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Buggy-whips revisited

16 June 2015

The only constant in the hi-tech world is change.

You don't have to think back far to remember the days when one of the most lucrative earners for Telecom was its Yellow Pages division.

If you ran any sort of business in NZ, you really had no option but to purchase a listing in the Yellow Pages directory if you wanted to be found by potential customers. It was a captive market and Telecom knew it. In the pre-internet era, this business directory raked in huge revenues for the telco and it really was the jewel in its crown.

I recall writing a story back in 1997 in which I reported the impending launch of an online version of The Yellow Pages -- wow, that was almost 18 years ago and pretty soon, the online version because so valuable that Telecom sought the arrest of anyone who infringed its trademark on the Net and as late as 2001, they were still at it.

I seem to recall predicting the demise of printed business directories such as the Yellow Pages on a number of occasions in the past and Telecom were obviously paying attention because they flicked this arm of their business off at exactly the right time -- and for a phenomenal amount of money.

It was very apparent by the early part of this century that search engines were going to be the ultimate replacement for business directories - be they printed or online.

Indeed, my observations and predictions have come to pass and the formerly omnipotent Yellow Pages found itself in dire financial trouble.

The new owners found themselves trying to flog buggy-whips in the 21st century -- it was never going to be a successful business model.

Well since then, things have gotten progressively worse for "Yellow" and now they owe almost half a billion dollars to creditors.

Wow... they've gone from being the goose that laid the golden egg to beyond insolvent in just over a decade. That's how fast things change when technology is involved.

In a last-ditch attempt to remain afloat, some of Yellow's creditors have opted to swap some of the debt for equity in the company.

My first thoughts were "what the?" Why would anyone want shares in a company which has a completely buggered business model and is so deeply in debt?

Then I realised that without this move, the creditors concerned would likely get virtually nothing. Given that most of the value in this company was its trademark (which is why Telecom worked so actively to protect it in the past) and now that this trademark is near-worthless, there are probably very few assets that could be sold to repay that debt.

It's "take the shares or take nothing".

The problem that Yellow faces is that it doesn't matter what colour you paint it and no matter how fancy the packaging -- people just have no need for buggy-whips these days.

I suspect that the next story we see about Yellow will be reports that it is being wound up.

You guys should have been reading Aardvark so you didn't waste your money on that lemon :-)

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