Gannett Buys ReachLocal to Anchor its Digital Business

Gannett announced today that it will buy ReachLocal, giving it a more solid anchor for selling digital marketing solutions to national brands targeting locally, as well as SMBs. The deal, at $4.60 per share, values Reach at $156 million – 188 percent above its closing price on Friday. Reach’s annual revenue of $320 Million will more than double Gannett’s digital business.

Gannett’s acquisition follows on the heels of Web.com’s acquisition of Yodle in February. It represents the end of a bold vision – shared with WebVisible, LocalLaunch, Weblistic, SpotRunner and others — of a local ecosystem dominated less by channel (i.e. Yellow Pages) than by a neutral sales force providing efficient solutions.

In the end, the vision was made moot by Google’s dominance of the marketplace. As SMBs found cheaper and more personalized solutions, all the ISOs suffered astronomical churn rates. Reach’s churn, at one point, was said to be above 100 percent.

The company, meanwhile, has evolved with the marketplace. In various bids to create a more sticky solution, Reach tried one local trend after another, including bids to integrate daily deals (DealOn), social platforms (Bizzy) and even a consumer-facing home services leads company (ClubLocal).

More recently, the company has marketed itself as a provider of local front and back office marketing solutions to both SMBs and national marketing entities, such as Scion and Eyefinity. Indeed, the company has seen some wins and has seen growth in less competitive international markets. But its customer count has also gone down from announced levels of 32,500 during the super high churn era to 16,000 today.

Gannett, which operates in the U.S. and UK, seems likely to sell off or close Reach’s international divisions. While Gannett is limited in its ability to integrate with Reach until 2017 because of current sales agreements, it says it will eventually use Reach as its main SMB and national digital services platform.

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