effectively competing with them and they’ve tried to impede our progress in the court of law,” he said.
“They fundamentally don’t want competition; they want to role back the clock to the days when they had a monopoly,” he added.
Consumers now have a choice and the advertisers have a choice, he said.
“I’m very much a free enterprise guy,” he said. “Let’s do our work in the marketplace. Let’s see who can serve the customer the best.”

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