ReachLocal aims to take down Yellow Pages

by Dan Kaplan

Local search marketing company ReachLocal will use its massive $55.2 million infusion (see our coverage) to build a gigantic sales force that it hopes will dislodge the Yellow Pages as the de-facto place local businesses spend their promotional dollars.

This is an unprecedented goal for an Internet-focused company, and a risky one. It comes at a time when the market for talented salespeople is extremely tight. The big guys — Yahoo, Google, Microsoft — are pouring billions into online sales efforts. Google lowered its strict GPA standards because building an army of salespeople with great college transcripts proved tougher than anticipated. San Mateo’s 4info, a start-up that inserts ads into SMS messages, has even hired a full-time recruiter in-house just to find them.

To add some perspective, ReachLocal has around 300 salespeople; the global Yellow Page market employs more than 41,000 in sales alone. Zorik Gordon, ReachLocal’s chief executive, doesn’t balk at that figure, and suggests that a sales force of 10,000 or more might be in the cards.

The Yellow Page companies, like Donnely and YellowBook, have online components, but their biggest source of revenue comes from their paper editions; ReachLocal says that its sole focus on the internet will give it an edge. It has plenty of competition there as well: Companies like Inceptor, LocalLaunch, WebVisible and others have similar services, but none have raised a comparably large round.

These companies make money by helping small and medium-sized businesses create a marketing presence online. The local businesses cut the marketing companies a check, and the marketing companies handle the rest: keyword selection, bidding and optimization on all the major search sites.

They use automation technologies to manage tens of thousands of local advertisers. Since these businesses are local and typically do not have an e-commerce element, measuring successful conversions means measuring clicks against phone calls to the businesses. ReachLocal says it has a patent-pending method of doing this, which includes replacing the phone number displayed on the local business’ site with one of its own, and recording the calls that come through.

The Woodlands, CA, company declined to comment on its revenue, but its valuation is an estimated whopping $305 million.