We believe that we are in the early stages of a large and long-term business opportunity presented by the shift of local marketing budgets from traditional media formats to digital media formats. Our strategy for pursuing this opportunity includes the following key components:
• Deploy new products on the Network
In 2011, we developed a number of products utilizing the technology acquired from Octane360 which now
comprise the core of our SMB ad products. Additionally, we acquired technologies through the Krillion and SMG acquisitions that have allowed for
the development of additional products. Many of these products are well suited to deployment throughout our Network creating many new
opportunities and channels for stronger and more defensible long term relationship with our Network partners.
• Add Network websites and expand Network content
Our Network growth strategy includes: adding new websites; expanding the content and products available to our network partners; growing the user base of our existing products through SEO efforts and content expansion; and improving our overall monetization per visitor through continued page optimization. We believe that expanded distribution increases our value in the local search ecosystem, thereby attracting new advertisers. This, in turn, allows us to compete for expanded distribution, creating what we feel is a virtuous cycle, with strategic defensibility originating from our significant base of traffic on our O&O properties. We further believe that over time, any local search network without an accompanying proprietary traffic source will find it increasingly difficult to compete.
From last 10K: "Our Network, which reaches over 12 million MUVs, is our second largest source of revenue and is our largest gross margin business by percentage and in real dollars. Our product is a nationwide database of local business and product listings along with ad feeds which monetize those listings. We provide our product in the form of a hosted solution or via an XML feed solution. Our hosted solution is designed to generate search engine optimization (“SEO”) traffic to our partners’ sites and this helps those partners to increase their reach to new online users. As with Local.the flagshipsite, we monetize those users with ads placed alongside our content and we share revenue generated from those ads with our partners. Our XML feed solution is provided to sites that prefer to maintain their own look-and-feel and we share revenues in a similar fashion. Our Network consists of over 1,200 partner websites, such as local newspaper, television and radio station websites and we have twelve month auto-renewing contracts with the majority of our partners. Our Network enables us to reach a larger audience than we can reach on our flagship-site alone."
• Optimize monetization. As an ongoing initiative, we continuously look to optimize our ability to monetize the traffic reaching our domains. In
particular, we apply scientific methodology when testing new user experiences that lend to both higher monetization/margin opportunities as well as
an enhanced user experience. In addition, we are leveraging the data from Krillion as another method of monetization across our properties.
• Add new targeted brands, products and services
We also expect to add new brands, products and services to our O&O business unit over time. Additionally, we anticipate that much of the content we develop or acquire for our own O&O properties may also be useful to enhance the product and content offerings we make to our network partners. Our Octane360 acquisition has provided us with some of these attributes including: the ability to quickly create websites focused on particular geographic areas and categories; and to populate those websites with targeted content that we
believe will be useful to both our core demographic and our advertisers. In December 2012, we announced the launch of certain vertical sites that focus on lead generation opportunities and expand our monetization methods and in January 2013, we announced the launch of the United Kingdom (“UK”) version of our flagship-site to expand the geographic footprint of our offering.
• Increase organic traffic
Our O&O growth strategy continues to be focused on increasing organic traffic to our websites, which includes organic and SEO traffic and expanding the monetization of the users we reach today. We believe that adding more content, such as product pricing and inventory information from Krillion, and presenting that content in a useful way to our users, will ultimately drive more organic and SEO traffic over time, both of which are our high margin traffic sources, compared to SEM sourced traffic. We plan to add more content to the website by launching verticals that appeal to our core demographic of soccer moms – for example: shopping; education; and health & wellness. If we are able to increase the amount of type-in and SEO traffic that our flagship-site receives, we may be able to reduce our reliance on lower-margin traffic we acquire from other search engines.
• Diversify product offerings
In 2010 and 2011, we took steps to diversify our revenue sources, while maintaining our focus on local offerings through the acquisition of: Octane360, which serves as the technology platform for many of our SMB ad products, in the third quarter of 2010; Krillion, which provides near-real-time product and inventory information; and SMG in mid-2011. Our development and acquisition efforts also represent a point of differentiation from an increasingly crowded field in online advertising. We believe that a diversity of offerings will differentiate us from certain of our competitors that may offer only one or two of our services, but not the full suite of our product offerings which we believe appeals to our customers and partners alike.
• Increase growth drivers
Key to driving our growth is: the expansion of both our reach (the number of MUVs we serve) and the monetization of that reach (how much ad revenue we generate from those users); and by increasing the number of SMB customers using our platform.