Books Proliferate : Firms Strike Gold in the Yellow Pages

Terry Johnson was ready to take on rusted valves and clogged pipes when he went into the plumbing business, but he was not prepared for a problem that would drain his earnings like water from a leaky faucet.

His gripe is an explosion in the number of Yellow Pages directories, the principal means for his and countless other small companies to reach their customers. Last year, Johnson’s Garden Grove, Calif., company shelled out $190,000 to advertise in 27 Orange County directories--paying a staggering $1 for every $5 it took in.

“You can’t turn down this advertising,” Johnson complains. “To the consumer, a big fat ad means you’re important and reliable, even if your company’s just one guy in a lean-to shack.” A small ad “means you’re nobody.”

Proliferating Directories

The proliferation of Yellow Pages directories has exasperated advertisers, confused consumers and delighted an emerging class of publisher-entrepreneurs. New directories are piling up at a rate of more than 400 a year, to a Himalayan total of nearly 7,000, making the $5-billion-a-year Yellow Pages business the fastest-growing advertising medium.

Ad rates are rising by more than 12% a year in many parts of the country, seemingly defying the economic law that competition drives down prices.

Perhaps not surprisingly, no region has attracted more competition than fast-growing Southern California. There may be as many as 200 directories published for the region, and industry officials say portions of the San Fernando Valley and the city of Orange are each covered by nine separate directories.

Bewildered advertisers gripe that they cannot trust all Yellow Pages companies to print their ads accurately, or to distribute their books as they promise. One San Francisco publisher has been a target of lawsuits and complaints for Yellow Pages directories it printed, oddly enough, under contract to several of California’s Better Business Bureaus.

“In the long run, I suppose the spread of new books will produce directories that do a better job for consumers and advertisers,” says Terry Ford, West Coast vice president of Chicago-based Communications Planning Corp., an agency that sells Yellow Pages advertising. “Unfortunately, in the short term, it’s meant a lot of confusion, frustration and extra expense.”

‘Neighborhood’ Format

The number of directories has been edging up for more than a decade, as independent telephone companies like GTE Corp. experimented with limited-coverage “neighborhood” formats and small publishers put out directories to address the common interests of such diverse groups as women, Iranians, Asians and homosexuals.

For years, such activities aroused little reaction from American Telephone & Telegraph, which seemed smug in the knowledge that its near monopoly in the telephone business gave it a 95% share of the Yellow Pages business. But the situation changed rapidly in January, 1984, when the government forced the breakup of AT&T; and barred it from the local Yellow Pages business for seven years.

The company’s Yellow Pages were turned over to hot-eyed marketing officials at the seven new regional holding companies, who knew that the directories had long been a lucrative part of the telephone business. While providing only about 10% of phone company revenues, Yellow Pages operations often had profit margins of 20%, compared to an average of about 5% for all publishing businesses, Wall Street analysts note.

The books are so successful, analysts say, because of low production costs and consumers’ reliance on Yellow Pages, which have developed from the time of Alexander Graham Bell’s first phone call into a uniquely American way of doing business. Annual Yellow Pages ad spending has nearly tripled over the past 10 years and now accounts for nearly 6% of all ad spending, says Communications Trends, a Larchmont, N.Y., research firm.

The books are most important for companies that offer services only occasionally required by consumers--rental car agencies, exterminators, TV repair people and plumbers, to name a few. Terry Johnson, for example, says 95% of the calls to his Dial One-A.A. Johnson plumbing, heating and air conditioning firm result from his Yellow Pages advertising.

Marketing Initiatives

Since divestiture, the regional telephone companies have moved quickly on marketing initiatives that have included a smorgasbord of specialty directories and forays onto the traditional turf of competing phone companies.

“Most of us are looking far and wide for opportunities,” said Leo Egan, president of Ameritech Publishing, a unit of the telephone holding company that serves the Great Lakes region. “The limits are only the limits of our competence.”

Nynex Corp., for example, the telephone holding company that serves New York, has thrust into the northern New Jersey hinterland of Bell Atlantic with its Spanish Yellow Pages directories. The goal is to corner the entire New York area’s Latino market, which consists of 2.4 million persons who spend $5.5 billion a year.

(Following the lead of Nynex and others, Pacific Bell last March distributed three Spanish-language directories to 1.5 million Los Angeles County residents with Spanish surnames.)

Southwestern Bell has plunged into the California market with the recent purchase of a San Diego directory publisher; Bell South has also signaled its interest in the hotly contested California market.

Specialty Directories

Among the new specialty directories are books for government purchasing agents, interior decorators, health-care officials, architects and the travel industry.

Perhaps the most ambitious of the specialty books is Southwestern Bell’s Silver Pages, which will list special offers and discounts for the over-60 population in 110 U.S. markets. To gain credibility, the St. Louis-based phone company has enlisted support from scores of government agencies for the aging and will include in each directory a section listing information on programs for older persons.

In the Los Angeles area, the company plans to deliver directories to 800,000 older persons, starting in October.

To bolster these plans, the regional telephone companies have launched advertising campaigns trumpeting their directories. Pacific Bell, for example, is now pitching its “real book,” as Bell South touts “the real Yellow Pages.”

“We’ve got to make clear who we are in this atmosphere of induced confusion,” says Doug Cambern, Pacific Bell’s area vice president in Los Angeles.

The inducers of confusion, according to the phone companies, are the growing number of independent Yellow Pages publishers. These 180-odd non-telephone company publishers have only 10% of the Yellow Pages business between them, but that has not dimmed their enthusiasm.

