Hyperlocal M&A in 2014 — Here’s What the Big Acquirers Are Looking For
A week into the new year, and the hyperlocal industry already has an acquisition in the bag. YP, the digital wing of AT&T’s former yellow pages business that was sold to Cerberus Capital in 2012, acquired Sense Networks on Monday, adding a key technological component to its sprawling mobile search and advertising business. The acquisition comes as M&A activity in the local technology continues to increase, with the market seeing a number of larger, more material exits in 2013.
There are quite a few major tech and media companies with an interest in hyperlocal, either with an eye toward bolstering their current stable of offerings or to opening up new local markets. Here’s a quick look at four major players who may currently be in the hunt for locally focused acquisitions and what each might be looking for.
- Notable Acquisitions: Media Temple (Oct. 2013), Ronin (Oct. 2013), Afternic (Sept. 2013), Locu (Aug. 2013), M.Dot (Feb. 2013)
- Target focus: Social media analytics, presence management, small business services
It’s been a year since Blake Irving took the helm at GoDaddy, and the company’s turnaround is in full force. The former Microsoft chief product officer is repositioning the business (and brand) from a commodity seller of domain names to a full-service marketing services provider for small business, built around the core domain and web hosting businesses that continue to print cash for the company.
To get there, GoDaddy has gone on an acquisition tear. Irving and his team snapped up five startups in 2013, ranging from a website development in M.dot to a local publishing network in Locu. While three of the buys (Media Temple, M.dot and Afternic) served its core web hosting, development, and domain management businesses, the acquisition of Locu and Ronin, an invoicing startup, brought GoDaddy into new, adjacent, areas of business — a trend that will likely continue in 2014.
With an install base of over 12 million small businesses, and a SMB technology sector that’s innovating at a breakneck pace, there’s a lot of white space where the company could expand. But during a presentation in December, Irving narrowed the company’s plans for expansion, positioning the strategy around two key criteria: very small businesses and discovery marketing.
The first is fairly straightforward. When Irving and his team reviewed GoDaddy’s operations in the months after his hire, they found that the bulk of the company’s clients were mostly very small business — single person operations or 2-5 person outfits. The company is betting big on this market, and any technology which the company acquires will need to be able to serve clients with limited resources.
The discovery marketing component is a bit more opaque. Serving as intellectual center of the turnaround, the concept applies some of the big learnings from Hubspot’s idea of inbound marketing to the small business market. In terms of GoDaddy’s M&A strategy, the takeaway here is that the company will be less focused on more traditional lead generation and advertising services and more on software-oriented tools that help merchants ensure that interested customers can find the right information and services to engage with their business online. That means presence management, social media analytics, ecommmerce, and more.
- Notable Acquisitions: Docstoc (Dec. 2013), FullSlate (Oct. 2013), Level Up Analytics (Oct. 2013), DemandForce (April 2012)
- Target focus: Relationship management, ecommerce, online booking, loyalty, social media management
Put Intuit in a similar boat as GoDaddy. The company has built out a similar — albeit more mature — suite of software for small businesses around its core accounting product, Quickbooks. However, where Godaddy’s bread-and-butter is managing the way potential customers find a business online, Intuit is working from the bottom of the funnel up, starting with software to help businesses manage the back-office operations and then expanding to relationship management and other services typically associated with the front-office.
Intuit’s corporate development team was busy last year as well. After the massive, $450 million acquisition of DemandForce in 2012, the company made a handful of smaller buys in 2013, snapping up a scheduling system in FullSlate and a back-end document management tech in Docstoc.
Expect the company to invest in more front-office and marketing technology in the coming year. In a conversation last month, Patrick Barry, chief marketing officer at DemandForce, told me the company plans to increase the scale of its marketing automation product, expanding its reach beyond owned channels like email into social media and other third-party sites. That means that social media and presence management services might be in the company’s crosshairs.
- Notable Acquisitions: MoPub (Twitter, Sept. 2013), Spindle (Twitter, June 2013), Tagtile (Facebook, April 2012), Gowalla (Facebook, Dec. 2011)
- Target focus: Local discovery, mobile-local ad tech
Spending on location-targeted advertising has skyrocketed in recent years, but social is one area of the media industry that’s been slower to adapt. Long considered a major revenue opportunity for Facebook, and now Twitter, both firms have been slower to roll out localization tools to both consumers and advertisers.
However, as its core monetization efforts mature, Facebook, in particular, will need to develop and open new markets to sustain the type of revenue growth seen in the first few years after going public. The company now claims that more than 25 million small business use its platform, and has simplified its SMB ad products over the past 12 months. However, it still lacks the more complex location analytics and targeting tools that are quickly becoming commonplace in the mobile advertising market.
From a consumer standpoint, I still believe that Facebook could still benefit from buying Foursquare. There’s lots of implicit local activity on Facebook, and Instagram, but the company lacks a compelling system which can tie all of this activity together. Paired with its strong, if not growing, brand as a discovery tool, Foursquare’s analytics engine provide the needed anchor through which Facebook exposes the wealth of content and data the company’s has about users’ local behavior.
- Notable Acquisitions: Blinq Media (by Gannett, Aug. 2012)
- Target focus: SEO, Social Media Management, Presence management, mobile advertising
Last year, many media execs threw their weight behind a new marketing services model, in which legacy content businesses sought to make up lost revenue by selling SEO, social media management, and other tools to small businesses. As the logic goes, media businesses can use their large sales forces with deep relationships in the community to position them as marketing agencies to help SMBs navigate a tumultuous digital landscape.
Consequently, selling through legacy media companies like Gatehouse Media and Gannett has become a popular go-to-market strategy for many digital marketing and technology startups. But the question that remains is whether these companies want to rely on a third-party to source technology that’s contributing increasingly to their bottom line.
Some, like Gannett, opted to buy, not rent last year. The company dished out $92 million for Blinq Media, a social media advertising service that built software to sell ads on Facebook. Expect more of these buys as the big local media firms look to put some of that legacy revenue to use, building a business for tomorrow.
Steven Jacobs is Street Fight’s deputy editor.