Young entrepreneur Joseph A. Mathews was looking for a business venture that would improve communications between advertisers and consumers when he struck on a simple idea that he thinks takes traditional Yellow Pages directories to another level.
Next month, by dialing 555-NEED, people who live in the Baltimore area will be able to make a free call to an operator who can provide product and service information previously obtained from printed telephone directories.
"We wanted to take all that purchasing and buying information and build a brand around it," said Mathews, 28, CEO and founder of Nexus Communications, based in Hanover. "That's 555-NEED."
Beginning June 1, operators will connect consumers to a variety of businesses, from plumbers to florists to electricians. In October, Mathews plans to expand the service to Phoenix, Ariz., and Orlando, Fla.
"It sounds like a decent idea," said Dwight Allen, a Washington consultant with international Deloitte Consulting, who follows the telecommunications industry. "I think the problem you run into is that people rightly or wrongly think that the available listing is less than what you're getting from the Yellow Pages."
Allen said there have been similar ventures in the past, including a service called Talking Pages that operates in Singapore. He also said a form of the service was offered in the Washington area several years ago.
"The fact that somebody has already been there and done that and not set the world on fire doesn't mean that the next guy won't be successful," Allen said. "If these guys have a better approach to marketing and are better managers than those who have gone before, it's quite possible this could succeed where others have failed."
Before launching a campaign to educate the public about the phone number, managers of the start-up company will have to sell advertisers on the new concept, Allen said.
"The problem is that it requires a leap of faith," Allen said. "They'd have to increase their advertising budget for a while to try this new venture. Or they'd have to cancel the Yellow Pages, and if this doesn't work, then they would have to wait for the next edition. It's not an obvious slam dunk."
He and others agree that getting people to remember the telephone number is a key component.
"Success depends on how much advertising they do with the phone number," said Bob Leffler, president of the Leffler Agency, a Baltimore advertising agency. "If they do a lot of it, it's got a shot at working."
The company, which will nearly double its 57 employees by the end of the month, has budgeted at least $1 million to market its product during the first 12 months of business.
Thomas Menton, an Ellicott City dentist, is one of the first advertisers to sign up for the new service.
"I think in the age of the phone company charging for information using 411, and people not liking to pick up the Yellow Pages, this fills the need in between," he said. "It's nice to be able to just pick up the phone and make the call. I couldn't even tell you where my Yellow Pages are."
Menton has chosen a priority position -- meaning that his dental services will be among the first mentioned to callers seeking a dentist. Menton, who said he doesn't buy big ads in the Yellow Pages, is spending $170 a month in a yearlong contract with Nexus. Customers can also pay on a per reference basis.
Harvey Okun, an attorney with offices in Baltimore, Columbia and Owings Mills, likes the idea that consumers whose needs match the services he provides automatically will be connected by telephone. He has opted for a year-long contract that includes four areas for $375 a month.
The idea for 555-NEED has been four years in the making. It is one of about a half dozen plans developed over the years by Baltimore native Mathews, who at age 19 bought an ice-cream truck and sold ice cream at the beach before moving on to other ventures in Baltimore. The 555-NEED idea is the one that has generated the most enthusiasm.
So far, about eight people -- mostly entrepreneurs in their own right -- have contributed $10 million to get the venture off the ground, Mathews said.
The service helps consumers often frustrated by multiple directories that are sometimes outdated or complicated to use.
Advertisers like the flexibility of being able to make changes with 24 hours' notice rather than having to notify the directory of changes as long as 18 months in advance.
Mathews' brother Jeffrey, a 31-year-old consultant who once taught at Harvard and Oxford universities, is the company's chief financial officer. He predicts Nexus will turn a profit this year.
So far, $3 million has been invested in brand building and working capital, and another $7 million on the infrastructure, which includes the call centers. About $5 million will be spent in the next couple months as service kicks off in Baltimore.
It took about six months to get rights to the 555-NEED numbers in all 50 states, Canada and Mexico, along with the rights to 1-800-555-NEED and 555-NEED.COM, the company said.
Freepages, a provider of similar services in Great Britain, went public in March 1997, with a market capitalization of $375 million. At the time, it had done about $9 million in revenue. Mathews anticipates revenue in Baltimore, alone, of more than $9 million this year.
Yellow Pages directories represent a $12 billion business in the United States, according to the brothers. And it is an advertising medium that has changed little in 110 years of existence, they say.
With an average price of $1,100 to $1,200 a month for a half-page ad in the Baltimore market, it is a relatively expensive medium for advertisers.
"If you look at the industry, the reason they'll pay so much is because those customers are ready to buy," Joseph Mathews said. "We love the job that the Yellow Pages have done in creating this market for us. We're looking at ways that we can work with the existing Yellow Pages."
Tomorrow a 45-seat call center will open on Joh Avenue in Baltimore to handle the volume of calls they expect as of June 1.
A 250-seat call center is being built in Clintwood, Va. Eight to 10 additional centers are planned in the next three years.
Pub Date: 5/19/98