Tellier, however, was not satisfied with Yellow Pages’ market position; he wanted national dominance, which meant acquiring SuperPages. Just as Yellow was originally part of Bell, SuperPages was once Telus’s directory. In 2001, the business was sold for $810 million to Verizon Communications Inc., which in turn sold it to Boston-based private equity firm Bain Capital LLC for a hair less than $2 billion in September, 2004. Less than six months later, Bain sold the business to Yellow Media for $2.55 billion, giving Tellier his national reach.
The deal, doubling the size of the company and realizing sizable cost savings, was hailed as a master stroke by the young executive. Yes, debt was growing, but neither the management team nor the market were much concerned, given the company’s rapid rate of growth.
But hidden within that deal was the company’s first misstep.
Even if the debt didn’t appear to be a problem, Yellow Pages had secured a geographic monopoly at a time when the Internet was rapidly making its business borderless. Tellier had bought himself dominance over an industry in decline. In only a few years, it would seem quaint to flip pages to find the right category in an oversized tome when one could turn to the Internet—where search engines like Google pop out locations, hours of operation and telephone numbers in 0.12 seconds, and niche sites and Facebook friends can offer the added value of customer reviews.
The pyrrhic victory of SuperPages was sealed with a string of acquisitions in the following years as Yellow cemented its dominance, buying directory publishers from coast to coast. Yellow Pages also made a series of buys in the following years to create its Trader unit, and expand into the print and online classified ad business. Tellier was just getting started, and he seemed to be making all the right moves. By 2006, a column in The Globe and Mail called him the most “fawned-over CEO in Canada today.”
It’s not as if Tellier doesn’t take the Internet seriously. He has long argued that Yellow Pages can replicate its hard-copy success online, and that is its priority—building a network of websites, mobile products and search engine marketing services. The CEO reminds anyone who will listen that he is building an Internet company.
He does have his believers. “Marc is a winner. ...They really have an Internet focus internally,” says Sebastien Provencher, who was formerly head of online business development and strategy at Yellow Pages. “Maybe they’re not doing a great job selling their own success. They’ve done more for Canadian small business online in the last 10 years than anyone else.”
In the past 18 months, Yellow Pages has made the most aggressive introduction of digital products in its history. It now offers a search engine optimization service, which helps customers’ listings push to the top of results on Google, Yahoo and Bing. Yellow has expanded its client base by targeting national advertisers in a way it never did before, landing the likes of Sears and Walmart. It is more actively selling its advertisers on the Yellow Pages application for mobile devices, which has scored 2.5 million downloads. And it has begun building websites for small businesses, selling 10,000 of them in the first six months of the effort. Digital revenues have grown from 14% of overall revenues to just over 25% in three years, and Tellier says he wants to see that percentage grow much further.
For all that, Tellier’s attachment to the books lasted longer than it should have. As recently as two years ago, in the midst of an economic downturn that decimated advertising budgets and forced a day of reckoning for other largely advertising-dependent print businesses such as newspapers and magazines, Tellier was bullish on the directories, claiming that even the younger generation used them to find their tattoo parlours and sushi restaurants. Instead of conveying the confidence that behooves a CEO, his claims made him seem out of touch.
“There are times in the past where we’ve lacked credibility by putting emphasis on the print, and by saying the print was more robust than people were giving us credit for,” Tellier says now. “Have we found the recipe quite yet in terms of offsetting the print erosion by selling all of these online products? Obviously the answer is no, because if we had, we would have reacquired growth and we haven’t. But we do remain cautiously optimistic at the early signs of our success.”