Dex Media's Digital Transformation

Scott Galloway shares his investment in Dex Media, a yellow pages company that successfully pivoted to become a CRM software company.

"Dex Media was probably my third or fourth best investment. Really great CEO, a guy named Joe Walsh. Yellow pages - the things dropped on your porch. Amazing business - like $600 million in revenue and $280 million in EBITDA, but it was declining 12% a year.

It was another Jason Mudrick investment. I went on the board, I invested about $4 million. I really liked that board because I could add a lot of value. I sort of understood the business, and they were trying to transition to become a CRM company because the core asset was relationships with tons of small and medium sized businesses. They started selling them calendaring and clienteling software.

Basically, we would go and buy the biggest yellow pages company in the South, then the biggest yellow pages company in Canada, then the biggest yellow pages company in Australia. These companies traded at two to three times EBITDA because everybody knew they were going away. But you could buy these companies, close the headquarters, keep the 30% of the best salespeople, let go of everyone else, and as long as you cut costs faster than 12% a year through consolidation, you were cash flow accretive. Every year the stock price went up.

What the management team did that's just staggeringly impressive is they were able to transition from a yellow pages company to a CRM software company - and they actually did it. I think we bought in at like $2 or $3 a share, and the stock's now at 15 or $20. I've already sold my stake. I think I four or five X'd there."