Gannett Buys ShopLocal at Reduced Valuation; PointRoll CEO Comments on Deal

As first reported by us on July 3, Gannett has purchased the 52.5 percent of ShopLocal that it didn’t own from Tribune, which owned 42.5 percent, and McClatchy, which owned 15 percent. The company’s valuation of $52.5 million reflects a sharp devaluation from 2006, when it was valued at $85 million.

Gannett, Tribune and McClatchy remain partners in CareerBuilder, Classified Ventures and Topix.net. Tribune and Gannett also jointly own the Metromix chain of city guides, and are partners in quadrantOne, a national ad net.

Cash-starved Tribune and McClatchy appear to have accepted the drop in ShopLocal’s valuation to reduce their exposure to the company, which is apparently expected to lose money this year. A McClatchy spokesperson noted that “the sale removes any potential for equity losses from ShopLocal’s operating results from our equity income. Our newspapers still have access to ShopLocal products and will be able to enjoy its future success in generating advertising revenues on their Web sites.”

ShopLocal also hasn’t been considered a key strategic asset for Tribune and McClatchy for some time. The company provides B2B and B2C sales information for major retailers and brands in a number of formats. While it has been positioned as a hub for advanced online services for retailers, it has struggled to jump-start local retailer marketing efforts and has suffered from a significant reduction in spending by national advertisers. Many advertisers have also been lukewarm on the need for “electronic circular” type products, especially coming from a company owned by newspaper companies.

“ShopLocal didn’t and still doesn’t work at all for the advertisers,” notes an anonymous comment on the Gannett Blog, an unofficial site. It is “a complete waste of money and another means of driving advertisers’ prices up and sending them along their way to another advertiser medium.”

Another anonymous commenter on the blog said that “dyed-in-the-wool print advertisers hate the unpredictability of the search results (you may come up first this week on a search for ‘camera’ but next week you may come up 10th) and our print reps still won’t learn how to use/sell it.”

Gannett, however, sees strong synergies between ShopLocal and its fast-growing 270-person PointRoll rich media unit, which generated 100 billion rich media impressions last year and is gunning for DoubleClick‘s business, especially now that the latter has been acquired by Google.

PointRoll CEO Jason Tafler, in a phone conversation with us, says the two companies will be positioned as “very close sister companies owned by Gannett.” At the same time, the ShopLocal executive team will stay intact. “It is a respected team,” he says. “I’m really excited. I’ve known them for several years.” Tafler adds that the takeover of ShopLocal by a single company will eliminate the “uncertain ownership structure under three companies.”

ShopLocal continues to have many unique and valuable attributes aside from a PointRoll relationship, Tafler adds. “It generates 25 million unique visitors a month. Gannett sees it as an excellent outlet for distributing its circular data.”

That said, Tafler also sees many joint synergies, given the trends with Web portals for “more sophisticated, dynamically generated ads, rich media surveys and analytics, proprietary data and retailer relationships. Retailers, automotive … they’ll see a perfect marriage. Our goal is an end-to-end solution,” he says.

Over the next several months, for example, PointRoll is rolling out a “next generation Paper Boy product” that is likely be used with ShopLocal. The key is really “understanding who the user is” via advanced targeting and analytics.

Tafler also downplays any sense that the acquisition of ShopLocal was at least partially motivated by the desire to have PointRoll replace DoubleClick for the electronic circulars, reversing an earlier contract that went the other way. While DoubleClick did win a large ShopLocal contract, “we never stopped working with them,” he says. It has never really been one or the other. The “Web audience is much more broad, more diverse. You want to extend the reach of data for clients to as many channels as possible.”