Marchex Adds Call-Based Advertising Services to Local Advertising Platform with VoiceStar Acquisition
August 09 2007 - 4:05PM
Business Wire
Marchex, Inc. (NASDAQ:MCHX) (NASDAQ:MCHXP), a local online
advertising�company�and leading publisher of�local content, today
announced that it has entered into an agreement to acquire
VoiceStar, one of the largest providers of call-based advertising
services, including pay-per-phone-call and call-tracking, for local
advertisers. The acquisition of VoiceStar gives Marchex a clear
leadership position in local online advertising by adding
call-based services to its local online advertising platform,
making it one of the most comprehensive offerings available, and
expanding Marchex�s base of local advertisers and large
aggregators. Marchex total anticipated investment to acquire
VoiceStar will be $28 million, consisting of approximately $20
million in transaction consideration and $8 million in company
investment. Specifically, transaction consideration consists of
approximately $12.9 million in cash consideration and Marchex will
issue approximately $7.1 million in restricted stock that is
subject to vesting over two-and-one-half years from closing to
certain employees of VoiceStar; and company investment consists of
$8 million relating to products, infrastructure, human resources
and other items through 2008. The acquisition is expected to close
by October 1, 2007. VoiceStar will continue to operate from its
headquarters in Philadelphia, PA. "With the addition of VoiceStar,
Marchex offers one of the most comprehensive online advertising
platforms and agency services for local advertisers at scale in the
industry. We can now offer local aggregators a private label
search- and call-based marketing platform with distribution for
their advertisements in search engines, vertical Web sites, and on
our network of local Web sites," said Peter Christothoulou, Marchex
Chief Strategy Officer. �Additionally, we can now also add
proprietary pay-per-phone-call advertising units to our network of
local Web sites, which allows us to increase the direct
monetization of our own properties.� "We are very excited to be
joining forces and bringing the value of our combined assets to a
greater audience," said Todd Lieberman, VoiceStar CEO. �We share
Marchex�s vision for unlocking growth opportunities in the local
space and look forward to being a part of the innovative solutions
Marchex brings to the marketplace.� In addition to enabling Marchex
to offer one of the most comprehensive local advertising platforms
in the industry, the VoiceStar acquisition adds more than 100 local
advertiser aggregators, including Comcast, The Cobalt Group, and
YellowBook USA to Marchex�s current partner roster which already
includes AT&T and Yellowpages.com. VoiceStar also increases
Marchex�s ability to directly monetize its proprietary network of
Web Sites, lessening its dependence on third-parties and increasing
the revenue yield from its Web sites through the utilization of
call-based advertising units which tend to have higher rates then
pay-per-click listings. Pay-Per-Phone-Call Offers Significant
Growth Opportunities: In addition to the growth opportunity
associated with the pay-per-phone-call market which the Kelsey
Group estimates will reach up to $4 billion by 2009, Marchex
believes that providing advertisers with call-based advertising
options, in addition to search-based marketing tools, is a
prerequisite to success in the local advertising channel. According
to Piper Jaffray, only 42% of the estimated 20 million small- to
medium-sized businesses (SMBs) in the U.S. have Web sites and many
others are still are at the early stages of online marketing. As a
result, call-based advertising will continue to be a priority for
local advertisers, further evidenced by a recent Kelsey Group
survey reporting that 71% of local advertisers would rather pay for
phone calls versus clicks. �We believe that call-based online
advertising is not only a key extension of local search, but is
also an important driver to close the gap between the vast number
of consumers searching locally and the small percentage of local
businesses currently advertising online,� said John Keister,
Marchex President and Chief Operating Officer. �Phone calls have
been, and will continue to be, a predominant way in which consumers
connect with small businesses. Providers that deliver both search-
and call-based solutions will be in a tremendous position to expose
online advertising to the millions of SMBs who are not yet online.�
VoiceStar�s technology generates custom, trackable phone numbers
for advertisers. Whenever an advertiser�s phone number is dialed by
a consumer who sees a relevant advertisement (online or offline),
the calls are routed through VoiceStar�s servers to the advertiser.
From that point, the call is tracked, monitored, recorded and
billed. The technology supports multiple advertiser
implementations, including: click-to-call, Web form-to-phone and
other call-based products. The combination of VoiceStar�s
call-based offerings and technology with Marchex�s search-based
offerings delivered through Marchex Connect, Marchex�s local online
advertising platform, provides significant benefits for local
advertisers and aggregators as well as national advertisers.
Aggregators will now have expanded integrated search- and
call-based offerings to present to their large base of local
advertisers. In addition, national advertisers will increasingly
benefit from integrated search- and call-based options from Marchex
by enabling them to better target their ads locally and more
effectively measure the offline revenue driven from their online
marketing using call-tracking. Marchex Updated Financial Guidance:
The VoiceStar transaction has the following anticipated financial
impact to Marchex. 1. While Marchex will only recognize a partial
year contribution from VoiceStar, it believes that VoiceStar will
generate revenue of approximately $1.5 million for the full year
2007, with an operating income loss. Revenue contribution to
Marchex from VoiceStar for the remainder of 2007 is anticipated to
be $0.5 million. Additionally, based on current VoiceStar growth
rates, Marchex anticipates that VoiceStar�s 2008 contribution will
more than double its total anticipated 2007 revenue, excluding
cross-selling opportunities with Marchex. 2. Marchex expects that
investment in VoiceStar and various call-related opportunities will
total $3 million in 2007 and $5 million in 2008. The investment
will primarily be directed toward: (i) increased infrastructure,
communications platform investments, and investments in technology
and development to drive integration into Marchex and launch
marketplace systems (pay-per-phone-call system for syndication
across relevant proprietary and third party Web sites); (ii)
Marchex partner support; (iii) increased sales, marketing and
business development initiatives; (iv) increased intellectual
property development, (v) increased personnel costs; and (vi)
increased expenses to support Marchex�s public company
requirements. About Marchex, Inc. Marchex (www.marchex.com) is a
local online advertising company and leading publisher of local
content. Marchex's innovative advertising platform delivers search
marketing products and services for local and national advertisers.
Marchex's local content network, one of the largest online, helps
consumers make better, more informed local decisions though its
network of content-rich Web sites that reach tens of millions of
unique visitors each month. Forward looking statements: This press
release contains forward-looking statements that involve
substantial risks and uncertainties. All statements, other than
statements of historical facts, included in this press release
regarding our strategy, future operations, future financial
position, future revenues, projected costs, prospects, plans and
objectives of management are forward-looking statements. We may not
actually achieve the plans, intentions or expectations disclosed in
our forward-looking statements and you should not place undue
reliance on our forward-looking statements. Actual results or
events could differ materially from the plans, intentions and
expectations disclosed in the forward-looking statements we make.
There are a number of important factors that could cause Marchex's
actual results to differ materially from those indicated by such
forward-looking statements which are described in the "Risk
Factors" section of our most recent periodic report and
registration statement filed with the SEC. In addition, Marchex's
acquisition of VoiceStar remains subject to customary closing
conditions. KEYWORDS: Search Marketing Online Advertising Search
Engines Shopping Search Local Search
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