ReachLocal Moves Away From Consumer-Facing ‘ClubLocal’

ReachLocal announced today that it is moving away from its new ClubLocal business, which connects consumers with service providers. The publicly-owned company said that it is now considering a deal that would allow ClubLocal to be taken over by a “major” local entity along with a group that includes ex CEO Zorik Gordon and CSO Michael Kline. At the same time, ReachLocal would maintain a large investment in the business.

It is not a done deal. The company said it will “go shop,” or look at all options for the ClubLocal business until December 24.

ReachLocal’s move last Spring to develop “ClubLocal,” a consumer facing business to assign home repair jobs to vetted local services, met with some head-shaking within the industry. Reach has been seen primarily as a B2B service that did not appear to have the core competency or brand to work with consumers.

The service, however, went ahead and launched in Dallas and San Francisco, perhaps spending between $12 million and $15 million on the initial development and rollout. The main idea was that if Reach could provide SMBs with leads and actually process transactions for them, it would make for a much longer lasting relationship than simply relying on advertising solutions.

One of our BIA/Kelsey users of ClubLocal in Dallas reports that it provides excellent service. But there haven’t been extensive reports on its early business results. Soon after the launch, however, there may have been internal dissension about the company’s strategic direction.

CEO Zorik Gordon left the company, along with President Nathan Hanks. CSO Michel Kline had also announced plans to leave, although at the end of 2013. No explanations have been provided for any of the departures. Hanks is not part of the new group that will run ClubLocal if the proposed deal goes through.

In a discussion with BIA/Kelsey today, interim CEO David Carlick and CFO Ross Lansbaum wouldn’t comment on the executive departures, but noted that there is a search going on for a fulltime CEO; that Reach has become more of an enterprise business; and that B2C services such as ClubLocal are “not really our sweetspot.”

Carlick also noted that ReachLocal is going full speed ahead with its new ReachEdge product, a marketing automation and website project for SMBs. In fact, the company is accelerating deployment in Canada.

“Edge is the back part of ReachLocal – getting people to look at the local merchant Website and other offerings, and converting those visits into customer engagments,” said Carlick. “We have found the things that our clients tend to be worst at — like turning merchants into customers. We achieve results that are 200-300 percent better than what most merchants do now.”