Directory publishing appears, at first sight, like an easy trade: find an industry or group of professionals working in a fragmented market and who can be sold a wide range of services; employ a researcher to find the names and details of those involved, compile a directory and watch the copies fly off the shelves.
With prices of many directories at somewhere between &£100 to &£200, it may only take sales of a few hundred copies to cover costs. And, on top of that, you can sell some of the businesses listed enlarged panels or even whole-page ads for their company details so they steal a march on rivals.
Unfortunately, it is not always so simple. “In commercial directories, as many die as are born each year,” says Alan Philipp, managing director of directory publisher AP Information Services (APIS). He publishes directories that are repeated year in and out, but admits that he has backed the odd loser. What at first sight can look likely to be a profitable directory can end up backfiring at launch. And just because one directory has succeeded it does not mean that, by identifying the elements of its success, you can repeat this in other areas.
Trial and error
Philipp publishes a number of successful directories such as the Marketing Manager’s Yearbook and he attributes the popularity of this publication to the fact that there are many businesses and agencies that are looking to sell services to marketers. “We felt that must be the case for the finance sector,” says Philipp. “A lot of people want to sell to the finance department, be it corporate software or training, so we published a finance directors’ yearbook. It was a disaster. We were sure those people needed a mailing list of potential customers, and we tried it twice and did research.” But despite spending some &£100,000 on developing the product, the idea was scrapped after just one edition.
It seems there is an element of trial and error in finding a successful trade directory. The Royal Society for the Prevention of Accidents suggested creating a directory of providers of health and safety equipment, but this also failed even after three editions. The probable reason for failure was because nobody spends much money on health and safety products.
There are many sources for gleaning ideas on publishing a new directory – they may come from an industry trade body, they may come from a publisher or even emerge after a dinner party conversation. But Philipp is sceptical about using market research to ascertain whether the idea is going to be successful. “I go more for good recognition than scientific market research. I know I should use it, but I don’t know to what extent I can depend on it,” he says.
As directory publishing is such a fragmented industry, some would deny that the different parts of it have much in common at all. Yellow Pages and Thomson Directories provide fundamentally different services from the trade directory publishers. But there are some similarities: the fact that it requires a long-term commitment to brands which are built up over many years means that players have to be in it for the long term.
“Directory or database publishing tends to require a long-term view and those that are successful have been consistent in meeting market demands generally over many years,” says Mike Harrington, managing director of Wilmington Business Information, which publishes the Waterlow directories of professional services, the Hollis PR directories and the Caritas directory for fund managers, which lists organisations that may require their services.
He believes the formula for creating successful directories comprises a number of basic principles. First, the publisher has to ensure that the information provided is what he labels “the best the market can afford”. Harrington explains: “You can have a perfect data-set, but that doesn’t mean you can sell it at a profit. There is a cut-off point between what people are prepared to pay for and how much it costs to provide.”
He gives the example of the Retail Entertainment Data brand, which has information on every record release and is used widely in the pop music field by record shops and others. “People perceive the market to be huge, but it is only worth a few million pounds,” says Harrington. Another important thing to remember is to sell the data in as many different forms as possible be it through books, CD-ROMs, or via internet access. And strong branding and taking care over intellectual property rights are also crucial, he says. Keeping the brand values of directories over time is vital. This is achieved largely through ensuring the data is always definitive for its industry, but also by strong advertising every time a new edition is launched.
Harrington believes there are huge opportunities for directory publishers in the area of mobile phone services. Data services, particularly local services, can be sold to mobile phone companies once they get their third-generation services going, and he believes this will provide potentially huge turnover for existing publishers.
For Yell head of external relations Richard Duggleby, the key to success is finding a successful model, then pursuing it relentlessly. “The key thing to all good business success is keeping what you do simple. We set our aim as being the best business information bridge between buyers and sellers,” he says. Since the first Yellow Pages was produced in the UK in 1966 – covering the Brighton area – the company has aimed to create what Duggleby calls a virtuous circle where greater usage leads to more people wanting to advertise and this in turn encourages greater usage. Yellow Pages are now used on over 100 million occasions a month in the UK.
Yellow Pages and Thomson are watched closely by other directory publishers because they are driven by the way they slice up their information. It is not the quality of their data that is in question – they are generally trusted to have the most up-to-date information on local business and services – it is the way they present that data for use by their customers.
One new venture from Thomson is the Webfinder directory, produced in conjunction with internet service provider Freeserve, which provides an A-Z listing of business websites. The company has 173 directories, which cover 85 per cent of the UK population. Some 300,000 copies of the Webfinder directories are being distributed in London. “We are the first from the regular directory world to go into this,” says Thomson’s marketing and strategic development director Kendall Gordon. However, with the existence of so many search engines on the Web, it is debatable whether Web directories will ever really take off. But Thomson has scored a notable success with its Business Search Pro, offering information on businesses.
One would assume that the criterion for judging the quality of a directory would be based on its take up by its target market. But there is a suspicion among some market players that the annual Directory and Database Publishers Association (DPA) Awards tend to reward good ideas rather real successful in the market. As Wilmington’s Harrington says: “The DPA awards are not generally a good guide to success, but rather reward innovation. There have been some fine winners through the years. But there are also quite a few that have rapidly disappeared as they have been over-engineered in terms of their data and packaging, yet have won because of their ‘perceived’ value by the judges. This not a criticism as new ideas, even those that fail, are always interesting.”
Directory publishing is a source of huge profits for those who get it right, and its low barriers to entry have attracted many entrants into the business, making it something of a cottage industry.
While Yellow Pages and Thomson may dominate the market for local directories of businesses and services, trade directories are often published by small operations that produce only two or three books a year. One estimate is that the big publishers – such as Reed, Jane’s, CMP (the former United Business & Media) and Wilmington – account for perhaps half of the directories published each year in the UK, with the rest being produced by small operations.
Depending on how the publishing is organised, a directory can be produced for as little as &£50,000 and the potential profits can be huge if you manage to find an untapped market. For the major publishers, real profitability lies in the way the data is managed and offered to customers. They are always on the look out for new ways of slicing up the data and delivering it to the market.
In many cases it is not so much the data collected that is of prime importance, but how it is made accessible to the people who need it.