Financial analysts have initiated coverage of ReachLocal (RLOC). The other day I got the first report of that coverage from Citi’s Mark Mahaney. The firm conducted a small online SMB survey as part of its due diligence, which it discussed in its research note.
Below are some interesting facts/data and charts pulled that note:
- Revenue grew 38% in ’09, with organic growth of 41% Y/Y in Q1 (ex-ReachLocal Australia acquisition).
- We estimate that RLOC will grow its 2010 revenue to $284MM, up 40% Y/Y, and that the ’09-’12 revenue CAGR will be approximately 40%.
- International revenue currently accounts for about 15% of its total revenue.
Here’s the discussion of the survey:
As part of our due diligence, we conducted a survey of over 110 small businesses (n=112) across all DMAs in the U.S. . . . Because we were targeting SMBs, we wanted businesses that were smaller than 50 employees and spend a material amount marketing their businesses.
Of the SMBs we surveyed, we found that 87% use some form of online marketing, while only 13% don’t market online. Also, it appears that 71% tend to do online marketing in-house.
The finding “that 87% use some form of online marketing” is high in terms of the overall SMB population. It partly depends on how we define “marketing.” But if we include any sort of “online presence” the survey numbers now go well above 50%.
Here are a few of the charts from the Citi note:
This is from the SMB survey as well as those below:
This slide (again with a small sample) indicates that there are probably considerable numbers of SMBs that are doing very limited or no “advertising.” However it must be kept in mind that “advertising” and online marketing are not identical. Creating a Facebook page, Twitter account or claiming and enhancing listings on Google or in Yelp are all free marketing activities.
By contrast we had difficulty finding SMBs that had worked with any of the local online marketing firms:
Source: Internet2Go/Opus Research, 6/10 (n=111 US small businesses with 99 or fewer employees)
So the “half full” version of this slide, as well as Citi’s Figure 7 above, is that there is a vast market of SMBs out there waiting to be exposed to the services offered by Reach and others.
June 30th, 2010 at 7:03 pm
Nothing against ReachLocal but it sure seems like Citi pulled their data out of somewhere local.
June 30th, 2010 at 7:04 pm
Nice pun there. As I said the sample was small. I don’t know how they found the Reach advertisers. As I said I can’t find them randomly in the market.
June 30th, 2010 at 8:34 pm
How much you want to bet they hit http://business.reachlocal.com/ and started dialing?
June 30th, 2010 at 8:40 pm
Probably so.
July 1st, 2010 at 4:11 am
Hi Greg – Thanks for posting this data. We agree that the market opportunity for providing digital marketing products and services to small businesses is significant. A couple of things that I think are worth calling out: (1) An online-only survey comprised of only ~100 small businesses is of somewhat limited value given the sample is small and many small businesses are still not active online. (Therefore, a more valuable data set would include a mix of email and phone participants.) (2) The last chart highlighting that most small businesses have not worked with the likes of Marchex and other online marketing service providers is not at all surprising. As you know, most of the companies highlighted do not sell directly to small businesses, but rather power private-label online marketing programs for leading IYPs, broadcasters, newspapers, etc. Best, Brooks
July 1st, 2010 at 3:01 pm
The last chart is based on my survey. The previous ones are from the Citi survey. Yes 100 respondents makes it nearly impossible to generalize anything. I wrote it up because it’s interesting data as a general matter.