The local landscapeWho’s making money in local? Where’s the

money going?

Simon Greenman

CEO ServiceMagic

Europe

London / Luxembourg

• Career highlights:• CEO, ServiceMagic Europe

• MD Online, European Directories

• Head of Digital, Dex Media & R.H. Donnelley

• Co-founded MapQuest.com

• Also held positions or consulted with Accenture, AOL, Charles Schwab, Merkel Direct Marketing.

• Investing:– Advisor and former Venture Partner

DN Capital

– Angel investor and director

20+ years of international local digital

management and investment

So many new companies in local. But who’s

making money?

Courtesy BIA / Kelsey

Where’s the money gone? The precipitous decline of the

yellow pages in just six years…

2006

• $12B revenue

• $6B ebitda

• 10x EV / EBITDAhttp://www.prnewswire.com/news-releases/worldwide-yellow-pages-revenues-surpass-31-billion-latest-simba-market-research-says-58546972.htmll various Kelsey research

2012

• $6B revenue

• $2B ebitda

• 1.75x EV / EBITDA

2000s

Online Directories

1990s

Print Directories

The past ten+ years consumers have moved to new online

directories and increasingly vertical directories and services

2000s

Marketing services agencies

1990s

Print Directories

SMEs have many new choices for their marketing needs…the rise of

the integrated digital marketing agencies.

2014 revenues of $544M, +10.5%

YoY

Operating income +$9M

GM 51%

2014 revenues of $475M, -8% YoY

Operating income - $45M

GM 43%

ReachLocal and Web.com are $0.5B revenue

marketing services companies, but little money

2013 $160M +22% YoY

revenues and -$13M operating income…2014

growth accelerating 30%+

Go Daddy is a billion dollar revenue company and Yodle is

likely $200M+. But still no profits.

2013 $1.1B +15% YoY

revenues and operating income of -$200M Vs -

$279M in ‘12

2014 revenues of $315, +28% YoY

Operating income -$12M vs -$33M

PY

GM 83%

2014 revenues of $378M, +62% YoY

Operating income -$9.2M vs -$19M

PY

GM 89%

So what about the new consumer directories? Are they just

about to starting make lots of money?

2014 H1 revenues £70M, 60%+ YoY

Operating income £16M

Operating margin 22%

HomeAdvisor is a $200M+ revenue business,

profitable and growing 20%+ YoY*2013 revenues of $190M, +18% YoY

Operating income $46M vs $37M PY

Operating margin 25%

But there are a few vertical starting to make serious money.

OpenTable has 25%+ margins and was acquired by Priceline.

2014 revenues £238M

Operating income £100M

Operating margin 42%

IAC Q4 ’14 earnings announcement

So who’s really making the money in local?

• In 2014 Google had total of $62B in revenue, growing 20% YoY

• Operating income of $16.5B

• Gross margin of 62%

• And how much of this is local?– Todd Rowe heads up Google’s $5B

reseller channel focused on SMBs across 25 countries

– So could argue they are making as much as $3B in SME profit globally

• And Google has minimal sales costs! Others pay for the sales channel.

• And don’t forget the yellow pages.

• Nor Facebook.

Good margin

lead generation

High margin

transacting verticals

High margin search &

directoryLow margin marketing

agencies

So how do you make money in local? Need scale…get

vertical, get the transaction and own the branded media

Vertical and

Transaction

Horizontal and No

Transaction

Don’t own

the

consumer

Own the

consumer

brand

“Picks &

Shovels” –

margin at

scale?

OpenTable and JustEat points to the future of where the

money is going…the “uberfication of the world”

Yesterday

Based on ppt from @schlaf and RRE Ventures

The value chain is being dis-intermediated and reassembled by the

on-demand economy

Tomorrow

Everything seems to being “uberfied” at the moment

Transportation, dining, delivery, events, home services, healthy

& beauty, food, travel…Everything On Demand

Steve Schlafman, Principal

Transportation Health & BeautyDining + Drinks

Delivery & Logistics

Food & BeverageHome Services

Travel / Hospitality

Events

The money is pouring into the On Demand Economy

(ODE)!

• “Instant, pervasive access to goods and services without the burden

of ownership or long-term commitment”

http://www.slideshare.net/ZachNoorani/2014-ode-report

Uber has raised $5.9B at a $40B+ valuation. Airbnb has

raised $0.8b at $13B valuation.

• These companies are only five years old but yet have massive international scale and valuations.

In 2013 $1B+ invested in car services alone. And in 2014

Uber raised $3B and in 2015 alone $1B.

http://www.slideshare.net/ZachNoorani/2014-ode-report

Home Services marketplaces are really hot…$100Ms

invested in new names…

• Thumbtack has raised $148,200,000 including Google Ventures. Why? Porch raised $100M.

And Serviz has raised $20M to go beyond the marketplace to

its own “fair price” network of tradesmen

HomeServices is being sliced and diced into verticals,

with the cleaning vertical raising $100M+

Handy has raised

$45,700,000 in four rounds

And want someone to look after your dog?

DogVacay has raised $67,000,000…

And can’t be bothered to do your laundry

Washio has raised $16,800,000

The ODE economy is happening not just in

America!

• UrbanMassage is offering massages brought to your home in London

• Many ODE companies in Germany – Quandoo just bought for $219M, Book a Tiger…

If its bookable online its getting money!

Booker has raised $77,000,000 in just one round!

You will never have to leave your home again!

• Can book pretty much any local service or product!http://www.slideshare.net/ZachNoorani/2014-ode-report

So where’s the money going?

• The race is on for the On Demand Economy – first

mover advantage exists

• Google is concerned that the front door to local is no

longer its search, but the app (and Amazon)

• If you are going to make really good money, you

need to ensure you scale really fast…

– Get lots of investment!

– Get branded!

– Get into that transaction!

Questions