I have been amused by the massive buying frenzy over the yellow pages divisions of various phone companies. Everyone from Sprint to Qwest have auctioned off their supposedly cash cow divisions and taken the cash to pare down their debt. I used to wonder why they were doing that. And then after reading this post by Mike Walsh, it all fell into place.
bq. Search players such as Google, combine both editorial listings with a highly efficient model for auctioning popular keyword advertisements. Despite Google and Overture/Yahoo’s growing market power, the traditional players have a few aces up their sleeve. The vast majority of commercial searches are for goods and services within the general locality of the consumer. Search engines need to figure out how to make ‘local search’ work, which is the key strength of Yellow Pages directories. Telstra’s recent acquisition of the Trading Post classifieds is an example of how publishers are waking up to the fact that if they don’t become master search engines for small business, then someone else will take that position from them.
Using this logic, I think it is not entirely impossible to imagine SBC or Verizon buying a search-engine/paid advertisement company. Actually when Telefonica bought Lycos, they were ahead of the curve, except I don’t think this is what they had in mind.
Recommended reading: The Secret Economics of Search