Some interesting details about LiveDeal’s operations have been released as the result of its $11.8 million sale to YP.com. During a June 7 investor call announcing the sale, LiveDeal, a local/college/vertical-oriented classifieds company that bills itself as “eBay without the auction,” revealed that it grossed $2.6 million last year (different than the “$5 million” figure that I thought I heard during the call). The company, usually close-lipped about results, also says it has experienced 300 percent growth during the past two years.
The Silicon Valley-based company also says it has reduced its burn rate to under $100,000 per month, with break-even expected later this year. It has roughly one million unique visitors.
YP.com and Live Deal execs on the call said they share a “mutual vision to be a leader in the local classifieds and Yellow Pages market,” which they see emerging as the local search marketplace. The deal allows YP.com to use LiveDeal’s more sophisticated platform to provide “hyper-local marketing solutions.” In addition to classifieds listings, LiveDeal has recently been bundling a broader set of offerings, including Yellow Pages.
YP.com, for its part, has new management in place that has impressed industry-ites. This acquisition is the clearest indicator yet of new directions for the Las Vegas-based, publicly-owned company.
Under terms of the deal, stock worth $11.8 million will be given to YP.com’s owners. CEO and Founder Rajesh Navar will wind up with 11.5 percent of the combined entity. TorStar, the Canadian newspaper company that is LiveDeal’s second largest shareholder, after investing $3 million in late 2005, is also going to be a significant shareholder — if it doesn’t sell out.
TorStar recently announced that it was backing away from a free classifieds model that was largely powered by LiveDeal, but it isn’t clear whether or not TorStar is using LiveDeal’s technology for other applications. It also isn’t known whether TorStar played a direct role in the sale.
Other LiveDeal partners, such as The Philadelphia Inquirer, are apparently maintaining their ties to the company. Moreover, deals with several large media companies (TV stations and/or networks?) are said to be in place. Some non-U.S. deals have also been discussed in the past.
While there are significant differences between Yellow Pages and classifieds (i.e. Yellow Pages are services-oriented, while classifieds are based on daily frequency and highlight one time sales of goods), Canada’s YPG, and Scandinavia’s Eniro and Schipsted have each invested heavily in merging YP and Classifieds in hopes of creating a local information hub that aim to outpace the search engines with a depth and breadth of local services.
In any case, LiveDeal and YP.com want to be YP/Classifieds players, too. “The synergy of classified and Yellow pages is huge and not yet factored in the market valuation,” said Navar, in a followup email exchange with me. “So in reality it is more about 25 percent of combined company than a $12 million deal. I am the President of the combined company and committed to building this into a successful ‘Local Search’ firm without worrying about cash flow issues as the company is profitable and growing.”
$12m of stock in an OTC stock doesn’t seem to smell right for an online classifieds business that ‘grosses $5m a year’. Do you know if that is ‘grosses’ as in gross merchandise value or actual revenue (i.e. 3-5% of that number)?
The sale price seems low based on the financials reported.