During the past 16 months, Local.com has shifted away from an almost exclusive focus on monetizing Local.com traffic toward a more complex, three business approach. These include building up its network syndication and distribution business and, increasingly, small-business advertising and services.
The 97-person, publicly traded company’s Owned and Operated Site business — largely composed of Local.com –still makes up 58 percent of the company’s revenues. But that’s down from 90 percent three years ago.
Meanwhile, the network distribution and syndication arm now makes up 28 percent of the business. This includes more than 800 directory-oriented sites for what had been Premier Guide, as well as syndication with megasites such as Yahoo, SuperMedia and Citysearch. The remaining 15 percent comes from SMB advertising and service accounts, which now number more than 70,000.
Last week, the SMB arm was given a major boost with the $5 million-plus cash and stock acquisition of Octane 360, a domain registration and services company in nearby Hermosa Beach, California, that positions the company more along the lines of a Demand Media-type firm that includes SMB services, content and search-related sales.
CEO Heath Clarke tells us that the company did an internal evaluation of its business and realized it was really serving three different customers: consumers — primarily “soccer moms” — media partners and SMBs. “Each have very different needs,” he says.
To be sure, each of the three business units is being further developed, with Local.com, for instance, soon to be given new branding and site layouts featuring improved home pages. The redesigned and improved site “will be more than just search results,” says Clarke. The Network business, similarly, is adding 20 new ad supported widgets for customers during the second half of 2010.
“We are now orienting around these customers,” and also creating synergies between the three units, says Clarke. The emphasis is less on profitability than expansion right now. “We’re plowing the money back into the business.”
The SMB business holds special promise, earning roughly $40 a month per account. The company initially tried to sell SMB accounts itself via telemarketing, but while “mildly profitable,” found it took too much time and wasn’t core.
Local.com has since settled on mostly acquiring the accounts from third parties, such as LiveDeal. The company has shelled out anywhere from $85 to $225 per account, says Clarke. “They typically pay for themselves within 18 months.”
These kind of accounts are more mature and less likely to suffer from churn, says Clarke. They also transition across other products well. The introduction of Octane 360’s product adds a great deal of value and should further “cut churn in half.” It also makes the company more appealing, as “more advertisers buy a block” of services. While Local.com has traditionally resisted the geodomain business, Clarke believes that the market is now ready for it.