Paul Wallbank – Brilliant Communications

Tag: sensis

  • The Roadrunner Effect

    The Roadrunner Effect

    Fans of the roadrunner cartoon will remember how in almost every episode one of the characters, usually the coyote, would run over a cliff.

    A few seconds after running off the cliff they’d keep going and then, just as they realise their mistake, they’d plummet into the deep canyon.

    It’s similar for businesses – you can be a long way over the cliff’s edge before you realise you’re about to take a big fall.

    Yesterday’s post about Sensis and the squandering of ten billion dollars is a good example of the Roadrunner Effect in business.

    Sensis annual revenue and profit 1999-2013
    Sensis annual revenue and profit 1999-2013 (millions of dollars)

    While it was obvious from the early 2000s onwards that the Yellow Pages model of expensive small business advertising listing was doomed, Sensis boss Bruce Akhurst did an admirable job of keeping revenue flowing.

    Even more impressive is that the division managed to book close to a 50% gross profit most years during that period even when the revenues started to decline.

    A large part of Sensis’ success was in screwing more money out of its client base with enhanced ads, new categories and a better digital offering that tied into Google’s Adwords program.

    Unfortunately for Akhurst and his management team, economic gravity eventually claims even the luckiest or best run enterprise and Sensis was no different as small business started realising Yellow Pages advertising had become largely ineffective.

    In many respects Sensis is a good example of a once profitable business that fails in the face of technological change – the new technologies help it become more profitable at first, but eventually a changed marketplace kill the business.

    The question for those enterprises and industries is how long can the owners, managers and employees keep running before they realise the ground has dropped out from beneath them?

    It could even be entire countries that suffer from the Roadrunner Effect, it certainly appears that the game was up for the European PIIGS long before it became obvious to the governments and citizens. This may prove true for Australia as well.

    Either way, it’s worthwhile for business owners and managers to consider whether there’s a cliff face ahead even when revenues are accelerating.

    Similar posts:

  • Google schmoogle – how one telco destroyed 9 billion dollars in shareholder funds

    Google schmoogle – how one telco destroyed 9 billion dollars in shareholder funds

    How one company blew nine billion dollars in shareholders’ equity is a business lesson on the value of timing and wise management.

    As a rule, telecommunications executives are an arrogant bunch and none are more so than Sol Trujillo – formerly of American West, French provider Orange and finally Telstra, Australia’s incumbent telecommunications operator.

    History shows that Telstra’s board, largely made up of dim-witted political appointees, had little idea of what they were getting when they hired Trujillo in 2005 but they soon found out as the brash American’s less than diplomatic style quickly alienated politicians and industry commentators alike.

    Trujillo though wasn’t particularly concerned about the sensibilities of passes for Australia’s business and political elites, he was happier to take on bigger players on the global stage and one of those was Google.

    Google Schmoogle

    Like telcos and media companies around the world in the mid-2000s, Telstra had a problem with its directories business as the World Wide Web was eroding the value of the Yellow and White Pages franchises.

    At the time many analysts were agitating for Sensis, Telstra’s directory division, to be sold off as a separate business. In 2005 it was valued at ten billion dollars which was a tidy sum for the telco as it rolled out its Next G network.

    Trujillo though had a better idea – Sensis would claw back the market by taking Google on with their own search engine.

    Sensis Search was born in November 2005 and the Telstra CEO dismissed questions about the wisdom of taking on the search engine giant with the comment, “Google Schmoogle.”

    Three years later, Telstra quietly accepted defeat with Sensis CEO Bruce Akhurst announcing a ‘commercial agreement’ with Google.

    Nielsen NetRatings at the time showed Google search being used by 9.3 million Australians compared to just 184,000 users for Sensis Search.

    In Telstra’s 2008 annual report, Sensis earned 2.1 billion dollars. On a 2.5x valuation, the division was worth five billion to Telstra’s shareholders at the time the search engine was closed down..

    The Dying Yelp

    Despite the setback, Sensis was able to struggle along for another decade on the back of its strong cashflow and legacy market position although income was steadily falling.

    In a desperate attempt to shore up its declining revenues, the company picked up the failed digital ventures of Australia’s newspaper duopoly and licensed operations from overseas startups like Yelp!

    Few of these acquisitions made sense and none of them were properly integrated into the declining directory media business.

    Finally a year ago, Sensis admitted they live in a digital era with Managing Director John Allen admitting what most industry observers knew a decade earlier;

    Until now we have been operating with an outdated print-based model – this is no longer sustainable for us. As we have made clear in the past, we will continue to produce Yellow and White Pages books to meet the needs of customers and advertisers who rely on the printed directories, but our future is online and mobile where the vast majority of search and directory business takes place.

    But it was all too late, the market had been lost along with the bulk of shareholders’ equity.

