24 March 2010
Let me ask you a question. When you see a local search marketing company with 3.8 Billion dollars in revenue shrink down to 2.5 Billion, from 2005 to 2010, among what should be a growth business, when more and more local businesses startup and more and more local search options are available to choose from, who is to blame for the companies inability to adapt? Obviously, the GTE and telco local search ( print or web based ) dominance is no more. Reachlocal.com, one of the fastest growing local search companies is doing better.
Meanwhile, the SuperMedia Executive Team is taking money away from the bankrupt company and investing it into their own pockets. I challenge them to give the money back. How about Obama tax SuperMedia CEO Scott Klein on his fat cat bonus like the other Wall Street Bankers? What have they done to earn the bonus? Shouldn't that money go to pay investors and former shareholders? Did Klein ever "personally" purchase stock in "his" company? No. Why? He knew he would be declaring bankruptcy. It was pre-planned just like Fair Point, Hawaiian Telecom, and others. Reminds me of Enron, the AIG corporate parties, and other acts by crony capitalists!
Am I the only one asking tough questions about the direction that Verizon's former Yellow Pages brand, SuperMedia, is headed? Here are a few interesting comments regarding the financial status of SuperMedia posted around the web:
Supermedia has been attempting to leverage the direct mail aspect of their business model. This is a Yellow Page directory company, with almost no experience in the mail arena. Senior management certainly has no experience in this arena either. Their direct mail components are much more expensive than competitors that have been there for decades in the same markets. The company keeps positioning itself as a direct mail solution, when it clearly it is not even close. It also touts its position with internet products, when it has been losing audience steadily for over a year (according to ComScore--was top 20, now barely in top 50). The director of internet is gone, as he is no longer listed as a director (Briggs Ferguson of Citysearch). Now there seems to be no expertise at the senior management level for internet search either. So, in summary- no senior management experience in directory print advertising. No senior management experience in direct mail. None in internet either. Does that sound like a sound approach to turning around your business? As far as Yellow Book competition being on it's "last legs"...look it up YELL...they are doing far better than what was IDEARC in the investment arena. Not that they are what anyone would consider healthy...but not as dead as the commenter would imply by comparing Idearc with Yellow Book. This was a really insightful article, that brings to light aspects not discussed before. Just a small amount of research backs up what the author states.Here is a summary of the financial trouble for SuperMedia.:
The current negotiated debt position showed SuperMedia owing $2.75 billion, due in 2015. The interest rate on the bonds is 8% over LIBOR with a minimum of 11%, qualifying it for High-yield debt or "junk bond" status. The outlook presented for SuperMedia's future prospects in its September 15, 2009 8-K filing with the SEC was stark. Its "current case" projections for print revenue showed a decline from $2.165 billion in 2009 to $1.694 billion in 2010 to $1.418 billion in 2011 to $1.278 billion in 2012 and $1.187 billion in 2013. Unfortunately, the online revenues are only projected to increase $144 million during the same time that print revenues are forecast to drop $978 million. The same 8-K filing shows that projected EBITDA would be insufficient to cover the $2.75 billion debt, much less free cash being able to do so.
People often forget that what as afforded the company with a direct outside sales channel was the huge margins from a product that permits or requires a "consultant" to go out and visit a client, with very little attention, only one to two times per year. The same cannot be said for direct mail, complex search marketing, or other forms of media. Print requires significantly less creativity and energy to fulfill vs search marketing. So what happens next? What is next for SuperMedia? I hear there is another plan being rolled out to RIF or reduce the number of sales support, top level management, and "lesser performing" sales consultants. In my opinion you can cut as many folks as you see fit, but while outsourcing, company seriously needs to educate the right folks around the organization who can comprehend with passion the search marketing processes and methods. Don't expect them to take this kind of common sense advice. And because of not acceptging/incorporating it you will see continued erosion of SuperMedia at the hand of inexperienced Executives who know very little about how to really transform the company into the digital age. I have had countless phone calls asking me about a potential merger with Dex One. I can tell you that in my opinion consolidation is not an option but a necessity. If SuperMedia combines efficiencies of both Dex One and existing operations, the amount of cost savings would be tremendous. They also are able to consolidate real estate operations, telephone operations, human resources operations, and even the debt. I am sure the Executives and Paulson's Hedge Fund team are meeting right now.
Challenges and Predictions:
-Margins will drop as they offer products less profitable.
-Cost of sales will continue to increase.
-SuperPages.com is no longer in the Top 30 of All Web Properties and will fall outside of the top 50.
-Mobile Search will impact the print yellow pages dramatically.
-Print is still a high margin business, welcoming new competitors with new ideas.
-Leadership issues. President of Marketing and Transformation, Sandy Henjum, left due to fraud allegations. President of Internet and former CEO of CitySearch, Briggs Ferguson, has also left.
