Two of the major US yellow pages publishers and local search providers, DexOne and SuperMedia are merging in an all-stock transaction. After the merger closes, pending a shareholder vote, the combined entity will have 700,000 advertisers, 3,100 salespeople and revenues of roughly $3 billion.
The merger was partly dictated by the need to accelerate the transition from traditional print directory advertising to digital, which is growing but still lags print revenue for both companies. The two entities also anticipate significant cost savings through the combination of their operations.
Assuming the merger is approved by shareholders there will be three large yellow pages entities in the US: YP (the former AT&T directory unit), Yellowbook (owned by Yell/hibu in the UK) and the merged Dex-SuperMedia. There are a number of independent regional and local publishers as well.
Historically print yellow pages were the primary advertising vehicle for small businesses in the US and around the world. They were also the primary way that consumers found local business information. And though print directories are still widely used — more than many people believe — the internet has become the primary source of information about local businesses.
Both SuperMedia and DexOne currently operate multiple domains, among them: Superpages (SuperMedia), Localsearch.com (SuperMedia), DexKnows (DexOne). Both companies also have mobile apps. Figuring out how to manage these properties and how to best deploy them will be one of several challenges facing newco.
While internet yellow pages traffic has grown over the past decade more recently growth rates have started to flatten as Google, Yelp and others have come to dominate local search. Yellow pages companies have sought to hold on to local advertisers by becoming ad networks, “agencies” and technology providers to small businesses. They have also diversified their traffic sources and formed distribution partnerships with Google, CityGrid and many others, including xAd in mobile.
While consumer attention and usage may be consolidating around a few major brands, the local market has become increasingly complex and fragmented for small business marketers. The strategy being employed by SuperMedia and Dex is to help those businesses manage their marketing across channels, including social and mobile.
The merger is expected to be approved and close in Q4 of this year.
Postscript: I had originally listed Business.com as one of DexOne’s properties. I had forgotten that the publisher sold it in February 2011. Business.com was originally acquired by DexOne predecessor RH Donnelley for $350 million in 2007.