FOR IMMEDIATE RELEASE
New York, NY, September 2001

According to a report recently released by yellow pages industry analyst The Kelsey Group, independent publishers' share of total yellow pages revenues will grow to 35% by 2006, more than tripling current market share. The trend supporting this explosive growth is already underway, with The Kelsey Group forecasting that independent publishers will grow their revenues by 17.5% in 2001 and another 20% in 2002. To some extent, that growth will come "at the expense of incumbent utility affiliated publishers," the report states, with the remaining share growth coming from new market launches and product development. As a group, independent publishers are optimistic about their prospects. During its research, Kelsey was told that company executives expected future growth to be the same as this year or better. This upbeat view must certainly be weighed in relation to other market drivers, but nevertheless remains valid, Kelsey analysts Charles Laughlin and Neal Polachek say. "While we believe the full impact of the economy has not yet been priced into the individual publisher forecast[s], a number of major independents are entering their second, third or even fourth canvass in some major markets, which should accelerate growth in all but a severely weakened economy," the report concluded. Fueling the expansion of independent publishing are several factors, perhaps the most significant of which has been the lowering and stabilization of listings costs following the Telecom Reform Act of 1996 and subsequent FCC rulings on Section 222e of that act. Kelsey analysts confirmed that as independent costs have dropped, they have become much more attractive to investors. This has allowed publishers to launch into major metropolitan markets, as well as expand through acquisitions and new products, while keeping their ad rates below those of the incumbent telco publishers. Lower rates, in turn, have attracted advertising from many smaller businesses that simply could not afford to buy presence in the local telco book. Additionally, incumbent telcos face "considerable pressure to protect margins through rate increases and cost cutting, which in a competitive environment can accelerate share loss," the Kelsey report says. And their independent competition, overall, has gotten smarter and more professional as independent publishers consolidate into larger corporate entities. Looking forward, Laughlin and Polachek expect to see more balance between usage of independent books and the revenue they generate in several competitive markets. For example, in a market where an independent may have 40% of yellow pages usage, it may currently demand only 20% of revenues. Those numbers will close, with revenue reaching a level comparable to usage, the two analysts claim. Additionally, they foresee more penetration of major markets by independents. Not only will the telcos face new books in such communities, but scoping by the new competitors may eventually match that of the incumbents. The big stumbling block for independent publishers as a group remains the national channel, Laughlin and Polachek say. "While national advertising accounts for 16% of total yellow pages advertising, independent publishers typically derive between 8% and 10% of their revenues from national." While most independent publishers have improved their share of national modestly in the last two years, the existing commission structure favors volume of business sent to a single publisher-typically the incumbent telco. "The current compensation structure suggests national may not be a growth area for independents in the near term until there is a significant change in how national yellow pages advertising is sold." Nevertheless, independent publishers have "sizable growth opportunities" the Kelsey analysts say. "Overall, TKG is bullish on the independent yellow pages channel. We see significant growth driven by new market entry, organic growth driven by growing 'ubiquity' in key markets and consolidation into the hands of seasoned managers who can leverage systems, production, marketing and sales assets.