ReachLocal Buys DealOn, Plans 'Deals Exchange'

As speculation about a Groupon acquisition persists, marketing services firm ReachLocal announced a deal of its own today with the purchase of DealOn Media. The acquisition, valued at $10 million, gives ReachLocal a ready-made local deals offering for its small business advertiser clients. Key to the deal is DealOn’s offers exchange, which pairs deal suppliers with deals publishers.

DealOn, a Somerville, NJ-based firm founded in 2009, operates in 18 markets. In addition to the DealOn.com site, the buy gives ReachLocal a platform enabling white-label or co-branded deals services for publishers.

It also gives ReachLocal a new so-called “deals exchange” platform. Currently in beta, the OfferEx system allows daily deal suppliers to upload deal offers and attach an amount the supplier is willing to pay as a commission to resellers of the deals.

“Our strategy is much more around syndicating deals rather than having a direct Groupon competitor,” said ReachLocal CEO Zorik Gordon. “That’s clearly where we think we can be a dominant player – via partnerships” through the white-label and exchange platforms.

Gordon argues the biggest barrier to success in the local deals space is garnering the deals from local businesses, whose willingness to do business is often contingent on longer-term relationships with vendors. “It’s a lot harder than it looks to get to these merchants…and get quality deals out of them,” said Gordon, who believes ReachLocal’s 700 salespeople can do it.

“ReachLocal’s customer base is really going to be the core of that; we’re betting that we will be the key supplier,” he said. The company has 48 offices worldwide and went public last year.

ReachLocal’s core business has been reselling search advertising, and offering other services such as social media marketing, display ad design, and SEO to small and local businesses. Historically, the company has competed head-on with traditional newspaper and yellow pages publishers. While traditional publishers may not want to work with ReachLocal on daily deals, Gordon believes large and small online pureplays – from Yahoo, AOL, and Google, to Yelp, OpenTable, and travel sites – will be willing to partner.

The local deals space is red hot, with continued speculation that Google is in acquisition talks with daily deals services following a spurned attempt to buy Groupon. Firms like Yahoo and local news publisher Gannett are exploring development of daily deals products, for example. Yahoo, which already partners with daily deals providers including Groupon, LivingSocial, and Gilt City for its “Local Offers” channel, recently told ClickZ News it may unveil a deals-type offering for its newspaper publisher partners – which include Gannett – later this year.

DealOn has around 30 employees, approximately half of whom are in sales and the other half in operations and management, according to DealOn CEO Rich Razgaitis. Razgaitis will now serve as general manager of ReachLocal Deals – the new home of DealOn and OfferEx.

According to Gordon, DealOn’s brand names will remain intact and employees will stay in Somerville for the time being.