message to our shareholders / our strategy /
As we head into 2013 with renewed vigour, it’s important we take the opportunity to reiterate our business strategy, our challenges and opportunities, and how we plan to protect and grow our company going forward.
How people search for, locate and digest information continues to change and evolve rapidly. We no longer rely on a single channel for our information, instead we turn to multiple sources, including mobile, online and print media. Yet, despite the rapid evolution of communications, the fundamental needs of small and medium-sized enterprises (SME) remain the same. Find customers, attract customers, keep customers.
However, due to the constant evolution of search habits, businesses lag behind in their understanding of how to use the variety of communications and marketing options available to them to accomplish this. As the advertising and marketing industry is a highly fragmented environment, businesses often need to juggle multiple service providers and contracts to meet their various marketing needs and ensure they remain visible across print and digital media. This detracts from the time they could be using to focus on managing and growing their core business. In the new marketing world, Canadian SMEs are often struggling to keep pace.
Given this, there exists a very tangible and significant market opportunity for a full-service marketing company with a solid understanding of the needs of Canadian businesses.
Yellow Media is that company.
Not only do we have a wealth of experience in local search and a strong physical presence in local communities across Canada, we also make agency-level solutions accessible to SMEs. By gathering traditional and digital marketing solutions, services and counsel under one roof through our Yellow Pages 360º Solution – our portfolio combining our digital and traditional product and service offerings – we’re directly addressing the need of many businesses for comprehensive, single-source marketing services.
Now with our recapitalization behind us and a stronger balance sheet in front of us, we’re able to invest in and fully focus on executing our Yellow Pages 360º Solution, thereby further aligning our business operations with the needs of the modern consumer and advertiser.
Here’s how we’re going to do that.
message to our shareholders / our roadmap & progress so far /
We’ve experienced solid success with our Yellow Pages 360º Solution, with approximately 51,000 businesses having purchased a combination of three products or more. We intend to provide our large advertiser service channels with even more comprehensive products and servicing to accomplish similar results.Doug A. Clarke Senior Vice-President, Sales
Our main challenge is closing the gap between the decline in our traditional print business and the growth of our online segment. Although the introduction of the Yellow Pages 360º Solution has helped support growth across our digital offerings, this is currently unable to offset print declines. One of the reasons is that we need to accelerate the migration of our large, multi-market advertiser accounts to our digital offerings. Their needs are different and therefore, in order to mitigate revenue risk and optimize revenue growth, we’ve developed and implemented a differentiated servicing model across this sales channel.
Last year, we established a High Priority Account (HPA) management process in which we developed a methodology to comprehensively profile each business, evaluate these advertisers’ needs and opportunities and define an appropriate marketing strategy and service level. This account management process leads us to a clearer understanding of where we’re under servicing these clients and what can be done to retain them. Specialty products are one of the incentives we identified and we began work in this area last year. We launched Digital PowerPlay, a product jointly developed by Yellow Pages Group and Mediative, specifically designed with large advertisers in mind. This product helps businesses determine the digital advertising channels they should be using in order to reach their target audiences, the necessary steps to maximize qualified leads across these channels and how they compare in visibility and effectiveness with their competitors.
It is these types of sophisticated and tailored products for larger advertisers that we must continue developing. Moreover, as we continue to grow online revenues, it is crucial that we properly execute on our Yellow Pages 360º Solution. With this in mind, we plan to invest in the proper sales training and tools to improve sales efficiency and reach and properly migrate advertisers, where appropriate, from print to digital products.
In 2012, we continued to experience success in the execution of our Yellow Pages 360º Solution. At the end of the fourth quarter, the number of advertisers who subscribed to three product categories or more, reached 16.5% compared to 5.5% at the end of our fourth quarter in 2011. During 2012, we also re-defined the Yellow Pages 360º Solution value proposition to advertisers, shifting from a product-focused offering to a needs and benefits-based approach. Shifting the value proposition of the Yellow Pages 360º Solution clarified our offering for our clients and the benefit it could generate for their business, leading to greater interest and traction among advertisers.
