IAC Acquires Urbanspoon, Reports Decline in Ad Revenue

IAC has expanded its portfolio of local search sites with the acquisition of Urbanspoon, the online restaurant guide and review aggregator that spawned one of the most popular iPhone apps. IAC already owns Citysearch, Insiderpages and Evite.

IAC said it was committed to having as little impact as possible on the operation of the company, a commitment that extends to how it sells its advertising.

That will not be difficult to achieve, however, as Urbanspoon has been sharing content and advertisers with IAC sites as a member of the Citysearch Partner Network since 2008.

“They’ve never run their own direct sales force,” Jay Herratti, CEO of Citysearch, said. “Restaurants sign up to the Citysearch network and know they gets leads from them, too.”

Urbanspoon, which is based in Seattle, also pulls display ads from Google Ad Sense, Herratti said, though display advertising is ultimately a small piece of the site’s ad revenue.

“The money in local is being able to drive a customer who is looking for a specific business in a specific geography and is in a shopping mindset,” he said. “We’ll continue to do display but are focused on what we know is lucrative for them.”

The three founding partners of Urbanspoon continue to comprise its entire staff, and all will remain in Seattle. Financial terms of the deal were not disclosed. Indeed, the acquisition came to light on Wedneday when IAC announced its quarterly earnings. The deal actually closed more than two months ago, on February 13.

Revenue from IAC’s ad and media division was down 22 percent from the first quarter of 2008 to $167 million. The company blamed the decline on “broader economic pressures on advertising, coupled with certain actions we have taken that have improved the consumer experience and usage metrics on Ask.com, but have reduced monetization in the short-term.” Overall, IAC revenue dipped 10 percent to $331 million.

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