LiveDeal, under new management, has moved away from its roots in Yellow Pages and classifieds, and begun a strategic focus on high end SMB services. As part of its strategy, the company has been selling off many of its directory-related accounts, which CEO Mike Edelhart calls high maintenance, high churn, low yielding and declining.
To date, 24,000 accounts have been sold off, including 14,000 yesterday to Local.com, which paid $3.1 million. That leaves roughly 25,000 of LiveDeal’s original directory accounts.
Edelhart notes that the typical Internet Yellow Pages account has been bringing in just $380 per year, with as much as 45 percent going to third parties and billing costs. They often have delayed payments to boot.
By contrast, its suite of SMB services brings in $3,500 per year. Included in LiveDeal’s suite are URLs, websites, SEO/SEM and click to call. Most are being sold via telemarketing. “We’re good at that,” he says.
The company’s clean, new, sophisticated website also plays a role. “It encourages people to call us.”
“We’re (no longer) selling other people’s capabilities,” says Edelhart. “We’re selling things that we service ourselves” and allows the company to extend customer relationships.
At this point, LiveDeal has 1,500 leads-related accounts, on top of the remaining 25,000 directory accounts. In the end, Edelhart hopes to acquire many more leads-related accounts, while keeping just 10,000 of the directory accounts – the ones that come from higher-yielding national- and automatic clearing house accounts.
Classifieds, however, are not a current focus (remember, LiveDeal started life as a classifieds company). But Edelhart expects that they’ll eventually be integrated with the new offerings.
With the sales of the directory accounts and the SMB services’ stronger cash generation, the company has developed a cash hoard of $11 million, Edelhart adds, up from $3.8 million in September. “This business model accumulates cash,” he says.
The company also has a management team “that is entirely new,” says Edelhart. “We never had a VP of marketing before. We never had a VP of product.” The company now has 120 employees in total, half of which are in sales.
Note: This is the full text of a comment that I turned into a Blog Post (See “Schauer: Classifieds are Hyperlocal).
LiveDeal out of the classifieds business? Is this a surprise? See my earlier comments on their business and business model.
I can hardly wait for Facebooks classifieds to launch.
People seem to assume that classified advertising is an easy business to understand and enter. It’s not.
It’s a business that demands fierce commitment to localization, understanding the nature of the small local advertiser, and a commitment to small, individual sales. Hard ground for startups driven by dreams of an IPO.
In the past year I’ve seen three competitors drown. Two others are careening toward the treacherous shoals of this turbulent sea. It gives me no pleasure. Good people with good intentions and lots of hard work wasted — it’s a shame and I mean it.
What those failing groups seem to have lacked is the desire to get down and get real with the individual advertiser who will actually pay for classifieds. That customer is not rich, not sophisticated, not interested in pretty, elegant or cool.
The bulk of classified advertisers live in small towns and tight neighborhoods. They don’t build social networks. They are typically the salt of the earth — and hence of little interest to VCs.
This customer wants RESULTS FAST. They want to get information to their neighbors — who are also their customers. Most important, they will pay a reasonable price to do so.
I encourage other companies in this space who have not yet capitulated to reconsider the true nature of their customers. I encourage them to love and not sneer at their user base.
Classifieds are not pretty, but the economic engine they support is large and remains robust. More important, the neighbor-to-neighbor business interaction is core to the strength of the greater economy and to our political well-being.