Investment Newsletter Sees Data Loop Closing, M&A Levels up 186%

The June 2012 issue of The Hyperlocal Investment Report, a monthly newsletter that takes a deep dive into the financial state of the industry, has been released. Key takeaways from the report include:

* EBay Looks to Close Data Loop: Lead Generation, Loyalty Converge Around Payments Industry
EBay (NASDAQ: EBAY) took a major step toward an integrated local strategy in May, bringing WHERE — the location-based advertising network that the company acquired in 2011 — under the PayPal brand as PayPal Media Network.… The entity will serve as the lead generation engine for eBay’s growing local offering, which includes ecommerce capabilities through ebay.com and shopping.com, product search through Milo, in-store comparison-shopping via RedLaser and payments processing through PayPal… Street Fight believes integration with the point of sale, either via a partnership or through a proprietary payments product like PayPal, is a necessary point of differentiation as products look to create a seamless flow of data from customer acquisition to in-store conversion to retention. Read more.

* Content Economics Issues in Hyperlocal Media: Tribune Outsources, AOL Defends
The Tribune Company, which operates the Los Angeles Times and Chicago Tribune, announced a strategic investment in new-media startup Journatic that will see the quickly growing content production company take over operations of TribLocal, the legacy media company’s network of 88 hyperlocal sites…. The inhibitive cost for hyperlocal media is largely around content creation – paying professional writers and editors is expensive and the cost does not decrease with scale… Street Fight believes that for margins to warrant investment, a model must build on proprietary data management and curation technologies and structure staffing around those capabilities. It’s important that a team’s leadership considers the business as much a technology play as it does a media company. Read more.

* Google, Facebook Look to Unproven Self-Serve Model: Shift in Focus from Consumer to Merchant Pits Major Players in Direct Competition
May saw a major repositioning in the hyperlocal industry with Google (NASDAQ:GOOG), Facebook (NASDAQ:FB), and Foursquare announcing new initiatives to scale existing offers programs… The push marks the onset of a potential showdown between Google and Facebook over local marketing spend (a $38 billion pool, according to BIA/Kelsey), and periods of intense competition between once-adjacent startups like Foursquare, Groupon (NASDAQ:GRPN) and Yelp (NYSE: YELP) as they look towards revenue growth…. Street Fight believes that the decision by the major players to remain self-serve, and thus remain high in the stack, will open opportunities for merchant-facing marketing services to bring their products to market. Read more.

* The Financial Update: Hyperlocal Raises $53 million in May; Directories Look to M&A for Answers
M&A activity is picking up in the local/hyperlocal sector. Year to date, 2012 transaction levels are up 186% compared to prior year and the list contains a large number of active acquirers… On the financing side, 30 hyperlocal companies received $53mm in private funding this past month… As companies are looking to bulk up on their online-mobile-local offerings to merchants and customers, we expect to continue to see strategic themes driving acquisitions and also active VC support in the sector in the coming quarters. Read more.

* Acquisition Spotlight: Yell Group Snaps Up Moonfruit for $37 million
On May 16th, The Yell Group (LSE: YELL; Enterprise Value: $3.5b) announced the acquisition of Moonfruit for a total consideration of $37 million. Moonfruit brings Yell an easy-to-use, self-service platform allowing local merchants a robust web, Facebook and mobile presence, both for marketing and direct commerce purposes…  While the old guard remains important, particularly for their merchant relationships and sales forces, it’s a new breed of local/hyperlocal solution provider who will more likely drive headline M&A transactions. Read more.

The newsletter is written and edited by Street Fight associate editor Steven Jacobs, with contributions from Palo Alto-based M&A advisory firm Architect Partners. Buy the latest issue, or start an annual subscription today.