It’s About the Money, Remember

Last week, Local.com announced that it will acquire PremierGuide, a white-label local search solution, for US$2 million. I’ve read a handful of reviews about this acquisition and most seem to be missing the most important part of this deal: It’s about the money.

Specifically, it looks to me like this deal has a pay-back for Local.com of about one year. I spoke with Heath Clarke, CEO of Local.com, about the deal this week to confirm a few numbers. Sure enough, here’s why this deal was such a no-brainer for Local.com. In fairness, Local.com is a public company and Heath would only tell me that my numbers were in range (or close or no comment). Here are the details I put together:

• PremierGuide has about 55 million page views. Based on a few calls, I’ve triangulated CPM to roughly $14. It has the retail Google ad share and a few other smaller ad deals.
• Local.com reports about 10 million unique users. After pulling apart the financial statements (and making a few more calls), the company has a CPM of about $40 (plus or minus). This CPM rate is a combination of a negotiated performance rate from YSM, an Idearc distribution deal and a few others.

Therefore, Local.com should generate top-line revenues off this acquisition of roughly $2.2 million per year vs. an estimated $770,000 that PremierGuide had been generating previously (note: the Local.com release says $800k). There is even more upside here since the Local.com folks will likely go back to the ad networks and demand and receive a deeper ad revenue share for the combined traffic.

Then, of course, Local.com is out actively looking for other distribution, acquisition and partnership opportunities, which should continue to increase the top-line revenues.