RHD: Building ‘Service-Centric Models’ Focused on Local Business Needs

Few companies have seen the ups and downs of the media industry like R.H. Donnelley. BIA/Kelsey President Neal Polachek asked Directonal Media Strategies Day 2 keynote Speaker Dave Swanson, RHD chairman and CEO, to speak about what’s happened and what’s ahead for his company and the industry. The audience was treated to an honest, passionate and extremely eloquent perspective.

“We are in an industry where the definition of good is doing less bad,” Swanson said. His view is the good news today is that because of how far and fast the industry has fallen, the opportunity is now greater for everyone in the directional media business.

RHD was one of the first media companies to tell analysts in their quarterly reports that the economy was in trouble. There was scoffing at the time, but RHD clearly had identified an unfortunate leading economic indicator. To make his point about the current economy, Swanson referenced a Goldman Sachs report that he said showed the average sales of S&P 500 companies were down 16 percent in the second quarter. That was on top of a 14 percent drop in Q1, according to Swanson.

There were three major bubbles that contributed to our economic woes: the well-known housing bubble, the lesser-known advertising bubble and the all important credit bubble. Nevertheless, “I don’t regret choosing the growth strategy we pursued,” said Swanson, adding that he really didn’t have an alternative if he wanted RHD to survive.

For media companies, it is the downturn of the economy that overshadows any other changes. Besides the economy, secular changes in shopping habits, the growth of print competitors (according to Swanson, the number of books being distributed has doubled) and overall media competition, including a new set of online companies, have combined to hurt the Yellow Pages industry. Every one of these competitors promises to give businesses better results at a significantly lower price. “It’s a darn good thing that our products work as well as they do,” Swanson said.

At that point, he looked at the audience and admitted that as he reread his remarks, he sounded like he was whining, but the fault lies within as well. “The fact is that technology and our execution has been a huge disruptor for us,” he said. Systems conversions are painful both for employees and for customers. To meet competition, we have created a shiny new set of digital offerings where we too often overpromised and underdelivered.

Importantly, Swanson said, “for RHD, the worst is behind us. Our systems are burned in; our cultures are melding together. We are learning how to better execute print, online and local search products.” He said that Yellow Pages will never dominate directional media as we have in the past and that RHD is investing money in those myriad places where consumers begin their search. He reminded the audience that there is a big difference between good and not so good traffic, so RHD is investing in technology that shows how successful leads are.

Finally, RHD is focusing on “how we can help merchants. We are building service-centric models focused on the needs of local businesses. We want to be the No. 1 provider of directional marketing services.” He admitted that we’re in a transition right now, but the model works because there are no incremental sales costs because of the channel and the relationships. RHD is looking at micro strategies for growth and focusing on geo-verticals (i.e., lawyers in Denver).

Swanson was upbeat despite the fact that “main street is not participating in Wall Street’s rally yet.” This is a position that BIA/Kelsey has stated several times in the past. The recession has a way to go before we start to see job, housing, advertising and credit growth. Swanson has been on a wild ride since he became CEO of RHD in 2002, but his look at what happened was honest and his perspective of what’s ahead sounded reasonable and doable.