In a world of free classifieds, newspapers are struggling to find a differentiating factor that local businesses value enough to pay for. Yext, a startup based in New York City, may have found a way to overcome that threshold by developing an advertising system that enables local businesses to pay only for calls that result in business.
Companies like Yodle and Superpages have developed pay-per-call solutions that have had some success driving revenue, but both of them face the particular challenge of trying to defend their pricing models against complaints of junk calls. Local business owners struggle with measuring their return-on-investment as well as understanding the technology behind the products.
Yext attacks the problems by creating a straightforward dashboard that 
emulates an email inbox. When the customer goes to their inbox, they see a list of calls they received and can immediately see the person from whom the call originated and the actions that were associated with that call (appointment set, engine diagnostic scheduled, etc.). It's straightforward and easy to understand. In addition, this inbox filters out "junk" calls similar to spam. Those calls include telemarketers and wrong numbers but may also contain calls that did not lead to a close, immediately demonstrating that the customer is paying only for those calls that led to business. The video at the bottom of this page provides an explanation as to how Yext does this as well as a live demo of the product in action.
emulates an email inbox. When the customer goes to their inbox, they see a list of calls they received and can immediately see the person from whom the call originated and the actions that were associated with that call (appointment set, engine diagnostic scheduled, etc.). It's straightforward and easy to understand. In addition, this inbox filters out "junk" calls similar to spam. Those calls include telemarketers and wrong numbers but may also contain calls that did not lead to a close, immediately demonstrating that the customer is paying only for those calls that led to business. The video at the bottom of this page provides an explanation as to how Yext does this as well as a live demo of the product in action.What I think makes Yext such a compelling partner to newspapers and other local media companies is that their model appears to give it the scale necessary to open up partnerships. While companies like Yodle are having great success, their sales process requires a bit of prospect education and their implementation requires more work than Yext. All of this puts pressures on margins, which makes partnership with a traditional media company a challenge.
Yext takes a lot of that work out of the equation. The pitch is a straightforward, "You pay us when you get a call that results in business. You get an audio file as well as a text transcription of the call to double-check us and ensure that you received a quality lead." The advertiser doesn't have to care how it happened, just that they got a qualified lead. In addition, the implementation of a campaign is far easier than Yodle's because there is no microsite creation for the client.
Yext just landed $25 million in additional funding and reportedly has revenues exceeding $20 million. They are currently in thirteen local business categories (auto repair, chiropractic, health clubs, vets, etc.) and see the opportunity to broaden to the full 2,300 yellow pages categories that are out there.
Where newspapers can benefit is Yext's need to scale the business. New funding creates new pressures for growth and scale. Newspaper and local media companies have a sales force that can grasp this concept and market it effectively to their existing customers. The value proposition is far greater than a Craigs List ad, and the scalability of the model would enable newspapers to take a significant enough size revenue share.
The true beauty of this kind of partnership is that these sales have the potential to become more of an annuity than traditional classifieds. Because of the self-recognized ROI, there is less need for a difficult renewal pitch where the salesperson has to convince the advertiser of the continued value. While this does assume that the client perceives the value, if you trust the data in this presentation (fast forward to 6:58 in the video below), Yext is generating 500,000 calls for 20,000 advertisers. That would be 25 calls per advertiser per month... more than enough value to convince a customer to continue to spend on a marketing initiative.
Howard Morgan, of First Round Capital, spoke at a RoseTech Ventures "free lunch Friday" in July about local marketing and its challenges. During his session, he mentioned that a local advertisers had about a $250 cost-per-acquisition, which made it difficult to be profitable. (Morgan had invested in some yellow-page dot-com companies back in the 90's and early 2000's, giving him tremendous insight into this business.) At 25 calls per advertiser per month, it's pretty easy to figure out what the cost-per-lead pricing needs to be in order for a partnership to work.
Some smart newspaper executive is going to figure out how to do a deal with these guys...
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Comments
Yext
Prescott,
Great post and appreciate the endorsement. We are working hard to create the best local advertising experience and I agree newspapers can benefit as the shift to digital continues. Would be happy to talk sometime.
Ross Weinstein
My experiences with Yext.
Ross,
As a new small business owner, I really like what Yext has to offer and find the interface really innovative and think it will grow. I am happy to say that I have had several calls come from it so far and hope to have hundreds more in the future.
That being said, I have had a few issues with the service so far. You can read about them over at this other blog-
http://www.localseoguide.com/yext-are-half-your-phone-leads-junk
Thanks for your time.
www.PitstopAppliance.com
Cost of Sales
Prescott,
IMO, there are two key milestones on the path to local media nirvana.
The first is reducing the cost of sale. Howard Morgan nails it above. Still costs too much to bring all local advertisers online relative to their individual spend. That's where tools like Yext (and they look great) should help.
Second is a lack of quality local inventory that converts for advertisers. Some newspapers are doing a good job extending the reach for their advertisers by selling Yahoo inventory and that is a great start. But imagine what happens when more than 10% of local advertising is spent online.....
-- Mark Josephson
Cost of Sale has Turned into Predatory Selling
The cost of the local sale is so high that YPs and the like have reverted to a predatory method of selling where they are qualifying leads purely around available budget, regardless of whether the product is right for that advertiser. So when the ad spend doesn't turn revenue around, that company is no where to be found because the relationship was purely based around the dollar. Short term profitable, but not a sustainable model.
They are basically just skimming what they can most quickly off that top 10% that is spending money online. Yext has a great model and should experience some great success, but the guys showing up just to spend SMB's budgets will get left behind when that tipping point occurs.
- Jamie