This story originally appeared on Technology Spectator
Fifteen years ago Sensis, the directories arm of Telstra, was untouchable. A listing in the Yellow and White Pages was essential for every business and Sensis’ monopoly was a true river of gold.
Sensis’ launch this week of an Australian partnership with the US based review site Yelp is Telstra’s desperate throw of the dice to survive in a market where its directories business has become irrelevant.
Attempts to stay relevent
There have been many attempts by Sensis to overcome this erosion of its core maket including purchasing an IT services business and unsuccessful forays into publishing and online search with Trading Post and CitySearch.
Probably Sensis’ lowest point was the squandered millions of dollars and years of management time wasted in trying to compete against Google after Telstra CEO Sol Trujilo made the sneering comment of “Google Schmoogle”.
Declining values
At the time of Trujillo’s comment in 2005 Sensis was valued at $10 billion as a stand alone company. After last week’s disappointing results that saw revenue drop 18 per cent for the year, the value of the division is an optimistic $5 billion.
Yelp itself is unlikely to help Sensis’ revenue woes. Despite filing for a $100 billion public offering, Yelp has never made a profit in its seven years of operation. Although licensing their service to failing directory companies around the world might prove to be a handy revenue stream.
That lack of profit – on North American revenues that are tiny compared to Sensis’ Australian cashflow – shows the fallacy in the social media business model that many of the popular online services are faced with.
Users of social media services like Yelp are looking for a community of trustworthy and relevant referrals. The directory sale model is based on displaying the biggest advertisers prominently, which is exactly what social media users don’t want.
Yelp also comes into a marketplace already crowded with competing, established services like Word Of Mouth Online, Eatability, and the faster moving social media platforms like Foursquare.
Competitors’ Missed Opportunities
In many ways Sensis has been lucky in that most of the competition has been from smaller upstarts while their bigger competitors haven’t capitalised on the market opportunities.
Google Places, the biggest competitor to the world’s Yellow Pages directories, is mired in bureaucracy and isn’t doing a good job in telling business its story while Facebook’s local search function isn’t getting much traction either.
Of the local Australian incumbents, ninemsn isn’t interested in local business with its international partner Microsoft not offering an Australian product and the local team preferring to deal with big spending advertising agencies, while Fairfax squandered its early advantage and eventually sold the CitySearch service to Sensis.
News Limited’s True Local is having limited success while it struggles with the transition from print to online. At News’ recent launch of its new digital platform, the company’s executives stated they expected journalists to develop a “digital mind”.
Lacking a Digital Mindset
That “digital mindset” is the key to the problem at companies like News Limited, Fairfax and Sensis. In a marketplace where customers, advertising and readers have moved online it requires management, not just the lower workers, to “think digital”.
Sensis’ key problem is its management structures – and more importantly its sales teams’ commissions and KPIs – which are still based around its traditional business models that will make selling services like Yelp difficult.
The phone directory business model is a product of the 1920s and in many ways Telstra and the other Yellow Pages franchisees around the world should be grateful it has lasted so long.
Whether the phone directories that have been so profitable for phone companies can make it to their one hundredth birthday is an open question. One thing is for sure, bolting on an unprofitable and late to market social media service isn’t the answer.
