ReachLocal Bets Commerce Model on Larger Local Movement

reachlocalMany consumer tech companies are zeroing in on local advertisers. Take Foursquare, which has rolled out a self-service tool to facilitate small-business ads, and Groupon, which is backing away from the deal-a-day email (direct-offer emails accounted for less than 40% of transactions in Q2) in favor of mobile and a burgeoning local marketplace to draw in consumers and get them searching natively.

Local search-advertising and retargeting company ReachLocal has worked to streamline the sometimes complicated task of connecting local advertisers with online media. It recently partnered with deal site Yelp to integrate new product ReachCommerce to fuel merchant transactions in-app.

Zorik Gordon, ReachLocal’s co-founder & CEO, spoke to AdExchanger.

AdExchanger: Give us a brief refresher on ReachLocal and what you do.

ZORIK GORDON: We started the company almost 10 years ago to focus on helping offline businesses move from offline advertising to online advertising. We saw that as huge opportunity. These businesses were appropriating almost all of their dollars to Yellow Pages and even although Google was already pretty dominant, they were having a really difficult time understanding how they should be moving those dollars over.

That’s really what ReachLocal was about. We built a technology platform that was highly scalable, so we were able to manage thousands of individual advertisers. We came up with technology where we could track phone calls, so we could go back to advertisers and say, ‘Hey, you’re spending $2,000 a month on search and we drove you 200 phone calls, and you could hear those phone calls,' which was something they were never able to get with the offline media sources they were using before.

One of the big things we did was we built a really big sales force because that was one of the issues with local. You had to be able to go out and reach these guys and we really built probably the first global digital sales force and we did that across North America and expanded that very, very aggressively. Now, as of today, we’re in 17 countries and five continents with about 800 salespeople, doing 30,000-plus campaigns and we do about half a billion dollars a year in revenue from these businesses.

ReachLocal has been immersed in display ad and retargeting efforts for local advertisers. How have you expanded?

We started with search because that was really the first disruption in local – moving your directory Yellow Page spend over to search and we’ve expanded it now where we do display, retargeting, social through our ReachCast product, and so really a full suite of lead-generation services on behalf of these clients. We just recently announced that we’re moving more into the website and marketing-automation business, so not only do we drive you this lead, but we drive it into a website that we’ve built for you that has marketing automation built in, and we are also able to track the performance of other sources of traffic we send you. So beyond what we drive, and beyond the clicks we send you from Google, we want to provide a full picture of SEO and other traffic sources to give [clients] a really robust marketing suite.

Where have you seen the most traction with local?

Our biggest product, by far, is the ReachSearch product. The local businesses love the direct-response kind of model of the Yellow Pages. We see good growth in display and on social. It also depends on the market because we’re such a global company now. Today, in the US, there are less and less folks who are not on search now, so it’s more of a mature market. I think internationally, in Japan and Brazil, we’re in the very early stages of getting local businesses to start advertising there, and search is a dominant player there.

Where are you focusing your efforts in commerce? It looks like you’re pivoting from marketing automation to actually managing payments, etc.

The real big next step for us was around commerce, so we were not only providing marketing services, but we [wanted to have] a software-as-a-service platform that could run SMB websites. From putting a booking widget on a website to automatically sending text notifications to customers to do online scheduling and notifications, employee management and customer management. If it’s a home services business, it’s being able to take orders and payments.

ReachCommerce has been a quantum leap for us because it takes us from the marketing part of the equation where we manage the leads, through to the bookings and handling all aspects of the funnel. This has led us into the ability to do things like we just did with Yelp, where if we have your schedule and all your information and we’re putting a widget on your website, we can also place that information on sites like Yelp, so merchants can offer booking. It’s a big extension and we’re excited about it.

ReachCommerce is really early and we’re just in beta. Obviously Yelp is one of the strongest brands in local. From a local influence perspective, it’s right up there with Google. There are three really powerful brands and it’s Google with search engines, Yahoo and then it’s Yelp, and, one may argue, Angie’s List. They control all of the local consumer demand. I think it adds a layer to ReachLocal, where it not only makes the customer experience better, but it’s going to run your back office and allow you to potentially bring in new customers via these booking deals.

Do the social platforms, such as Twitter and Foursquare, with their work to develop small-business ad products for merchants, pose a challenge or opportunity in “who owns” first-party local data?

They have so much usage and a lot of companies have figured out, à la Google, that you create self-service platforms and marketplaces and [that’s] probably the best way to monetize that traffic and the demand you’ve aggregated. You see the kind of quarter Facebook had and how they’ve really started to figure out self-service mobile ads and I think it is inevitable, from a local perspective, [because] a lot of these social sites have local traffic and data. Everyone’s ‘somewhere,’ right? So the ability to add local as a component – as buy-in to their platform – is a big thing.

What are you focused on in the coming months?

I think the plan is, with ReachCommerce, to launch it nationwide. We have over 40 offices and several hundred salespeople in the US, and the goal is to move it internationally. I think it shows the promise of Yelp. They’re driving so many bookings and, to be able to see the revenue generation, it’s closing the loop. More and more local marketing will be about closing the loop on a booking or transaction basis and not so much paying on a click. You need to know what happens [throughout the funnel] to make it better for consumers. They want to pay for a cost-per-transaction model.

 

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