RHD Aims to Carve B2B Niche with Business.com Buy

They may not have as much play as competitors in the consumer-aimed directories space, but R.H. Donnelley Corporation’s purchase of Business.com will help the company carve out a niche in digital B2B directories and search. The yellow pages publisher, recently-turned local search player, has agreed to purchase the business directory and performance-based ad network for $345 million.

“They’ve already been doing a lot of business-to-business stuff in Chicago,” said Kelsey Group Analyst Neal Polachek, noting RHD’s Chicago B2B site, which allows people to compare vendors and create personal directories. “I think this Business.com purchase is a reflection that they’re going to go down a different path than some of the other publishers.”

The firm scooped up local search marketing consulting firm LocalLaunch last September to bolster its local search engine marketing and pay-per-performance ad services. At the time, RHD expressed an interest in pursuing B2B clients among other advertiser verticals through the acquisition.

Business.com also runs how-to guide site Work.com and a performance-based ad network which serves up keyword-targeted text ads on sites such as Hoovers, Wall Street Journal Online, and Forbes.com.

“The business owners that are first going to do SEM/SEO stuff are business-to-business,” said Polachek. “People aren’t going to use the yellow pages to find a screw manufacturer anymore.”

Indeed, because B2B directories are mainly virtual these days, RHD’s full-fledged move into B2B correlates with its intentions to focus on digital media, including mobile. During the company’s Q2 2006 earnings call today, Chairman and CEO David Swanson said of the Business.com buy, “We wanted control over the PDA platform and that technology, and we felt that was very important.”

Swanson also stressed the Business.com platform will supplement RHD’s DexKnows.com, its unified local search site launched in April. “We got a lot in this acquisition…[including] the technology and platform capabilities that we needed for DexKnows.com,” he said. The plan is for Business.com and DexKnows.com to continue to operate separately, according to Swanson.

Besides tech brawn, Swanson believes Business.com will bring executive brains to RHD in the form of Business.com founder and CEO Jake Winebaum. Pending standard regulatory approval of the acquisition, Winebaum will head operations of RHD’s interactive unit, RHDi, as president; RHDi will act as the hub for DexKnows.com, LocalLaunch and the Business.com entities.

The interactive unit’s current head, SVP George Bednarz, will serve as an advisor to Winebaum over the next several months, and eventually will take on a “new leadership role,” said Swanson. The shift “will have an immediate impact on our interactive unit,” he added.

Overall ad sales in the second quarter of ’07 for RHD totaled $729 million, up 2 percent over Q2 2006. Q2 2007 net revenue was $667 million. RHD does not break out its online revenues, but Swanson did say the company’s digital revenues “grew significantly in first half of the year.”

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