With regards to our print segment, despite anticipated ongoing declines in print revenues, we do believe there exist opportunities to protect and stabilize the print franchise. For instance, we’ve already started by eliminating little used sections, such as the residential phone number listings, and we’re also reducing directory sizing, making it more compact and portable, to best reflect the needs of the modern user. We are going to be re-evaluating and optimizing directory content formats as well, as we know there is still a solid advertiser and user base for the print directory and we must continue meeting the needs of both these audiences.
There still exists a solid addressable market for the print directory. As we transform our business, the print directory will also be changing and evolving to best address the needs of those who continue to derive value from this product.D. Lorne Richmond Vice-President, Print Operations and Sales Support
Another existing market need we’re going to continue focusing on is that of reliable local data and content. One of our key, yet often understated advantages and revenue opportunities is the business data we hold on local businesses in Canada. This data is unrivalled in its accuracy, its validity and its depth. This is a resource that we have only scratched the surface of with our YellowAPI however its market value is considerable. We create value for our partners who utilize the information we hold on local businesses to populate local search results or to enrich the existing user experiences of their products. More importantly, these types of data integration and sharing agreements create significant added value for our advertisers by amplifying their visibility and reach. We’re going to be looking at ways to continue growing that value and further monetize this resource in conjunction with the growing need in the marketplace for reliable local search information.
During 2012, we continued to develop data partnerships in traffic and distribution and support local search innovation through our YellowAPI network, steadily increasing leads to our advertisers. Over 2,500 application developers are currently using our database of 1.5 million business listings to fuel a variety of new digital applications. Our data is also being used to populate Canadian local search results for leading digital properties such as Yahoo!™, Google™, and CBC™ and we have data integration partnerships with companies such as TripAdvisor, foursquare and OpenTable meaning more comprehensive content on our YellowPages.ca™ merchant pages and a richer experience for users.
Our existing clout in the online and mobile spaces grew last year as well. We sold approximately 14,500 websites to Canadian businesses in 2012 and our own Yellow Pages Group network of websites continued to be a leading resource for business searches and information in Canada, with 9 million unduplicated unique visitors per month in traffic at the end of 2012. In terms of advertisers, we had 309,000 advertising with us, with 61% of those advertisers using our online services and approximately 18,000 exclusively using our digital products.
Among these products were our offerings in mobile. Mobile is a growth engine for us and a key aspect of this company’s future. With the increase in smartphone penetration and the fact that mobile platforms are poised to overtake desktop computers in usage for local searches, this platform is undeniably one of the pillars of our transformation.
As we grow our digital platforms, we’re making the necessary investments in technology to provide real-time and actionable data analytics to our advertisers so that together, we can optimize their marketing efforts.Paul T. Ryan Chief Technology Officer
Approximately 24,600 Canadian SMEs had purchased our mobile products by the end of 2012, representing approximately 46,600 mobile units. Our mobile applications, including YellowPages.ca, RedFlagDeals.com™, and ShopWise™, had also been downloaded over 5 million times.
Throughout 2012, we enhanced the YellowPages.ca and ShopWise mobile applications to include more user relevant content, new functionalities and enhanced designs. Our flagship YellowPages.ca mobile application has won a number of awards and was also recognized by the App Store as one of the top applications of 2012. Our ShopWise app, which helps people find and compare deals and savings on millions of products, was also enhanced through an agreement with Calgary-based Shoptoit, a leading shopping search engine. This partnership increased ShopWise’s catalogue by over seven million products and 600 local and national retailers making it among the most comprehensive deals databases in Canada.
While we continue to experience online growth and receive industry recognition with our digital products, we recognize that there remain large user segments that continue to primarily associate our brand with our print product, as opposed to our diversity of business activities. To address this misconception, we’ll be making investments in targeted communications with the end goal of conveying that we are no longer an exclusively print business. We will communicate our relevance in today’s digital marketplace and demonstrate how we meet the digital marketing needs of local businesses. Moreover, we also need to continue to grow our brand equity by developing specific strategies to engage audiences who are not familiar with the brand and have no preconceptions about it, such as the millennial generation.
