PagesJaunes Takes Huge Online Risk

Pagesjaunes France has announced it will take a dramatic pricing approach in its largest urban markets where it will cut print costs by 20 percent while raising online costs on average by 50 percent. The goal of the pricing program is to move more revenues into online while reducing the revenue growth risk created by declining print usage in its major urban markets. The areas affected by this pricing strategy are Paris and its surrounding areas as well as the Southeast (Provence, Alps, Cote d’Azur).

In addition to the 20 percent print directory price cut, PagesJaunes will offer a multi-heading discounts. Unlike its European peers, PagesJaunes had charged for each heading purchased. These urban regions represent 18 percent of 2007 print revenues, 25 percent of online revenues and 8 percent of total 2007 revenues, which makes this a substantial risk. For now, the remaining middle tier and rural markets will be unaffected by this pricing policy.   PagesJaunes feels justified in making the change in order to preserve its revenue growth projections as well as benchmark its proposed online cost increases with Google.fr’s current pricing. In a comparison between Google and PagesJaunes.fr conducted by the financial group Exane BNP Paribas, Google’s average price per click in the main Yellow Pages categories in France was 0.8 euros and 1.2 euros in Paris, compared with PagesJaunes’ cost-per-call average rate of 0.5 euros. 

One might argue that a call is more valuable than a click when considering PagesJaunes reports 70 percent result in a commercial contact or phone call demonstrating better ROI. Also supporting the decision is the fact that Exane BNP Paribas estimates 90 percent of Pagesjaunes.fr customers do not advertise on Google.fr.  PagesJaunes has also made the decision to charge for each online category. In the past, a company advertising under “used cars” and “car repair” was only charged once. Under the new pricing structure, advertisers will be required to pay extra for multiple online ads from 2008 onward. In order to mitigate some of the increase, volume discounts have been introduced.  

Online has sold relatively well for most publishers due to the lower cost structure and high ROI derived from the calls generated. Changing the pricing structure has the potential to increase cost per call and ultimately ROI. The move to reducing print cost while at the same time increasing online costs by 50 percent assumes savings from one will be reinvested in the other. Kelsey research shows only a portion of print savings is in fact reinvested into online media with a large portion of the savings returned to the business to cover increased operational costs.  

With declining usage and print revenues in its major metropolitan markets, PagesJaunes is clearly looking to the future. As Andrew Day of Truvo has stated, “a Euro invested in online is a longer-term investment compared to print.”  With 2007 online revenues making up 36 percent of overall revenues, PagesJaunes is in a good position to make this grand experiment work. It will be interesting to see if it drives other publishers to take a similar major market approach and concede to the inevitable shift from print to online. The key will be whether these strategies successfully migrate advertisers at most risk while maintaining the stable print advertiser base as long as possible.