KEY POINTS:
Directories company Yellow Pages is easing into the world of online shopping, putting the former Telecom division into competition with the telco's struggling online retail website Ferrit.co.nz.
The company - which Telecom sold in March to a private equity consortium for $2.24 billion - has spent $10 million
upgrading its website, Yellow.co.nz and has ramped up advertising.
The search engine has been enhanced and and every business in the country is being offered a free website, whether or not it advertises with print directories.
Of the 221,000 businesses around 50,000 have their own websites.
The free web pages include details such as the product or service on offer, maps that show their location and parking facilities.
Yellow Pages estimates around 30,000 businesses have yet to take up the offer of a free site and listing.
Only 2000 companies are listed on the website without buying advertising in a printed directory.
Marketing director Blair Glubb said the offering helped readers "find and compare, book and buy".
Yellow Pages print directories were aimed at helping its audience to find and compare products and services.
He said changes to the Yellow website allowed it to develop the other part of the offering - booking services and buying products online.
"The new website definitely gives us that capability and it makes sense for us to go in that direction in the medium to long term," said Glubb. He said the biggest selling point for Yellow Pages was its audience but there were no immediate plans to start selling off the Yellow website.
The website still only attracts a small proportion of the users for the print Yellow Pages directories, which earn the bulk of income through advertising, The online listings increased 45 per cent last year from a low base, while print was up by 17 per cent, Glubb said. But traffic is expected to double in the next 12 months and revenue is expected to grow with that.
The website will make money by charging businesses to be recorded at the top of the search results. Charges are expected to rise as traffic increases.
Glubb, who planned and worked on the online upgrade while Yellow Pages was owned by Telecom, said Yellow Pages' e-commerce ambitions were slightly different to those for Ferrit.co.nz.
He said that it had become apparent that Yellow Pages did not fit easily with Telecom.
But the Business Herald has been told the sale of Yellow Pages alongside the costly development of Ferrit has raised eyebrows inside and outside Telecom.
One Telecom source suggested that the telco wanted to reproduce the Trade Me model with Ferrit, building the site up and then selling it at a big profit in the future.
Grey Advertising media analyst Michael Carney has questioned the logic of Ferrit developing commercial relationships when Yellow Pages had provided Telecom an extensive database and relationships with businesses, including retailers, that could have been a foundation for any online retail venture. Ferrit head of commercial services Angela Dutton said Telecom launched Ferrit as a retail mall, concentrating on developing an online market for new retail goods.
"When Ferrit was launched the Yellow Pages online presence was an online directory service, whereas Ferrit was developed as a specific retail products offering delivering significantly more than a simple business search function."
Until expansion into e-commerce, Glubb said, Yellow would remain focused on advertising and marketing.