For years, size wasn’t necessarily the most important thing in local marketing tech — smaller companies could create competitive products and carve out a profitable chunk of the largely fragmented marketplace. But that dynamic may be changing as new tools — and bigger players — start to take hold.
The latest move comes from UBL, a business listings syndication service that has spent the past few years reworking its product to compete with rapidly growing competitor Yext. Today the company is announcing a merger with Advice Interactive Group, which sells digital presence software to agencies and other small business marketing firms. Terms of the transaction were not disclosed.
The deal will bring together UBL’s global listings syndication network with Advice Interactive’s reputation management, SEO and analytics products — a suite that has become table stakes in the local marketing technology industry. Doyal Bryant, chief executive at UBL, said that the two companies together generated revenues in the $20 million range last year, split evenly — and that the combined company would now be the second-biggest player in the industry, after Yext.
After raising $50 million in venture funding last summer, Yext said that it expected to generate $55 million in revenue in 2014 — up from $34 million a year earlier. Yext chief executive Howard Lerman said in an email that the company would not comment on its revenue plans for 2015.
“The combination of UBL and Advice Interactive should make us the second-largest in the industry, and I believe that eventually there will be three or four large players,” said Bryant.
The breakout success of Yext’s data syndication product, which allows businesses to control local data across hundreds of sites, has undoubtedly shaped the trajectory of a still-maturing industry. By requiring publishers to use Yext data ahead of any other source, the company made the product exponentially more powerful as its each side of its network grew.
These types of network products — software that builds on the collaboration of multiple users — are essential in creating the economies of scale that drive consolidation in digital industries. Without networked products, industries inevitably succumb to the democratization and fragmentation endemic to the Internet, which necessarily reduces the barriers to entry for development and distribution.
We’re seeing other consolidation in the market as well. Over the past few years a handful of richly-capitalized new business and legacy firms have committed to selling marketing software to local businesses, creating a more established channel infrastructure through which technology can sell.
In addition to these legacy media firms, other tech-first players like GoDaddy and Wix, were originally web development firms but now are investing in the small business market. That means that a company can capture a much larger portion of the market with a only a handful of deals. And once those deals are set, it becomes much more difficult for a technology company to carve out a mid-market play.
What’s left is a dumbbell curve in the local technology industry similar to what’s emerged in media and other industries. On the one end, there’s a few large players who handle the tentpole products such as presence management, display, loyalty and web development. On the other, there’s smaller startups that develop and sell more emerging technologies and may, eventually, get acquired by the larger technology players.
But increasingly, there’s less of a business in the mid-market — and that may actually be a good sign for the industry. Bigger players with more established channel structures will create the sales strategy and exit opportunity needed to accelerate the investment in local, and particularly small business, technology.
Steven Jacobs is Street Fight’s deputy editor.