Earlier this week, Woodland Hills-based ReachLocal (www.reachlocal.com), which helps small and medium sized businesses place online ads, announced a deal to buy daily deals site DealOn.com. The buy puts ReachLocal squarely into the fast growing area of daily deals, but also potentially into competition with such companies as Groupon and LivingSocial. To get some perspective into ReachLocal's entry into the daily deals space and where it sees the acquisition fitting, we spoke with Zorik Gordon, CEO of the company.
So what is the strategy behind the acquisition, and how do you see this fitting into the daily deals area?
Zorik Gordon: We're excited about the acquisition. The strategy is really very similar to what we've done in search and display. It's a sourcing syndication strategy. We're going to local merchants, getting deals, and building the DealOn network. Publishers will be able to display those deals, and we're building a publisher network which will enable lots of publishers, big and small, to enter the deal space. We're looking to enhance the deal space with sourcing of deals. The big problem we've found is there are lots of local publishers who have eyeballs, but don't have the ability to source deals across a large geography.
You're entering into a fairly crowded area, what's the value that ReachLocal adds here?
Zorik Gordon: We have 700 sales people, and nearly 20,000 local merchants already. We have vast experience in sourcing merchants, and are probably the leading source of SMB dollars for search and display. We are extremely well positioned. Unlike companies who might have one or two markets and only five to 10 employees, we've got 48 offices across three continents. It's definitely a different level of scale. We want to partner with other people, and help them by solving the sourcing and distribution. It's not as much of a consumer play.
What made you decide to specifically buy DealOn, given the number of companies in the industry?
Zorik Gordon: One, is we really liked the management team. Two, and a big part of what attracted us to them, was they had a white label and exchange strategy. They have the technology suite, which helps us to connect to those partners. That really gave us all the capabilities we needed from a product and technology perspective. Between those things, it was really a perfect intersection of things we were looking for, so we went and acquired them.
How quickly will you be building on what DealOn currently has running?
Zorik Gordon: We're going to be moving pretty quickly with integration, and rolling out aggressively in 2011.
You've got lots of contact with local advertisers -- how aware are they of the whole daily deals phenomenon, and where do you see this market being now?
Zorik Gordon: It's huge, and it's still early, and it's going to get much larger. It will be a ubiquitous part of the landscape, for years to come. I think you'll see daily deals everywhere, though it may evolve in how it is delivered. I was talking with Greg Sterling yesterday, and 85 percent of local merchants haven't even heard of or tried local deals. I think there is a huge, untapped market and lots of consumers, as well as a lot of merchants, who need to be doing this.
Another thing about our strategy is connecting this to Bizzy. We see an intersection of recommendations and deals as a really attractive opportunity. With Bizzy, we give you personalized recommendations, so we'll be able to send you deals in Bizzy which are also personalized. It's an interesting opportunity to pursue, and a sourcing and network play. It's empowering people in the deal a day space, through our white label or exchange with DealOn, and later direct to the consumer through Bizzy in the second half of the year.
We're not trying to out-Groupon Groupon. But, I think deals will be here to stay, and will be ubiquitous, and will grow in usage. However, it's not a great model sending hair salon deals to guys, which is not the best targeting. That's where we can add value, sorting through deals, and combining recommendations and deals, which could be really powerful.