At its peak, The Yellow Pages was a $23 Billion a year business. It was an advertisers dream to have the catchiest ad and the most space purchased for that ad on the page. You remember these ‘phone books’ don’t you? Super thick, organized by industry, and…well…all published on yellow paper. Not sure who determined the color of the pages, but it became super recognizable, didn’t it?
Then, around 2005, Google Maps came to market. Led by the successful tech entrepreneur Sukhinder Singh Cassidy, there seemed to be a way to disrupt the Yellow Pages dominance. Why not put a free app out there that acted as an online atlas. And along the way, why not have advertisers pay to show up on the app when the driver headed on family vacation wanted to stop at a restaurant.
Two major innovations that Google Maps brought to market, which are under-appreciated and likely unknown. First, putting the name of the road inside the border of the road. This had never been done before. Putting the name of the road was typically typed outside the road border to identify it. Google innovated by putting the road name inside the border of the road, saving space for more details outside the border of the road.
The second innovation was done via acquisition. Later in 2005, Google purchased Keyhole, a satellite imaging company that was taking geospatial pictures of the entire earth. This helped the app in that you could tap a button to see the satellite image of the area you were searching, making it a bit easier to find from a human brain standpoint, orienting your self to buildings and grass instead of a computer-generated background.
And with that, The Yellow Pages was undone. I doubt many of you can remember the last time you looked at the Yellow Pages for the last number you dialed or restaurant you ordered from. To be sure, my research reveals that the business still exists, likely for those few people who have yet to take the leap to purchasing a smart phone. But what was a $23 Billion business, is now a small semblance of its glory days. I tried to trace who owns it now, my best guess is a small company named Thryv Holdings based in Dallas, Texas. Granted, it’s all been rebranded to adapt to today’s online world. Bottom line, no one cares.
This, my friends, is Creative Destruction. It’s kinda like the typewriter industry giving way to the PC. While our empathetic hearts go out to those being ‘disrupted’, we also personally benefit from the ‘creation’ that’s replacing the outgoing business. This is the fun, yet woefully intense part, of investing. Trying to get in on the ground floor of the disruptor, and being sure to sell out of the disruptee…before it goes bankrupt.
I’ve been in the financial and investment industry for over 20 years. I’m dating myself, but crazy to think that I was there when FaceBook was initially publicly traded. I bought the first iPhone (and, quite honestly, the first iPod (no longer in existence…lest I digress, there’s an example of Creative Destruction within the same company!)). I was there for the transition from VHS to DVD to Streaming. I’ve seen big box televisions replaced with flat screens.
So, what’s the best way to avoid the next Yellow Pages and embrace (invest in) the next Google Maps? Far be it from me to not admit my own bias, but my answer lies solely in prudent active management. Now, I didn’t say prudent passive management. A passive investor is an indexer, and therefore gets what the market gives them. An active investor rigorously researches the market in search of the next thriving company that will produce innovations, disruptive technology, earnings, and a satisfactory return for the shareholder.
Creative Destruction is a necessary occurrence in culture, and hence, the investment landscape. Some companies will endure, some will not. Searching for the difference is a never-ending game. That search is one I’m actively engaged in…and having the time of my life doing it!
