|SuperPages.com goes Bankrupt|
Idearc Initiates Voluntary Chapter 11 Proceeding To Implement Debt Restruct
Idearc, Inc. owners of the brand SuperPages.com have initiated their Chapter 11 proceeds as per a press release [ir.idearc.com] on their own website today.
I've always wondered how (and why) there's hardly any data/stats showing trends in online local search. There appears to be a total lack of transparency in sharing data over who is how-big in the local search online world. Even the Internet Yellow Pages Association website hardly shows any statistical information. The last we can hear about market share of search engines/IYP's is of some obscure date in 2006. Post-2006, there's a deafening silence on how Local Search is moving as a trend.
Does Idearc's bankruptcy say anything about the hype and hoopla that surrounds Local Search in SEM world? Is it the beginning of the end of Local Search as a promise for the small businesses?
I think local search is alive and well but Superpages just couldn't compete with big daddy Goog. As for lack of stats its probably because companies like Yellow Pages doesn't want to brag about their 1% and shrinking market share.
Kind of old news...
If you look at the details, the company is making money. The problem is the money they have to pay back to Verizon as part of the spin-off of Idearc as a separate entity.
The cause of Idearc (and many other similar companies) getting into difficulties is the scale of their debt (and the covenent arrangements on said debt) in comparison to their profitability prior to interest payments.
Idearc, and others such as RH Donnelly, will probably emerge stronger from Chapter 11 as they will end up with less debt (in exchange for equity bein common). The spending spree that many companies went on (at inflated prices) hurt them; in other cases is was private equity companies loading under-geared, cash rich companies with debt and then refloating them onto an all to willing stock market.
We are likely to see consolidations and fewer, stronger players emerge from the recession.
Regardless of the woes of individual comapnies, the increase in Local Search revenues continues, and there are lots of successful companies that you don't read about.
It seems they filed bankruptcy simply so Verizon could spin them off as a separate entity and filter their debt through it so that Verizon could get rid of the excess debt.
[edited by: inbound at 11:22 am (utc) on June 28, 2009]
[edit reason] Removed Specifics [/edit]
Yes, the point about Chapter 11 is to allow a company to restructure (which often means 'getting away' with not paying some creditors all or some of the debt owed to them). Unfortunately, this means that many publishers who partnered with SuperPages will find themselves in a position where invoices will be difficult/impossible to collect. I suspect this means that WebmasterWorld members will be affected, and I do symapthise if anyone is, but let's widen the discussion in regards to Chapter 11 (or worldwide equivalents) in general. Of course, discussion as to the health of the Yellow Pages industry is very welcome (but please keep speculation out of the discussion - we can reflect upon official filings though).
Having a client go into bankruptcy/liquidation/recievership/administration is a much bigger danger at the moment (it has always been a risk). Having had experience of this, and being much further down the food chain than banks and other secured lenders, it can be frustrating waiting for everything to resolve itself.
Hopefully we are through the worst of such filings in the economy as a whole, but the shift from print to online (and the much smaller margins that means for the Yellow Pages companies, if they can even keep those advertisers) means that there are still large structural challenges ahead for the owners of many of the big IYP's.
The realy big question remains for the big companies - what's the right offering that will reduce churn (which is hurrendous with small businesses purchasing managed online advertising), keep margins reasonable (so they can turn a profit or at least not fail whilst restructuring) and build a solid base of advertisers which supports an online model (as print will be uneconomical/unacceptable at some point in the future).
A couple of notes on the subject - LifeinAsia was correct - Idearc is/was making money, but was unable to keep up with extremely high debt payments to Verizon. I recently wrote an article on the subject which outlined particulars (no speculation involved).
Larger debt holders stand to gain in the Chapt 11, since they'll end up owning the company. Shareholders stand to lose more, since they'll lose ownership.
What's interesting is to compare the two major YP companies, Idearc and R.H.Donnelley with AT&T yellow pages -- both Idearc and Donnelley had oversized debt loads forcing them into extremis, while AT&T YP has been kept by their corporation and is continuing to show very healthy performance.
My take is that the major print YP companies will overall continue to see weakening of the print product, and must replace those revenues with online rapidly, while whittling down the costs of the print side. Companies failing to do this will lose too much marketshare to remain competitive.
Unfortunately, the higher level of transparency and lower costs of online advertising are making trading print for online NOT a one-to-one trade -- they stand to lose more $ from print while not being able to make up for it in online.