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The YP industry exists beneath most peoples radar, as it’s not nearly as sexy as TV or Magazine advertising. Nevertheless, is estimated to control more than 25 Billion in local advertising revenue: a chuck of change that digital search companies like Google Yahoo and Live as well as SEO companies like The Search Engine Guys are jockeying for as people continue to migrate away from print media to digital search.While large YP companies such as RH Donnelley (currently the largest Yellow Page company in the US) www.rhd.com still trade above $70 a share, their stock performance may not be the best indicator of their future. I would argue that it has far more to do with consolidations, acquisitions and internal efficiencies, and insanely high margins (good management in short) than projected growth.

Simply look at your local book — and notice that it has shrunk in size. Though in many cases, the YP industry has been able to maintain the appearance of “lots of content” by including filler content often local art or filler ads for other YP services on the individual pages, not to mention the extraneous shopping guides, golf guides, maps to museums etc. More noticeable many YP books now cover a much larger geographic scope than they did 10 years ago. Often a book will cover a whole county now, which was once covered by 3 or 4 city directories, etc. The pitch to the small business owner might be — more turf for the same buck.

But come-on is that real growth? Not in my book.

Bill Gates - founder and Chairman of Microsoft made a hefty statement in an interview this past May (simply search “Bill Gates Yellow Pages” and you can find the article in 5 seconds) when he claimed that, “Yellow Page usage amongst people below 50, will drop to near zero over the next five years.”

And while Bill Gates was discussing the future of live.com (formally MSN) and his statement could be taken as evangelism for his cause, it is very safe and reasonable to see that the future of the yellow page industry is in decline and not positioned for growth.

A few factors:

1. The Yellow Page Industry thrives on two things: usage and content.

2. Usage in decline — without question, I saw it with my own eyes over from 2002-2005. As broadband access increases, access via smart phones, more people rely on search engines for information than on the Yellow Pages.

3. Content in decline - As fewer businesses choose to ante up for display ads, content declines, as content declines so does usage. A classic chicken-egg relationship, the impulse to pick up the Yellow Pages gives way to reluctance the minute you can’t quickly find what your looking for.

4. Availability - Next time your in your own (or neighbor’s) kitchen or home office, do a quick scan for a copy of the yellow pages. Is it easier to go on the web?

5. Markets - Most trends begin in large metropolitan cities then move to smaller markets. We saw the YP industry begin to hemorrhage in places like Chicago and New York long before the suburban markets, and smaller tier 2 or tier 3 metropolitan cities like Cleveland or Milwaukee. In some markets, the YP industry will remain strong for years to come. In others, it’s long past the hemorrhage stage.

6. Age Demographics - Bill Gates honed in on age as the predominant factor. Have you met anyone under 20 who has ever used the Yellow Pages? That said, the meaty belly of the population bell curve is still the group between 30-75 in America. The boomers and their kids- where the money in America is. This group clearly uses Google. The trend in this group is not back toward the Yellow Pages, but toward Search on Google, Yahoo and Live.

7. Obscurity of the search - Still to this day, if I am looking for something very obscure (say a hardware store in a certain part of town, or a shoe repair shop) I will first search on google, then if I can’t find what I’m looking for, I will pick open the Yellow Pages. Again, the growth trend will not be back to the YP, but rather toward Google & Co. That said, there are business types that have not shifted to digital search and until they do, there will continue to be some value in the content and the usage in the YP industry.

8. Additional factors -With digital search you can receive loads more information than you can receive in a static print format. You can quickly determine which store is close to home, which plumber is nearby, etc., you can more readily educate yourself and evaluate dynamic information about the product or service you are considering. Think of a ticket broker for a sports game — in the YP era, ticket brokers would jockey for placement in the Yellow pages hoping for a phone call. Now brokers can list tickets online, display prices and manage inventory electronically — drastically reducing their overhead while creating a more efficient internal market, where they can measure and better predict how to position their future ticket purchases. The end result — it is more efficient for a ticket broker to direct buyers to their website. The phone call interaction may still prove effective as the interaction may still be preferred by the buyer… but the point here, is to establish in principle how much more effective and efficient a dynamic website is, for this particular business type, than is a static display ad in the Yellow Pages.

In conclusion - there may still be value in the YP, the question is how much? and for how much longer?

The best litmus test is to test it for yourself. Look at the numbers. Think objectively about how people search. Broad strokes do you think your neighbors and friends, colleagues and aunts would pick up the yellow pages or go online to find your business? Do you think online directories are valid? Or would you rather put your website in front of the largest pool of savvy buyers (people who use digital search).

The nice thing about the digital world is the availability of data.

Test it for yourself.

You can very quickly determine and compare how people are searching online.

Go to Aaron Walds site: www.seobook.com and use his free key word analysis tool, or pay for a subscription to Wordtracker.com. You can quickly determine search trends and estimated search volumes for particular phrases and variations online.

Then ask your local yellow page company to provide stats (they can do call tracking numbers, but might not be inclined to share the results) for your business type.