Sensis’ digital marketing restructure likely to disappoint shareholders, but SMEs could benefit

Telstra’s attempt to turn its embattled directories arm, Sensis into a digital marketing services company for small business could deliver benefits for SMEs but disappoint investors, experts say.

Telstra, which has told investors it did not expect to make a profit on its new strategy for three years, has been under pressure to address the decline in print advertising for Sensis’ flagship White Pages and Yellow Pages products.

The telco giant yesterday announced plans, two years in the making and following criticisms shareholders could have made a motza from selling the business at the top of the market, to help customers sharpen their online advertising.

Its plans for small business include building and managing websites, assisting with advertising on tablets and smartphones, and looking at social media sites such as Facebook and Twitter.

Sensis also intends to bundle its online and print advertising, as it reduces its reliance on the higher-yielding print offerings to better focus on the lower-margin online offerings.

Sensis chief executive officer Bruce Akhurst said the “explosion of technology and advertising channels and the popularity of digital devices has created a complex digital world that small businesses must be part of to ensure they are found by customers looking for their services.”

BBY analyst Mark McDonnell said SMEs stand to benefit.

“It will be attractive, and if I heard Telstra saying ‘we’re going to give you more, and charge you less,’ and cut our margins in the process, I’d think that was terrific,” he said.

But Sensis compares unfavourably to its peers in the online classified online classified advertising market, such as REA Group, Seek or Carsales, McDonnell said.

“The whole positioning of the company seems to be very reactive around things I would have thought were very obvious,” he said.

The story of three years of lower earnings was “unimpressive”, McDonnell said, adding “it might take six to seven years that we get back to the level of earnings seen last year.”

“I am particularly conscious that this company… has gone from talking up Sensis as one of the stars of their business with very strong and continuing growth to a business that’s contracting,” McDonnell says.

“That has serious implications for the earnings outlook overall [for Telstra] and the sustainability of dividends.”

Paul Budde, of independent global telecommunications research and consultancy company BuddeComm, notes Sensis has halved in value over the past five years, and its online offering is particularly under pressure from alternatives.

“In my opinion, Telstra should divest Sensis and combine it with BigPond and Foxtel, and start looking at new digital media company,” Budde told SmartCompany.

Budde says while it’s never too late to target the SME advertising market, the delay has been costly for Sensis.

“I would have hoped that they’d done this five years ago, and I was hopeful when I saw the announcement that they would come up with real new innovation and do something new, and they didn’t so I was rather disappointed.”