Last week, Local Corporation, the parent of Local.com, announced multiple moves signaling a shift toward a savvier model — including the hiring of a firm to help the company “explore strategic alternatives.” The announcements come almost exactly one year into CEO Fred Thiel’s leadership.
Street Fight spoke to the CEO (who will be a speaker at Street Fight Summit West on June 2nd) about the company’s plans, the future of local directories and what a local search directory can learn from the workings of the stock market.
Local.com is in the interesting position of being a relatively young company, but also, to an extent, a legacy firm. What does this mean for you as CEO? What’s your vision for the near future?
I came in with the goal of trying to transform the company into a sort of modern search marketing business, away from the legacy search marketing and business listings that Local.com is best known for. My background has always been about coming in and transforming businesses from a legacy business to something new. What I love about Local.com is that the years of experience the company has in search have created a huge opportunity in two areas. One is in programmatic, the other is in mobile search.
We came up with a set of initiatives that we’ve been executing that allow us to leverage the traffic and data we collect about consumers and consumer intentions through our search business, and leverage that programmatically. We’re well on the way to building a programmatic platform. On the mobile side, we wanted to provide a solution for search for mobile phone users that was different than what the Google/Yahoo traditional browser vendors were doing.
Those are big trends with a lot of competition. What insight has shaped the way you’ve approached those markets?
We realized there were two ways to go to market there: build something specific for consumers, where the consumer would drive choice; and build a business model that focused on providing mobile carriers with solution that was more relevant for their consumers and allowed them to drive the demand generation for the product. Otherwise, we would have had to convince consumers to download a custom app, which is a very hard business to do.
The company just announced that it hired a firm to examine strategic alternatives. Can you expand a bit on what that means and where you see potential opportunities?
A number of interested parties have approached us, and as a public company we have a fiduciary duty to our shareholders to evaluate properly and walk down a process to see what makes sense, especially considering the fact that our stock is currently trading at a very low valuation. That makes us an attractive target. We obviously have to go down that path [of hiring the firm], and it opens up some interesting opportunities.
Depending on the nature of the transaction — if one happens, and there’s no guarantee that one’s going to happen — it could potentially provide the company with a great opportunity to maybe sell the traditional owned and operated network businesses that have been its legacy, and focus wholeheartedly on programmatic and inquiries. In a way, it could actually be an accelerator and an enabler for us to do what we really want to focus on, which is creating great value for our shareholders.
In the decade or so prior to your arrival, do you think there were any harmful strategic decisions for Local.com? What has the company learned since?
If you look at Local.com’s trajectory over the years, it’s a 15-year-old business, public for 10 years and, for the most part, [still] doing today what it’s done for the past 10 years. In a business where a lot of your revenue — whether it’s traffic or advertisers — is dependent on a couple of very large partners, anytime your company has that dependency, there’s risk. If you go back over the history of Local.com, what you’ll find is that they were very closely tied to Yahoo and Microsoft. When the two of those decided to do search together, it impacted Local.com’s business.
A lot of what we’re doing today with our programmatic and inquiry mobile products is really about moving away from that type of silver-bullet risk, where one person has the opportunity to put you out of business. That affects how the public market perceives us as an investment, because if they know that a policy change by a Google or a Yahoo could affect us, then they’re going to discount the value they put on the company because of the increased risk.
Do you think the local directory model is still viable?
It’s changing. I think over time, more and more of what local directories do will be absorbed into apps. Yelps, Trip Advisors. I think we have yet to see the last Foursquare-type app out there. Facebook will certainly have something like that. Predominantly, people are on their phones, they want to use local directories when they’re on their phones and they’re searching for something near them.
We’ve been very good at being able to supply that data to them, but more and more, through deep-linking, apps are going to get more intelligent. You tend to spend most of your time in a handful of apps. If those apps can do more for you, you’ll spend more time there, which means the app owners can sell more advertising. I think it’s a business that’s in a slow transition, but that being said, how many years have the Yellow Pages been printed profitably? The online version of that continues to be a very viable business, but as more and more traffic moves to mobile, you’ll see a shift.
Also earlier this week, you guys announced a partnership with RocketFuel. From a structural standpoint, how does the shift to programmatic sales alter the way you build your business?
In the traditional advertising world, you had to have a sales force that had relationships with advertisers. If you were an ad network, you had to have a sales force that was focused on building relationships with publishers. The world of programmatic enables you to now remove the inefficiencies of that very personal relationship-based business and go more toward one which makes the advertising industry look like the stock markets.
Because we have all this search intention data — we have 200 million unique consumers a year who come through our owned and operated business — we know a lot about what people want, because all of the people searching through our systems are looking to buy something or find a place to buy something. It’s not people searching for Justin Bieber’s latest adventure or who won at the Oscars. It’s “Where can I buy? What are the opening hours? What’s the price?” That gives us a huge insight into audiences, and it allows us to, on behalf of our advertisers, go out and procure traffic which will have the highest likelihood of conversion.
Do you see the selling of first-party data as a potentially meaningful revenue stream for the company?
The selling of data could be very interesting. But the bigger play here is really to trade. This goes back to the concept of stock trading — if I know what consumers want to buy, I can go find advertisers that can target those specific consumers. I can do that smarter than other people because I have more data. Say you do a search — you’re going to a wedding and need a gift. I can infer that you will have completed your search and bought the item within two weeks. Afterwards, there’s a low likelihood you’re still looking for that.
I’m effectively doing what’s called audience extension — leveraging our first-party commercial search intent data and monetizing it. We’re actually doing arbitrage in the advertising world, similar to what people do in the stock market. It’s a very scientific approach to the buying and selling of impressions, and filling demand on the advertiser’s side based on that knowledge. That business is very large, potentially.
You’ve been involved in a range of technology ventures, both as an investor and an executive. When you look at the rate of investment in local today, do you think it’s merited?
I think local is going to become much more relevant as soon as the brand advertisers are able to close the loop successfully on attribution, so they can understand when somebody has bought their product and what they did in the full chain of discovery to purchase, to know how better to spend their advertising dollars. The challenge remains: “I am a jeans brand, I do brand advertising and I subsidize my retailers to offer coupon-type advertising? But what I really want to know is: who is my audience? Where are they? Where do they search for information and where, in that funnel of discovery to purchase, can I be hitting them to maximize the effect that I have on everything I’m doing?”
Annie Melton is a contributor to Street Fight.
See Local Corp.’s Fred Thiel at Street Fight Summit West in San Francisco on June 2nd. More info and buy tickets here.