Local.com’s Spreebird Solidifies Deals Strategy; Buys Destination Site

Aiming to be a Top 5 deals site by the end of next year, Local.com today announced that it has bought Southern California’s Screamin’ Daily Deals to provide the infrastructure for its Spreebird daily deals site. The site has been purchased for $12.5 in stock, cash and relief of debt, with two-year, performance-based earn-outs possibly bringing the founders up to $20 million more.

Local.com hopes to leverage the existing company user base and technology and organizational infrastructure, and scale it through its own 22 million unique visitors around the U.S. SDD is currently operating in 14 markets. The vast majority are in Southern California, but the company has also set up shop in Salt Lake City. In addition to daily deals, the company has recently launched travel deals.

SDD grossed $2.4 million in 2010 and $4.4 million during the first half of 2011. If average deal sizes were $30, that would translate into 80,000 deals and 147,000 deals respectively. One differentiator to the site is its focus on “School Rewards,” which has already brought in $409,142 to 700 local schools and nonprofits. The company donates 10 percent of its share of deals — or roughly 4 percent to 5 percent of the cost of deals — to the program. Local.com says it will continue to build on the program, which complements a charity program it runs that provides 1 percent of profits to local charities — when it is profitable. Last year, it donated $140,000.

SDD’s 60 employees have been based in San Juan Capistrano, California, but will move to Local.com’s Irvine location, which is about 10 miles north. Its three C-level founders will become Spreebird’s VP of sales and marketing, product and operations, respectively. They report to Local.com SVP and Spreebird GM Malcolm Lewis. The deal fits a recent pattern of Local.com buying Southern California companies. It had also recently purchased Octane 360, a SMB optimizer based about 30 miles north of Irvine.

We spoke with Malcolm Lewis and Local.com CEO Heath Clarke about the acquisition. They say SDD gives them “a real business platform with very comprehensive back office automation.” While there had been hopes among some that the company’s $450k acquisition of iTwango at the end of 2010 would serve a similar need, iTwango’s real strength was limited to technology and it has mostly been used for personalization, says Clarke.

One of the real advantages of working with a local destination site like SDD is that it already has formed direct relationships with local merchants. As the daily deal space shakes out, this is going to be a key battleground, says Lewis.

One area that Local.com now hopes to innovate in the deal space is its marriage of merchant inventory with deals via its recent acquisition of Krillion. With 70,000 products from 15,000 retailers, “We can pull heavily discounted inventory from big-box retailers” for deals, says Clarke.

Clarke adds that the company is “already a Top 10 deals player based on revenue. Our aspiration is to be a Top 5 player by the end of next year. And we intend, ultimately, to be No. 1 in community deals.”

Local.com’s Malcolm Lewis is a featured speaker next Monday and Tuesday at BIA/Kelsey’s Deals 3D conference in San Francisco. You may register here.

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