Nodal Bits

Yellowbook has just this week announced the launch of Weforia, a group-buying/discount-deals service similar to Groupon. Like “Groupon”, the Weforia name is another “portmanteau word“, combining “we + euphoria”. The website for the new service sports a cheering crowd, evoking a music concert with the fans breathlessly waiting for the rock star to come out on stage:

The excitement of the rock concert certainly illustrates euphoria, and is probably channeling the hopes and feelings of the YP industry even more than reflecting what the new product will do. But, you can forgive Yellowbook for wanting to celebrate with a victory dance prior to having their eggs all hatch, because this is unquestionably a very strong concept that has a great chance of working exactly as they hope, and they were first out of the gates in the U.S. to integrate this type of service (Yellow Pages Group in Canada announced their service, RedFlagDeals.com, just a few days before). Read on and I’ll explain.

Yellow Pages companies have been casting about for some time now, in hopes of finding the “next big thing”, or hoping to hit upon that one “killer app” that will put them on better competitive footing, compared to the internet search engines and agile social media newcomers that are threatening their industry as the print product declines.

“This could be a game-changer for our industry!”   Afred Chow Head of Yellowbook.com

Internet Yellow Pages (“IYPs”) initially were ahead of the pack some years ago, beating newspapers to effective web incarnations, but that initial advantage began to be lost when the major search engines started making incursions into the local online marketing territory. Since that happened, IYPs have tried out multiple new ideas, from packaging service guarantees for their advertisers, to video ads, SEO service, and more. Yet, few of these ideas have seemed compelling enough to really grab back the prime position they once enjoyed with local advertisers.

However, enter Yellowbook with Weforia. Never mind that it’s closely modeled upon Groupon — that’s nearly beside the point when you consider that most of the effective business models out there were adapted from some early incarnation and later fine-tuned by someone else to work much better (multiple Google products are examples of this). The point to consider is: if you take Groupon’s already-successful model for social media smashed-up with coupons/discounts, and then you attach that to a company like Yellowbook which has many decades of experience in selling to SMBs and has thousands of feet-on-the-street salesmen embedded in local markets, then you have something that could well go into overdrive.

I spoke with Alfred Chow, Head of Yellowbook.com, and he described one of the key differentiating points between group-buying and traditional types of yellow pages advertising: “This is the first time yellow pages has sold direct to the consumer. Previous product models are pretty much all B2B, but this is more of a B2C model.”

What’s more, this model whereby individuals commit to buy at a certain price and pay upfront gives advertising businesses just about an absolute guarantee of a certain number of sales per every advertising dollar.

This pay-for-performance model has the potential to demolish the past criticisms that business owners have had about paying high fees and being unable to see clear ROI. This is similar to the Pay-Per-Click model advertising, but it appears to go even further in closing the loop in advertisers’ minds by directly connecting sales to the ad dollar.

It’s not paying for an advertisement that will have an uncertain return, it’s paying directly for a guaranteed number of sales.

“This offers a fuller product portfolio for the sales force to have a conversation with the business owner that would have been otherwise cut short if the business owner is not interested in directional advertising,” stated Alfred. “This could be a game-changer for our industry.”

I think he’s right, although there are obviously some caveats. Groupon has come splashing out of the gates, and has been gaining new members very rapidly. A big player such as a well-established YP company would need to expand and promote their own competing product very quickly right now in order to not get eclipsed. I’ve noted how Groupon grew rapidly through ads in Facebook, and others have noted that many other Groupon Clones are cropping up as well. Yelp has just announced a deals product, too, though I’m not sure how similar it is.

As the “Clone Wars” begin heating-up, a product must be configured to be sufficiently competitive to grow rapidly and to be attractive enough to beat out the other players. This is one area where Yellowbook’s better-established footing might provide leverage that startups simply don’t have — a YP company could likely afford to provide ads more cheaply by combining with other products (say, giving advertisers 4 deal promotions a year in return for display advertising), or by using it as a loss leader.

Yellowbook says they are offering low rates for these ads thus far, so one could conjecture that they may well intend to leverage their position to compete in the deals arena.

They also intend to provide payouts to the advertiser more rapidly after a deal offer achieves the required number of members accepting it.

Comparing further with Groupon, Weforia is poised to roll out deals for more granular areas — smaller cities could be targeted than only large metro areas. For instance, I live in the Dallas-Fort Worth metroplex, which is an area that covers hundreds of square miles. With Groupon I have gotten a number of deals offers for businesses which I would never drive to, like icecream shops that are twenty miles away. All of these group deals services need to rapidly calculate acceptable ranges for their ads — one might drive 20 miles for a day at a spa, where one wouldn’t be willing to drive that far for a burger-and-fries.

YPG’s Deal O’the Day would seem to place some upper limits on the numbers of ads they could sell — assumably only 365 per year for a particular area? Again, these limits likely need to be variable and fine-tuned by consumer opt-in. I know a lot of consumers who would balk if they got an email per day. If you could not only specify your locality, but also specify what types of deal offers you receive, it would likely go far in reducing consumer resistance.

One last pitfall that Yellowbook and other IYPs would have to address would be in terms of incentivizing their sales forces to actually sell the ads. For smaller, more-granular ads, a commission would have to be correspondingly small. IYPs have struggled at getting internet ad products that are cheap enough to be properly competitive to also be attractive enough for their salesmen to push, and that could happen to some degree with group-buying promotions. But, once they develop a sufficient number of members who wish to receive offers, nationwide deals can’t be far behind, and those would be large enough to make YP sales reps salivate. Groupon’s recent national Gap offer made $11 million in revenue, and that’s not small potatoes!

So, could group-buying be the “game-changer” of the YP industry?

I think it could prove to be just that.

(See also Greg Sterling’s post, “Yellowbook First US YP to Do Group Buying“, which has a few other interesting details.)

Postscript: I just noticed that Charles Laughlin of BIA/Kelsey also posted a piece about Weforia, adding that Yellowbook possibly partnered with an outside firm, NimbleCommerce, to roll out the service. I’m generally predisposed to keeping key product development in-house, rather than outsourcing, but if Yellowbook outsourced Weforia it was likely a smart move since it allowed them to deploy before anyone else — and most YP companies are probably planning to do similar products, I expect, since they nearly cannot afford to ignore Groupon’s success thus far.

Tags: coupons, group buying, group deals, group discounts, Groupon, internet yellow pages, IYPs, online yellow pages, Yellow Pages, Yellow Pages Group, Yellowbook, Yelp, YPG

This entry was posted on Thursday, August 26th, 2010 at 1:55 pm and is filed under Advertising, Social Media, Yellow Pages. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.