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Voice - Friday, August 10, 2007

Marchex' Drumbeat On Local Ads Hits Voicestar

Marchex (NASDAQ) says it is paying $28M to buy VoiceStar, a specialist in call-based advertising services. The move established Marchex as a leader in annoying advertising. Marchex has spent a fortune on buying URLs that draw traffic based on misspellings of well known keywords. It is figuring out how to cash in on those keywords by tying them to local advertising.

Voicestar's scheme is to charge advertisers for every call that the receive. To be fair, there should be nothing annoying about pay per call (we have just been hit by too many marketing calls at home so are easily annoyed). Using VoiceStar, local advertisers that have yet to establish Web sites or sophisticated online marketing practices can place simple online ads that when clicked upon will result in trackable phone calls to these businesses. So users get what they want. Voicestar has a VERY impressive management team. With the talent that they have on-board, we'd be surprised to to seem them stay on with Marchex for long. First Round Capital and Felicis Ventures invested an undisclosed amount in VoiceStar.

With that, it is surprising how little revenue Voicestar has pulled in. Marchex tells investors to expect additional revenue of approximately $1.5M for the full year 2007 with just $500K in revenue between now and December. And with the headcount it is looking at a loss to boot.

Read - press release