InfoSpace Sees Green in Online Yellow Pages

  |  March 26, 2004   |  Comments

The search specialist will pay $160M cash for local Internetdirectory Switchboard.

Former House Speaker "Tip" O'Neil once said, "All politics is local," meaning that what mattered most to constituents was what happened in their own neighborhood. A similar philosophy is emerging in the search industry.

While search has grown to be an essential marketing tool for companies with nationwide reach, search players are increasingly positioning themselves to help users find information closer to home: the phone number of a local plumber, directions to the hot new restaurant or the name of the nearest auto repair shop.

Seeing that opportunity, InfoSpace said today that it will buy local Internet yellow page specialist Switchboard for $160 million in cash.

If approved, the deal will make InfoSpace the leading U.S. online directory provider. According to comScore/MediaMetrix, the companies' combined networks comprise approximately 23 percent of total online yellow pages searches, just ahead of Verizon's SuperPages site.

Some of the traffic Switchboard brings to the deal comes from the syndication of its listings to other sites, including America Online, which owns 8 percent of the firm, and newspaper sites owned by McClatchy Co., the Washington Post Company and the Houston Chronicle.

"We believe that traffic is the most valuable asset to own and we've substantially increased our share, improving our attractiveness to advertisers and distribution partners," Jim Voelker, InfoSpace's chairman and CEO, said on an investor conference call.

InfoSpace, of Bellevue, Wash., isn't alone in betting on the trend. Earlier this month, Google introduced a beta version of local search tools allowing users to search for local merchants by zip code, city name, or address. Google's offering depends on Internet yellow pages data, but it won't say who is providing the information. And Yahoo has been gearing up to bring the battle down to local level, relying partly on its own yellow pages information, which it gets from BellSouth and InfoUSA. Search player FindWhat.com also recently teamed with Verizon to add pay-per-click advertising listings on the telco's SuperPages.com site.

Industry watchers say the thick yellow pages books that phone companies drop on customers' doorsteps are still the primary source of local merchant information for consumers. The yellow pages industry generates nearly $15 billion in annual ad sales in the United States, but there's a movement toward online, according to The Kelsey Group.

In 2003, the online directory market was approximately $450 million. And the number of online yellow pages searches are projected to grow 25 percent annually and to account for more than 30 percent of total yellow pages searches by 2006, The Kelsey Group said.

InfoSpace's acquisition of Switchboard is expected to close around mid-year, and requires approval from shareholders, as well as Switchboard investor ePresence, which holds about 51 percent.

Assuming the Switchboard purchase closes on or near July 1, 2004, InfoSpace anticipates the pickup of the Westborough, Mass., company will contribute approximately $10 million to $12 million in revenue and $4 million to $5 million in search and directory segment income for the second half of 2004.

This article originally appeared in ClickZ News sister site, internetnews.com

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ABOUT THE AUTHOR

Susan Solomon

Susan Solomon is the executive director of marketing and public relations for Memorial Health Services, a five-hospital health system in Southern California. In this capacity, she manages promotional activities for both traditional and new media. Susan is also a marketing communications instructor at the University of California, Irvine; California State University, Fullerton; and the University of California, Los Angeles.

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