Q1 Results Show Some Hopeful Signs for YP

First-quarter 2011 earnings reports are trickling in across the global Yellow Pages industry, and while the results are still largely negative, there are some signs that the rate of revenue decline is leveling off. This is consistent with what BIA/Kelsey has forecast for the Yellow Pages industry — a leveling off of print declines leading to a return to very modest growth by 2013.

SuperMedia, for example, reported that its advertising sales for the first quarter were down 17.8 percent this year, compared with a 20.4 percent drop in Q1 last year. Operating revenues were also down 17.8 percent, compared with 20.9 percent in Q1 last year. These are not monumental improvements, but they suggest some progress in stemming the flow of red ink.

At Dex One, ad sales declined roughly 17 percent vs. 19 percent a year ago. CFO Steve Blondy noted that were it not for the impact of TMP’s failure to pay money owed the publisher (TMP is currently winding down its operations) the ad sales decline would have been 14.7 percent, a more substantial improvement over Q1 2010.

Similarly, SuperMedia’s CFO Samuel Jones said factoring out the TMP impact would have given the company a Q1 ad sales decline of 15.9 percent, which amounts to a 450 bps improvement over Q1 2010.

AT&T’s results were essentially the same, down 16.6 percent in Q1 vs. 16.7 percent a year earlier. However, online growth continued to slow down, to a 6.8 percent increase vs. 12.9 percent last year. This suggests the rate of decline in print has settled a bit, otherwise the overall revenue decline would have accelerated.

AT&T has been arguably the most aggressive U.S. publisher online, and has recently added a number of new digital products, including reputation management and, most recently, deals. The slowdown in digital growth is likely a combination of the economy and the law of large numbers, since AT&T has roughly a billion in digital revenues. However, the slowdown might also suggest that IYP is maturing and new products are taking on greater importance as sources of new growth.

Across the pond in France, PagesJaunes reports its group revenues declined by just 1 percent for the first quarter, while its print decline was 7.5 percent, an improvement over a 10.2 percent drop in Q1 2010.

Collectively, these results seem to point to stabilization, defined as a leveling off of the rate of decline. This is probably the result of improving economic conditions, which includes steady improvement in bad debt ratios. This is consistent with the view that the decline in print revenues was the result of a combination of economic and transformational factors. The degee to which growth rates improve this year may be a pretty good indication of which portion of the recent declines have been cyclical vs. secular.  

None of these Q1 numbers is going to lead to any champagne being uncorked, but they do suggest that after a couple of very rough years, the worst may be over, at least for now.

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