You Will NEVER Replace This

Elon Musk is probably best-known as the founder of Tesla. When Elon isn’t re-inventing the automobile, he’s running SpaceX, a company that builds and launches rockets and spacecraft. To keep busy, he also runs The Boring Company that plans to tunnel highways under major cities to relieve traffic congestion (a company that also generated a reported $10 million selling flamethrowers to consumers – yes you read that correctly!). On the more esoteric end of the scale, he also founded Neuralink, a company focused on developing brain-computer interfaces. Love him or hate him, you can’t deny he’s brilliantly innovative.

Many people know that Elon Musk got rich as one of the founders of PayPal. Far fewer know that his initial business success came as the creator of an online yellow pages company called Zip2 way back in 1996. Seeking to partner with print yellow publishers, he and his brother visited a top executive at the largest yellow pages publisher in Canada. After pitching their vision, the executive responded by picking up one of his thickest directories off his desk, throwing it at them and saying, “You ever think you’re going to replace this?”

 Well, 25 years later, we know the answer to that one. Not only did the Internet replace the print yellow pages business, it largely destroyed the legacy yellow pages industry as well. Not surprisingly, the Musk brothers did well when Zip2 was ultimately sold for $300 million.

 But what caused the death of the huge and fabulously profitable yellow pages industry? At the time, a lot of people (including me) thought the Internet would herald a new era of growth for the industry. The answer, in large part, was hubris. 

Almost without exception, the big yellow pages publishers decided the fastest path to online riches was to take their regional products and go national. Overnight, these companies bought national business databases to roll out national yellow pages products. In doing so, they moved from having deep information on all the companies in their region, to having nothing more than name, address and telephone for all companies nationally. They vastly degraded the information value of their products in the belief that advertisers would flock to their doors. That’s critically important, because with yellow pages and buying guides, the advertising is the content.

That leads to the second miscalculation: these publishers all had regional rather than national salesforces. Good as these salespeople were, these publishers didn’t have the capability to sell nationally. This led to the third big miscalculation: the publishers all had regional brands and couldn’t come to grips with the fact that nobody had heard of them outside their regions. Without strong national brands, prospective advertisers yawned at these new national products that seemingly emerged out of nowhere.

Of course, the other big shift is that search engines got better. While still imperfect, in large part you now can find a plumber in your area with a simple search. And businesses flock to advertise on the search engines because with pay-per-click pricing, their advertising spend is now (at least in theory) more efficient.

The key take-away lessons for data publishers? First, a database that is a mile wide and an inch deep isn’t an effective product strategy these days. Far better to know a lot about a specific group than to know a little about everyone. Second, advertising-driven online data businesses are tougher than ever to pull off. Third, when you start believing your own press releases, things never end well. Fourth, when Elon Musk calls, listen before you throw something!

Buying Guides That Do Stuff

It’s been very interesting to watch the transition of buying guides from print to online. Print buying guides were a pretty good business, although in fact few of them were very good products. That’s because most buying guides were what I call shallow information products: they would typically list a product and the names and addresses of companies that (hopefully) made or sold the product. After that, users were on their own. This stripped-down format was in part practical, because even this limited information was hard to obtain. It was in part by design, because it encouraged companies to buy advertising next to their listings to provide additional information. There’s no room on the web for shallow information products anymore. Search engines have gotten good enough that you can find at least a few manufacturers or sellers of just about anything with very little effort. And company websites now typically contain a wealth of product information, in part because it is so cheap and efficient to do so. Overall, this leaves little room for buying guides to add value, at least in their traditional format.

So is the buying guide model dead? If you are talking about the traditional shallow information model, the answer is yes (something that the big yellow page publishers, incredibly, have still not figured out). But what is emerging in its place are a number of exciting new products that mix and match such features as:

• User ratings and reviews (and some now validate users and even confirm that they have purchased the product they are reviewing)
• Links to third-party professional reviews
• Downloadable CAD drawings
• Photo portfolios showing product applications and/or the product in use
• Strong parametric search
• Side-by-side comparison of selected products
• Guided search where instead of traditional searches, users answer a questionnaire instead
• Shared online areas where users can post products for review by co-workers
• Ability to request product samples from the manufacturer
• Integrated ordering capabilities
• Warehousing and shipping of product on behalf of manufacturers
• Product specification data, warranty data, installation instructions, manuals
• Real-time inventory information
• Real-time pricing information

In short, the list is long. And what results is a true destination purchasing research site and, increasingly, a central marketplace. Find exactly what you need and order it. That’s been the holy grail of buying guides for decades, and it’s finally becoming a reality.

The other piece of the puzzle is advertising. Because publishers are now building these true destination sites, they can also develop substantial traffic simply because they are offering utility and value. And advertisers respect these highly qualified or often quite large audiences because they are truly “in the market,” and what advertiser doesn’t want visibility when the buying decision is being made. It is, as we like to say, “data that does stuff.”

So while the approach is different, what we see with buying guides is exactly the same as what we see with other forms of data, and exemplifies infocommerce: creating a high value proposition with better, deeper data and tools to act on it.