AT&T; Slip-up

They have benefited from one AT&T; slip-up--the telephone giant never got a trademark on the “walking fingers” logo, which can now be used by any publisher.

The independents have sought to draw advertisers and consumers by offering deep discounts and packing their directories with such extras as seating charts for local stadiums and concert halls, ZIP code information and bus and street maps.

One independent firm, New York Yellow Pages Inc., has tried to increase the appeal of its pocket-size Manhattan neighborhood guides with a “tape library” consumers can call to hear taped messages about advertisers’ sales, hours and products. Users of the directories can call another number to reach an employee who dispenses advice on how to find merchandise.

The attraction of the business is illustrated by the recent acquisition binge of Reuben H. Donnelley Corp., a Chicago-based subsidiary of the big Dun & Bradstreet publishing house. After 99 years of publishing directories under contract to the telephone companies, Donnelley has in the last eight months opened a new unit that has purchased six publishing firms and launched two others to publish Yellow Pages under the Donnelley name.

Among the acquisitions was National Directory Co. of Orange, Calif., bought last November for what industry sources say was $25 million.

Donnelley is also among the companies that are improvising other ways of delivering Yellow Pages information. In Cincinnati, consumers can dial up the company’s “Talking Yellow Pages” service for no charge to have a Donnelley employee read them several listings from the local directory.

‘Electronic Yellow Pages’

For several years, industry officials have predicted that millions of U.S. consumers would soon use home computers to pore over Yellow Pages listings in computer data banks called “electronic Yellow Pages.” While consumers have so far shown only a limited taste for such services, one Omaha, Neb., firm, American Business Lists, offers “Instant Yellow Pages,” with 6 million listings from an assortment of directories.

The Yellow Pages business is also attracting some who have little experience but lots of entrepreneurial ardor. Three years ago, an unemployed race car promoter who had dabbled in publishing started a Yellow Pages operation in Lane County, Oregon. In three years, Rod Ormsby has built International Publishing into a 35-employee, four-directory company.

The firm obtains information for listings from Pacific Northwest Bell, which charges 10 cents for each in a computer printout. The books’ principal appeal may be their rates, which are nearly 80% below those of its larger, telephone-company competitor.

“I’ve come a long way from being flat broke three years ago,” Ormsby says. “You can do a lot in this business with dedication and hustle.”

Advertisers complain that some publishers offer little more than hustle.

To win advertisers’ dollars, most publishers dish up a potpourri of figures on circulation, directory usage and demographics to demonstrate the value of their directories. But few advertisers can afford to verify such figures, and there have long been charges that publishers overstate the number of copies they print or are lax in distributing them.

Advertiser complaints have recently been directed at a San Francisco publisher called the Better Book Inc., which puts out 29 books under contracts with Better Business Bureaus across the country. The directories carry only listings of bureau members.

Publisher Pays Penalties

Last January, the publisher paid $12,500 in civil penalties to settle a lawsuit brought by the Kern County district attorney alleging that the company had exaggerated how widely the books were distributed. An independent survey found that the books had been delivered to fewer than half the addresses promised, said Stephen Gildner, a prosecutor in the county’s consumer fraud division.

In a separate suit that was recently settled out of court, the county Better Business Bureau sued its own contractor on behalf of three complaining advertisers. “I was burned and burned badly,” said one aggrieved advertiser, Jim Dale of Coffee Brewing Service Co. in Bakersfield.

The company denies wrongdoing in both cases.

Advertisers also wonder how often the books, particularly those of the smaller, independent publishers, are used in areas with multiple directories.

“How many people will thumb through a couple of books for a plumber?” asks Roberto Velazquez, research analyst with TMP Inc., a Yellow Pages ad agency in New York.

Often, consumers are best served by sticking to the basic telephone company directories, which usually hold the most exhaustive Yellow Pages listings, many ad agency officials say. But they say that some independent books improve on the telephone firms’ directories, as in the case of neighborhood directories that cover the geographic area most often used by consumers for shopping.

Saddleback Shoppers

For example, a GTE neighborhood directory published for the Saddleback region of south Orange County has caught on with advertisers and consumers because it lists businesses in the most widely visited local shopping malls, noted one ad executive. Competitor Pacific Bell’s south Orange County directory is far fatter, but holds listings from portions of the county that Saddleback residents are less likely to visit, the executive said.

Advertisers and their ad representatives say they continue to be astonished at the upward spiral of Yellow Pages ad rates. They feel captive to the publishers’ demands because so much business is generated by the directories.

“I wouldn’t say it’s been a planned attack on Yellow Pages advertisers, but the rise in prices is more than a little frustrating,” said Sandy Hughes, local marketing director for Budget Rent a Car. In three years, Budget’s Yellow Pages ad costs have doubled, she said.

Bill Grech, president of Fritschman Associates, a Yellow Pages ad agency in Ridgefield, Conn., said that 10 years ago an advertiser could display its trademark in a one-column ad in a metropolitan directory for about $300. Today, such an ad costs an average of about $1,200, he said, and prices reach the stratospheric $2,475 charged by Bell of Pennsylvania for a trademark listing in its Philadelphia business-to-business book.

Advertisers grouse that publishers have also sought to increase revenues by charging for red letters, special coupons and other attention-getters.

Members of one trade organization, the Assn. of National Advertisers, are forming a group that may jointly underwrite research on directory circulation. Their goal is to verify circulation the way that A.C. Nielsen Co. verifies the size of television audiences.

“It would tell us what we get for what we pay,” said Janis Hewlett, advertising manager for Mary Kay Cosmetics in Dallas. “As it stands now, that’s an open question.”

Times staff writer Greg Johnson in San Diego contributed to this story.