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Advertising - Tuesday, December 22, 2009

Small Biz Ad Network ReachLocal Files IPO Papers

ReachLocal out of Woodland Hills, CA has filed for a $100M IPO. ReachLocal's clients are small and medium-sized businesses. It helps them to acquire and retain customers via the Internet with a suite of online marketing and reporting solutions, including search engine marketing, display advertising, remarketing and online marketing analytics.

The campaigns are indeed small. As of September 30, 2009, the company managed 17,600 active campaigns across 14,500 active advertisers, of which a substantial majority spends from $500 to $3,000 per month. That's a lot of clients but the addressable market is huge. There are roughly 7M SMBs in the US alone. And we know that most of these businesses do not have online lead gen has a core strength and need to outsource that.

The company reports over $143M in revenue for the first nine months of 2009, compared to around $100M over the same period last year. Its net income for the 2009 period is $11.66M, compared to a $4.47M loss in 2008. ReachLocal raised around $68M in VC funding, from VantagePoint Venture Partners (which owns over half the pre-IPO stake), Rho Ventures and Galleon Group (yes the disgraced PE firm whose founder recently did an insider trading perp walk).

ReachLocals top competitors are Yodle and Clickable. But all of these companies are looking to take away business from the yellow pages and local newspapers.

ReachLocal is led by co-founder and CEO Zorik Gordon who was CEO of online games biz WorldWinner and before that he founded Jackpot.com out of Idealab.

Of the companies that have filed to go public in the past few days, we like ReachLocal best we have to say if for no other reason than the market is huge and ReachLocal has momentum that will be hard to catch. If it can develop a brand (even one on par with GoDaddy) the sky is the limit.

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