We’re improving sales efficiencies and support and closing service gaps. As a company we need to be keeping pace with innovations in information processing and technology in the marketplace so we can help our clients do the same.René Poirier Chief Information Officer
With this goal of addressing our relevancy in today’s marketplace, last year we introduced Meet the New Neighbourhood, a new advertising campaign, complemented by an updated brand positioning more aligned with our actual business mission and impact. Catchphrases aside, the reality is that the nature of business interactions have changed. We’re looking at an economy equally driven by clicks and swipes as much as by a handshake in which the opportunity exists for businesses to reinvent themselves online and tap into new or previously unreachable customer bases. This is the new neighbourhood and this is where Yellow Media fits in. In many ways, our digital transformation and the ability of Canada’s small and medium-sized businesses to remain competitive in an increasingly crowded and more fragmented digital marketplace go hand-in-hand. This new brand positioning is not only a reflection of the essence of our business, but more accurately reflects who we have become as well.
As the pace of our transformation accelerates, product fulfillment and customer experience are also challenges we continue to work diligently to address and improve. Although we have seen strong advertiser adoption of our new digital products, we need to be prepared to deliver superior end-to-end fulfillment and customer service. Over the past year, we’ve worked hard to fix and replace legacy systems which failed to offer us the flexibility needed to manage client expectations. We also want to continue reducing purchase fulfillment waiting periods, close information gaps in advertiser understanding of the impact of digital solutions, and ultimately increase return on investment for our clients.
As part of our customer experience commitment, we began empowering our advertisers through new tools such as Yellow Pages™ Analytics. This performance reporting tool allows our clients to track and monitor the effectiveness of their marketing campaigns. The self-serve model gives greater freedom and involvement to our clients as well as tangible proof of their return on investment. It also serves to demystify the approach to properly tracking their marketing activities and really helps them zero in on how each dollar spent is driving value to their business. On the purely operational front, we improved the experience of our clients by reorganizing and significantly investing in our customer service operations, improving incoming call service levels, and diminishing incoming call abandon rates.
Our sales force remains one of our key strengths. We’re investing in onboarding the right talent and expertise in sales, information technology and digital media to ensure we retain the competitive advantages unique to our business.Lise Lavoie Chief Talent Officer
User engagement or inspiring adoption and loyalty to our products through better user experiences is also part of our ongoing plan. Our flagship website YellowPages.ca as well as the mobile app will be undergoing upgrades and receiving new functionalities all with the end goal of providing rich information and a memorable experience. These platforms will shift from pure search functionality to a neighbourhood discovery experience with greater social interaction and information sharing. Internally, we will continue upgrading our operation and fulfillment systems making us faster, stronger and nimbler. We’re introducing new software and collaboration tools to streamline operations and increase efficiencies and are making parallel investments in employee training as we transition between tools and systems.
In this vein, recruiting the right people with the right expertise was key in advancing our business transformation last year and remains so this year as well. As a result of our recapitalization plan, a new Board of Directors was appointed, bringing expertise in digital media and communications, corporate development, capital markets and corporate finance. We also reorganized our IT functions and created the positions of Chief Technology Officer and redefined the function of the Chief Information Officer to foster innovation at every level of our company and ensure our internal systems transform as quickly as our business activities and operations. We also streamlined our office operations, creating specialized hubs of expertise at our different locations across North America and created over 300 new positions specializing in digital media and technology in 2012.
Last, but definitely not least, focusing on our stakeholders remains a focus area for us this year. We enhanced our capital structure through a recapitalization plan which reduced our debt by $1.5 billion with debt first maturing in 2018. This provides us with the financial flexibility necessary to advance our transformation and deliver value to our shareholders. Moving forward, we’re focused on making the necessary investments to promote growth, alongside continued debt repayment.
We recognize that over the last year we’ve dealt with situations which have forced us to change directions from what was previously mapped out and this has impacted all of us and shaken your trust in this company. We do not take that lightly and we will be working diligently to earn that trust and grow this company’s long-term value for all our respective stakeholders.
The Yellow Media Management Team