There are about 14.6 million small-to-medium-sized businesses in the United States, and they spent more than $6.9 billion in local online advertising in 2008, according to a recent Media Life article.
Big firms have shied away from doing business with SMBs, primarily because of how difficult and time consuming it can be. Many times media sellers spend the same amount of time chasing SMBs, as they do larger businesses, and end up with a much smaller payday when they close a deal.
But sellers can’t ignore SMBs. They have the spending power and they’re spending.
The question is: Where?
Search and rich-media, according to Gordon Borrell of Borrell Associates.
Borrell predicted that SMB spending on paid search will increase by 34.9 percent to hit $3 billion and spending on streaming audio and visual will increase 274.6 percent to hit $563.2 million.
That’s where our Buzz Stock of the Day, Local.com, Inc. (Nasdaq: LOCM) comes in.
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The company provides paid-search advertising services to local and national businesses on the Internet in the United States and Europe, primarily through its destination Web site, Local.com, and also through private label search listings that are used by newspapers and other local publishers across the country.
Chief executive, Heath Clarke recently stated that the company has a “very bullish view on the near and long-term prospects for our business, and why Local.com is nearing break-even and has the confidence to project 30 percent revenue growth to about $50 million this year and turn to net income despite the tough economy.”
Ad budgets are being cut across the board, but Local.com is predicting that the plumber who stops running an ad in the Yellow Pages is going to look to spend his savings on a service like Local.com that may offer a better ROI on his marketing spend.
“Not only will our industry and Local.com receive some of the spend in the near-term, but in the long-term we believe our industry will permanently win this ad spend,” Clarke said in a conference call with analysts.
Clarke cited a study by Kelsey Group, which stated online online ad revenues will grow about 15 percent this year and local online ad revenues will grow about 25 percent, and expected Local.com to outperform the industry growth rates and gain market share “for the fourth year in a row.”
Here’s a quick overview of the company’s full-year results:
Revenue – Revenue was $38.3 million for the year ended December 31, 2008, a 78% increase over $21.5 million in 2007.
Net Loss – Net loss for the full year 2008 was $8.6 million or $0.60 per common share, an improvement over the $18.2 million or $1.58 loss per common share in 2007.
Adjusted EBITDA – Adjusted EBITDA was ($4.7 million), an improvement from ($7.2 million) in 2007. Adjusted EBITDA is net loss excluding: provision for income taxes; interest and other income (expenses), net; depreciation; amortization; and stock based compensation charges.
Balance Sheet – On December 31, 2008, the company had $12.1 million in cash and no debt.
Shares of Local.com, Inc. trade near their 52-week low.
