Yellowikis: a Web 2.0 Case Study, Part 2 - Industry Disruption and The Competition

Yesterday I wrote about Yellowikis, an open business listings site that has the potential to shake up the Yellow Pages industry. The reason I chose Yellowikis for this case study is because it has a lot of the characteristics of a Web 2.0 business - it was developed by a small team (2 people in this case), it was cheap to build, uses open source infrastructure, relies on word-of-mouth advertising, and perhaps most importantly it will only be successful if it achieves network effects. Which brings me to the number 1 piece of feedback I got from Part 1.

It's fair to say that Yellowikis hasn't yet reached the tipping point. There isn't a lot of content on the site so far and it has few users. Mike Arrington also noted that it doesn’t have tagging and an open API for the data. Mike thinks this will "get the network effect flowing" and I agree. Yellowikis demonstrates the classic dilemma of the current generation of web applications and services - in orderto be successful and/or generate revenue, it needs a lot of people to both contribute content and use it.

There's also a question around the structure of the content. Dick Larkin, who works in the Yellow Pages industry and writes a newsletter called The Yellow Pages Commando, wrote in an email that Yellowikis faces issues "gathering sufficient data that is consistently structured for ease of use by the searchers." 

To find out more about the business environment Yellowikis is challenging, I exchanged emails with Greg Sterling, Program Director of The Kelsey Group - a leading consultancy in the Yellow Pages industry. Greg thinks Yellowikis is a medium-to-long term experiment and that "had Wikipedia not gone before and, remarkably, proved what online communities are capable of it would be quite easy to dismiss this."

According to Greg Sterling, the traditional Yellow Pages industry took in revenues of approximately US$26.1 billion in 2004 on a global basis. The US market represented almost US$15 billion of that global figure. Web-based Yellow Pages services have so far not had much impact on this industry - Greg put their revenue growth in the very low single digits. However, he said "long term, the migration of usage from traditional media to the Internet will have an impact on revenues. That plays to Yellowikis’ long-term potential strength."
So the upshot, according to Greg Sterling, is that Yellowikis does not appear to have significant disruptive potential over the short term. "It's currently 'under the radar' and thus without much content", Greg wrote. "There's a kind of chicken and egg problem. Over the long term, however, it could ultimately affect the ability of established publishers to charge for inclusion in their online directories."

Let's not forget also the competitive threats to Yellowikis. The telephone companies are the major obstacle. In an article last year entitled The Story of YellowPages.com, Dick Larkin outlined how SBC and BellSouth teamed to buy the domain name and business YellowPages.com for nearly $100 million in November 2004. So they're serious about business listings on the Internet!

The big Internet companies also represent a significant threat. John Battelle wrote a post in February 2005 that suggested Yahoo could become "the new Yellow Pages", because of its ability to aggregate business listings through Yahoo! Local. Google also has such a product, called Google Local.

Then there is the question of whether a Wiki is really the best way to collect and distribute Yellow Pages data. Software Consultant Marty Himmelstein wrote an article in Feburary entitled "Local Search - The Internet IS the Yellow Pages" (PDF download). The gist of the article is summarized in a comment Marty left on John Battelle's blog:

"The question I pose and try to answer in my article is "What would it take for the Internet to duplicate and enhance the functionality of the print and Internet Yellow Pages?" A key challenge is to aggregate information for the millions of businesses that don't have a web presence. One way to do this is to decentralize the job of collecting this data, to entities that are close to these businesses, such as Chambers of Commerce, or trade organizations. These entities have relationships of trust with both the public and the businesses they represent. They can act as gatekeepers, ensuring the data they collect or certify is authentic."

So Marty believes entities such as Chambers of Commerce or trade organizations are best placed to take Yellow Pages data to the Internet - not collaborative wikis for the people.

It's obvious Yellowikis is potentially disruptive to the multi-billion dollar Yellow Pages industry. But it's needs a lot of user help to do that. Data needs to be input - and in a structured format. Lots more people need to use Yellowikis and the system needs to scale up along with it. Things such as tagging and open APIs, as suggested by Mike Arrington, may well help push things along.

In a nutshell: Yellowikis needs to achieve the same level of success that Wikipedia has had, in order to disrupt the Yellow Pages market.

In Part 3 of this series, I will look at alternative markets for Yellowikis and also investigate the design lessons for other Web 2.0 companies.