    Today Telstra announced a 70% sale of Sensis to US based Platinum Equity for $A454 million. The value of the entire business being $650 million – 7% of the division’s value nine years ago.With over nine billion Aussie dollars squandered on hubris and a failure to recognise a changed market place, Sensis stands as a good example of how valuable timing and good management are in business.Sol Trujillo though did very nicely, and the dim witted men who sat on Telstra’s board in 2005 will never be called to account for wasting so much of their shareholders’ money.

    Similar posts:

    • No Related Posts
  • It’s too late, baby – when digital reality bites

    It’s too late, baby – when digital reality bites

    Yesterday Sensis announced it would restructure for digital growth by sacking staff, offshoring and “accelerate its transition to a digital media business”.

    The directory division of Telstra has been in decline for years, a process that wasn’t helped by then CEO Sol Trujillo embarking on his expensive “Google Schmoogle” diversion.

    A decade later, Managing Director John Allen has announced another 650 jobs to go from the remaining 3,500 workforce.

    John’s comments are worth noting.

    Until now we have been operating with an outdated print-based model – this is no longer sustainable for us. As we have made clear in the past, we will continue to produce Yellow and White Pages books to meet the needs of customers and advertisers who rely on the printed directories, but our future is online and mobile where the vast majority of search and directory business takes place.

    Carol King put it best – it’s too late, Baby. These are words that should have been said a decade ago.

    Similar posts:

  • Eating the Old Man’s lunch

    Eating the Old Man’s lunch

    Optus today announced the purchase of restaurant review site Eatability for $6 million.

    Eatability is one of the services that’s destroyed the business models of both the phone directory business and that of newspapers.

    Thirty years ago the Sydney Morning Herald launched its Good Living section and it became the way people went found where the good places were to eat.

    Diners wanting to make a reservation at the hip eating places being reviewed in Good Living picked up the phone book.

    Now they do neither, they go to web sites like Eatabilty or Yelp where they get reviews, contact details and everything else they need about the venue.

    Which killed the advertising revenues that newspapers and phone directories depended upon.

    The sad thing is both the newspapers and Yellow Pages could have owned this space. Citysearch was setup by Fairfax to address the online market and it was sold to Telstra when the newspaper chain struggled to make it work.

    Citysearch today languishes neglected and nearly forgotten under the Sensis umbrella. Optus now owning Citysearch’s biggest local competitor which must bring a hollow laugh to those involved in the early days of Fairfax’s digital experiment.

    Whether Eatability thrives under Optus remains to be seen, but it illustrates just how incumbent strengths like telephone directories are being eroded in the online world.

    Old men have to start moving quickly if they don’t want upstarts eating their lunch.

    Similar posts:

  • Towards the Zettabyte enterprise

    Towards the Zettabyte enterprise

    Toward the Zettabyte Enterprise originally appeared in Smart Company on May 31, 2012

    Two hundred years ago, the idea of equivalent power of hundreds of horses in a single machine was unthinkable; then steam engine arrived with what seemed unlimited power and that, followed by electricity and the motor car, changed our society and the way we do business.

    Back then it was inconceivable that the average person would have the equivalent of several hundred horses of power in their household, today most of us have that sitting in our driveway.

    The same thing is happening with the explosion in data, it’s changing how we work in ways as profound as the steam engine, electricity or the motor car.

    A couple of surveys released this week illustrate the how business is changing. The Yellow Social Media Report 2012 and the Cisco VisualNetworking Index both show how business and our customers are adapting to having high speed internet at their fingertips.

    The Cisco index illustrates the explosive growth of data across the Internet as more people in Asia and Africa connect to the net while users in developed countries like Australia increase their already heavy usage.

    In Australia, Cisco see a sixfold growth in traffic between now and 2016. As the National Broadband Network is rolled out, they see speeds increasing substantially as well, with Australia moving from the back of global speed tables up to the front.

    Many people are still struggling with the Megabyte or Gigabyte, but very soon we’re going to have to deal with the Zettabyte – a trillion Gigabytes.

    For businesses, this means we’re going to have to deal with even more data, it’s clear our hardware and office equipment aren’t going to deal with the massive traffic increases we’re going to see in the next few years.

    Even if we have that equipment, it’s another question whether we have the systems, or intellectual capacity to use it effectively.

    The Sensis social media report shows consumers are expecting not just rich data but also 24/7 online services.

    A worrying part of the Sensis survey is that businesses aren’t keeping up with these demands; something that jumps out with the survey is that while 79% of big businesses have a social media presence, only 27% of small businesses have bothered setting one up.

    Australian small businesses have basically given the turf away to the big end of town.

    The real worry with these statistics is that small business just isn’t taking advantage of the tools available to them — not only are they leaving the field open to bigger competitors, but there’s a whole new generation of lean new startups about to grab markets off slow incumbents.

    While the big companies are vulnerable, it’s the smaller businesses who are the low hanging, easy to pick fruit. If you’re in a profitable niche segment this is something you’ll need to keep in mind.

    In the near future we’ll be dealing with inconceivable amounts of data, the businesses that understand this will thrive while those who don’t probably won’t even understand what has hit them.

    Similar posts: