Tag Archives: Web.com

Web.com Buys Yodle; Moves Deeper into Value Added SMB Services

A chapter in local commerce ended today with Web.com’s agreement to purchase Yodle for $320 million. The deal is expected to close by the end of 1Q.

The companies will complement each other well, with Web.com’s huge 3.45 million SMB base being driven up the value chain from domain registration (via its Network Solutions division) and websites and presence management to Yodle’s higher priced and more complex services, including SEO, leads, office based automation and CRM.

Yodle currently has 58,000 subscribers and an average revenue per user of $300 per month — a figure driven higher by the 9,000 franchise locations it serves for 200 customers. Its integration will have a large impact on Web.com averages, moving Web’s average customer earnings from $167 to $226 per month. It also will provide Web.com with a large, 700 person local sales team.

The sale price, of course, has got to be a major disappointment for Yodle backers. It was less than two years ago that Yodle had been talked about as a $1 Billion + company on the brink of a planned IPO. Its positioning at that time suggested it had finally broken down the wall in local between acquisition and relationship marketing as Yodle invested in CRM, cloud-based software and leads.

But Yodle never pulled the trigger on the IPO amidst a tough market for tech IPOs, There was speculation that the company simply could not withstand the exposure of publishing its churn and customer acquisition rates, which like the rest of the industry, would presumably be very high. And then there was the damning Wall Street Journal article on April 16, 2014 on poor customer service and poor values that focused on Yodle and Reach Local; and an apparent slowdown on efforts to sell enterprise level CRM and cloud based services to top franchise companies, or “brand networks.”

Right now, the battle to sell marketing services to SMBs includes a shrinking number of players. High acquisition costs and churn rates continue to plague the industry. But the potential rewards are rich for a group that not only includes Web.com but also ReachLocal, Endurance/Constant Contact, Vistaprint, Main Street Hub, SignPost, Deluxe Corp., Hibu, YP and in some verticals, DemandForce, which was just sold to Internet Brands.

Bookshelf: Stibel’s ‘Wired For Thought’

There has been kind of a disconnect for me in former Web.com head Jeff Stibel’s twin identities as a top local executive, and as a brain scientist. Not anymore. In a provocative and valuable new book, “Wired for Thought,” Stibel lays out a solid case that the development of the Internet parallels the development of the human brain – only the Internet doesn’t suffer from poor memory and slow processing speeds.

Things have moved quickly since the early 1980s, when I learned in a psychology class that the development of computers was based on human thought patterns — behaviorism. That’s too limiting for Stibel, who looks to the Internet and its free flow of billions of connections as the correct analogy for brain development.

But what is it about the brain science that excites Web entrereneurs like Stibel (and former Microsoft research head Nathan Myrhvold?). On the outer stretches, Stibel has developed technology that enables paraplegics and others to use implanted brain devices to turn on lights and manipulate TVs and computers.

But more practically for us, Stibel looks to social networks and search as direct beneficiaries of brain science. Yahoo’s hiring of hundreds of librarians in the 1990s to catalog the Web just wouldn’t make any sense today, he says. Indeed, linguistics is the more appropriate field of research to really understand how search will eventually climb the frontiers of “artificial intelligence” – a phrase that Stibel disparages.

Web.com, MerchantCircle to Market Each Other’s SMB Services

Web.com and MerchantCircle are teaming up to leverage Web.com’s appeal as a provider of “premium” SMB services, and MerchantCircle’s appeal as an introductory-level provider of SMB services that is more oriented towards building traffic and selling advertising.

Web.com is a publicly-owned SMB marketing giant that includes premium Website development and search engine marketing via its Leads.com division. It has 267,000 active accounts. MerchantCircle is a free directory service that upsells a variety of SMB online services to SMBs after they register for its directory.

Partially owned by IAC, MerchantCircle has over 900,000 SMBs registered for its directory, and reports that it has converted “high single digits” to paying accounts with search services and other advertising. Although positioned as a social network, MerchantCircle also reports 20 million unique visitors per month, which would make it the fifth largest Internet Yellow Pages.

The deal between the companies has multiple components. Web.com will receive leads from MerchantCircle’s large base of SMB registrants for its premium services, which include search engine marketing, premium web site building, ecommerce and analytics. At the same time, MerchantCircle’s various free and premium tools are being provided to Web.com customers as a way to boost their presence throughout the Web. The tools include a “verified by Merchant Circle” page for reputation management, blog and newsletter software, and coupons.

Initially, 100,000 Web.com accounts will be offered the Merchant Circle services; the remaining 167,000 accounts are indirect accounts via affiliate relationships, and may be added later. Presumably, both companies will receive bounties for any business they hand over, although arrangements aren’t being publicly discussed. Brown only says that “money will flow in both directions.”

The deal obviously limits the horizons for both companies as they shrink their focus to existing strengths – both companies had previously been providing the full range of SMB services. But that isn’t being described as a negative. “The way we look at it, the market is so big that this partnership is one of the ways to create more value for our customers,” says Web.com Chairman and CEO David Brown (who is assuming full leadership of the company as President Jeff Stibel prepares to step down at the end of September).

Brown says that the deal positions both companies to take advantage of the decline of print Yellow Pages and get a jump on providing enhanced services and related advertising to SMBs. “As (print YP) shrinks, we are seeking a mass adoption of services and the adoption of value added products,” he notes. “Once SMBs see the Internet work, they’re willing to pay for it.

Brown adds that pay per click, search engine optimization, email and a variety of ecommerce have been growing “at a much faster clip than traditional Website products” during the past three quarters. In fact, they now accounts for 30 percent of Web.com revenue.

MerchantCircle VP of Marketing Darren Waddell tells us that the deal is a perfect fit for the company’s current positioning. Increasingly, MerchantCircle is focusing on providing simple and efficient “self serve” products for SMBs and targeting the great volume of SMBs that still aren’t marketing on the Web.

Last week, for instance, MerchantCircle announced a deal with Demand Media to provide a category-based article and video package to SMBs for $9.99 per month that would form the basis of an instant website. As an example, a lumberyard could provide a variety of articles about pressure treated lumber. Demand Media has developed a rich body of information on every conceivable subject, says Waddell.

Monetizing the directory via Google AdSense is also a major consideration for MerchantCircle, given its heavy traffic. The company has built out 15 million SMB pages, but just 900,000 have been claimed, notes Waddell. “A lot of traffic goes to pages that haven’t been claimed.”

“We’ve chosen to focus more on what we’ve been doing,” Waddell adds. “When a merchant really wants a consultative approach to building out their Web presence, that’s where we end.”