-CEO is very concerned with his income and his Executives teams income vs turning the revenue decline trend around.
-CEO believes that copied gimmicks are the solution to product innovation vs real market differentiators. -Cost increases for Delivery and Printing will always go up. When is the last time gas prices declined over a 5 year span?
-Growing populations require larger distribution numbers
-Continuation of a saturation distribution (vs subscription) method will also be less profitable for the company over the next 5 years.
-The company is in debt with over $2,750,000,000 and has extremely high interest rates. The companies newly issued bonds have a junk bond rating. It is very likely that prior to the companies due date on paying off the debt that they will go into default on the loan.
-The company is just a hair above another default or bankruptcy based on the 20% Year over Year declines in revenue. If this continues, they will not afford the new debt. I can keep going, but I digress! So.. who is to blame for this fiasco? Kathy Harless? Ivan Seidenberg of Verizon? In my opinion the blame rests squarely on the shoulders of Scott Klein. His actions of misleading, misrepresenting, and hiding the economic position, earnings, and financial future of the company offer no other blame.
Klein, much like his 2008 Presidential pick, Barack Obama, can only blame so much on the "previous administration." I left Idearc in October. In January the company emerged from bankruptcy. Klein laid out and attempted to implement all of his "Ideas" and plans for transformation after the National Sales Drunkfest Meeting in February of 2009 at the Dallas Sheraton Hotel.
Ideas such as:
SuperGuarantee -copied marketing gimmick from Service Magic's Service Guaranatee
SuperView - tool that allows Klein to track "activities" or the number of phone calls and appointments reps perform or forecast.
SuperLeads - Internet product SuperLeads Multi-Product - High Cost per Lead pricing option that has very little sales results.
SuperYellowPages.com - Put a copy of a few of the printed versions of the antiquated phone book online. (might work for iPad?)
Idearc Challenge - Offered a guarantee that Idearc would generate more calls then competitors. Quickly found out that other books were a better value and that the incumbent print publishers were over-priced and in many cases had less penetration and usage.
SuperDirect - Changed clients to 3 month billing vs the 12 month, saw a huge decline in sales results and went back to the 12 month financing options for a post card that is sent to a consumer on a single day.
This was and is a credit and collections nightmare and shows that they could give a care less about preventing sales fraud and future accounts receivable issues. They offer credit to anyone that has a phone number under the majority of headings with hungry commissioned sales reps looking to put anyone on a $850.00 per month contract. I can keep going, but as you see... Klein's Highland Park backyard must be full of Dog Poop. He needs a Dallas Pooper Scooper Service. I admit, that was a shameless link plug for an SEO client! LOL. Meanwhile, homeowners associations will have a new title for some members, phone book waste recycling. I am going to create FREE websites for any and all homeowners associations who create an OPT OUT delivery recycling service by delegating someone responsible for the homeowners associations board of directors to pick up and properly dispose of directories for consumers. This is ridiculous, isn't it?
One company says I should pick them due to some ambiguous guarantee? Honestly, I wouldn't pick any of them. But... if forced... I think I would go with the smallest version. The bulky ones are only good for doorstops, holding up my computer monitor, booster seats, and right now great for chalking a set of tires while pulling the motor out of my racecar.
BTW, sending me a Spanish Version is a terrible waste of paper. Imagine if direct mail companies sent all the English information in a Spanish version. I am sure that "Anti-Illegal Immigration Supporters" in North Texas really despise getting the Spanish phone book waste. Personally it angers me to have to "press 1 for English, press 2 for Spanish". I, like many North Texans, am sick of being told that Spanish is equal to French, German, Italian, Russian, Chinese, Japanese,Hindu, Cantonese, or any other language. It is like we are being forced to accept the "illegal-ness" of our national immigration problem. Thanks for shoving it in my face every year SuperMedia!
328 million speak English
329 million speak Spanish
845 million speak Chinese.
I remember when Idearc/SuperMedia changed the name on the Verizon Farmers Branch Tx Spanish Yellow Pages (an area that had a high concentration of illegal immigrants) and renamed it theVerizon Carrollton/Addison Spanish Directory to avoid political ramifications during Farmers Branch's future Mayor Tim O'Hare's efforts to end the cities previous "sanctuary city efforts."When I heard his comments and press releases on Jan. 4th to Wall Street discussing his "transformation", kit solidified my opinions regarding his character as a leader who uses lip service and manipulation while attempting to mislead folks on what is really going on at SuperMedia. He's offered very few applications, tools, and strategy for true change and transformation. If they truely were worth more than lip service (or lipstick on a pig), one would see revenue trends flat lining vs continued erosion amongst a growing industry. SuperOverPricedAdvertising and SuperScrewed.
You know..... It's Just SUPER!