Stock Analyst Backs YPG

Just saw a note from media analyst Ben Mogil of Westwind Partners that takes issue with the conclusions of a recent report from Veritas suggesting that Yellow Pages Group’s core print directory business is imploding, citing a sharp reduction in page counts in key markets.

Here is my post from last week regarding the hit YPG has taken as a result of the Veritas report.

In his note, Mogil writes that the Veritas analysis ignores YPG’s pricing power and the tradeoff between high ARPA and having a growing number of accounts. He points out that YPG has deliberately sought to cull smaller accounts in favor of larger, more profitable accounts.

We can argue whether it is wise long term to cull small accounts that could become larger down the road, especially in a market that is getting more competitive. But YPG is not alone in this approach. There is also a debate over how aggressively a publisher should use its pricing power, since there is always risk of backlash, again especially in the presence of competition. Nevertheless, it seems the report from Veritas seeks to penalize YPG for actions that are consistent with its strategy.

It is worth noting some of Westwind’s disclosures related to YPG. The company has provided investment banking services for YPG and co-managed public offerings of YPG securities, all within the past 12 months. That said, Mogil makes some good points.