Yellow Pages Still Valued More Than Yelp

http://blogs.wsj.com/deals/2012/04/09/yellow-pages-still-valued-more-than-yelp/

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• More Text By David Benoit

The phone book still has some value, and not just as a booster seat.

Associated Press AT&T reached a deal to sell a majority stake in Yellow Pages to Cerberus Capital Management, a deal that values the business at about $1.42 billion in equity.

The business will form a new entity, creatively titled YP Holdings LLC, with Cerberus getting 53% of the unit for $750 million in cash. AT&T is also getting a $200 million note and the rest of the new entity.

The price for Yellow Pages means it is valued more than Yelp, one of the internet sites heralded as a Yellow Pages killer. With Yelp shares trading down 4.2% to $23.16 in recent trading, the Internet review company has a market capitalization of just $1.39 billion. Another Internet listings star, Angie’s List, is also valued well below the phone book, with a market cap of about $870 million.

In fact, even in the face of much apocalyptic talk about phone books being left to disintegrate in the weather instead of being picked up, the good old fashioned Yellow Pages wallops the internet star in terms of sales.

Yellow Pages brought in $3.3 billion in revenue last year compared to just $83.3 million that Yelp made.

But there is a reason Yelp commands the same market value, even with just a tiny fraction of the revenue of Yellow Pages: growth. The phone book isn’t getting any thicker but Yelp is soaring.

Since 2009, AT&T’s advertising unit, which houses Yellow Pages and will form the new entity, saw its revenue tumble nearly 32%, while Yelp’s has more than tripled.

In 2011 alone, Yelp revenue soared 75% while AT&T’s Yellow Pages’ dropped 17%.

The gap will still take a long time to close but in three years, if those rates stay stable, Yelp will be much closer to Yellow Pages in revenues. And by then Yelp’s market capitalization is likely to be much bigger too.