ReachLocal has launched ReachLocal XChange, a local business ad exchange, with Fox Audience Network, Ask Sponsored Listings and others. By doing so, the company moves beyond its initial reliance on search packages to small businesses.
The introduction of an ad exchange is the second major change to its model in recent months. A couple of months ago, the company started selling display ads alongside search. Display now accounts for fewer than 10 percent of ReachLocal’s business, but is projected internally to reach 25 percent to 40 percent within 12 to 18 months.
With XChange, ReachLocal enables major publishers to attract local advertisers. The company believes the offering should make it more compelling to agencies, franchisors/dealers and national brands.
The new effort appears, on paper, to be similar to efforts by Pulse 360, AdReady and others. Company Cofounder and XChange GM Rob Wright, however, emphasizes that the exchange is all about premium inventory, and decidedly not remnant. “We were getting 50 publishers a week asking us if we could sell their inventory,” he says.
One advantage to ReachLocal of the exchange network (and its other new offerings) is that it provides an alternative to current search packages for SMBs and larger local advertisers. These rely heavily on Google and tend to have low margins.
Meanwhile, ReachLocal reports general progress in its operations. The company notes that it now has 500 salespeople in 35 offices, and is beginning to expand internationally, with owned and operated ventures in Toronto and London, and a JV in Australia. An analyst for McKinsey & Co. earlier this month estimated that ReachLocal is now grossing more than $100 million per year, but Wright says the actual figure is “well north of that.”