Marchex is a company that made its name in the domain industry when, in 2005, it purchased the Name Development portfolio (Ultimate Search portfolio) for $164 million. The portfolio consisted of over 100,000 domains created by domain pioneer Yun Ye. This was all part of a plan orchestrated by Marchex CEO Russel Horowitz and domain name investor Frank Schilling. Simply put, they wanted to create a network of websites localized for every city in the U.S. so that customers could find businesses in their area. The domains would logically have the name of a city and a corresponding market term, such as AtlantaShoes.com.
“Everything we do, we look at through the lens of local,” Horowitz says. By focusing on technology and user generated content, Marchex has been able to successfully launch more than one billion web pages. The company’s strategy thus far has been to provide these sites, which already garner tens of millions of unique visitors a month, with cash generating content. And since advertising is the main way to make money on the Internet, they acquired Enhance Interactive, a pay-per-click company, and TrafficLeader, which ran paid-search ad campaigns.
At first, the sites were merely parked domains filled with pay-per-click ads. So whenever someone clicked on an ad, Marchex got paid. This worked at the time thanks to direct navigation, which is the practice of searching by typing a name directly into the browser. But Horowitz couldn’t see that method holding up in the long run, so he decided to focus on turning the domains into consumer friendly websites.
Ten years ago, there simply wasn’t enough traffic on the Internet to expedite the development of local search. But now, the Internet is mainstream in every developed country in the world and high-speed connections are the norm. Businesses are desperate to advertise locally on the Internet and right now, there is no dominant platform to do so, not even via Google or Craigslist. And with online local ad spending estimated to go from $5 billion to $25 billion in the next decade, Marchex is in a prime position to capitalize.
The more traffic their sites generate, the more advertisers they will attract. They’re hoping to create a more practical way for people to search for local services than a traditional search engine. For example, their site NewYorkDoctors.com allows you to refine you search for a doctor in several ways on a platform specifically designed to target New York doctors. “We’re trying to empower people and local advertisers in underserved markets,” Horowitz says. “We have the chance to do something profound.”
Obviously local search is a completely different entity from general search because small, local businesses don’t want to spend the time and money advertising through a general search engine, especially when their company name is so specific that it likely won’t show up in a relevant search query. Marchex’s Adhere aims to make local online advertising easier than it’s ever been, and because they already have the traffic, businesses have no reason to shy away from such an opportunity.
Along with placement on hundreds of premium publisher websites, with several new locally focused sites yet to be added, advertisers will be showcased on their OpenList network as well. It will benefit national advertisers by allowing them to purchase ads online the same way they do offline, which is all in one lump sum. Smaller businesses can reach local customers through the OpenList search engine and gain a national base through the individual publisher sites. With Adhere, the focus is narrow, but the reach is great.
The most important aspect of Adhere is that it provides a single source for quality local, national, and vertical traffic. The term vertical is basically synonymous with “specialized” in that vertical traffic, search, or websites focus on a specific kind of service. A vertical search engine, for example, can deliver results that the big search engines can’t with some sort of elaborate keyword combination. Large search engines use a proprietary algorithm to create indexes of sites based on the words contained in very large numbers of documents. Vertical search engines, on the other hand, search highly refined databases and create indexes centering around a specific topic.
OpenList is Marchex’s vertical search engine designed to gather information on local businesses. It started off as a review site that pulled together reviews for local restaurants, hotels, and attractions before it was acquired by Marchex in May 2006. They then developed software to scour the web for reviews about local businesses and, after sorting out duplicate content, create an overall review that helps users better determine which business to patronize. Obviously, advertisers see vertical search engines, like Open List, as the gateway to users much more intent on buying than the average user of a large search engine.
OpenList can find information on every business in every city, giving advertisers the opportunity to reach any city in America locally. “Many of our clients are increasingly looking to build their brand awareness on a national level while leveraging that brand to drive transactions at the local level,” said Michael Lee, Director, Strategic Partnerships, DoubleClick Performics. “The ability to target premium publisher Web sites as well as vertical and local search sites in one source enables us to deliver additional quality traffic, at volume, to our clients in a very cost-effective manner.”
So what exactly is Marchex offering with this Adhere product? Well, for the advertiser, there are many of the opportunities I have already discussed. But specifically, they offer pay-per-click and display ads to go alongside category leading Web publishers. Pay-per-click ads are offered through “site-specific” targeting in which advertisers bid for placement on premium websites. First, they select the site and categories related to their service, then they set multiple bids for what they’re willing to pay per buyer click-through. Their ad is then placed based on their bid and ad relevancy.
Display ads are placed on category leading websites on a CPM basis. CPM (cost per mille) is a measurement used in advertising. In Latin, “mille” means thousand, thus, CPM stands for cost per thousand. In this case, advertising is purchased based on what it costs to show the ad on one thousand page views. First, advertisers choose topic categories and ad unit sizes related to their service, then they enter CPM bids for each ad unit under a category. Their ad is then displayed based on the bid (highest bidder is shown).
As for publishers, they can charge a premium for their audience and content. Ads are only placed in targeted content areas on their site and they control what ads appear on their site, once the advertisers go through the ad buying process. Publishers can choose from pay-per-click ads and display ads. Premium publishers have the ability to develop their own pay-per-click marketplace program where they can set categories and minimum bids for advertisers.
And who are these premium publishers? Marchex already had partnerships with BusinessWeek Online, Bankrate.com, and Kiplinger.com before the launch of Adhere. And now they’ve announced new partnerships with IDG (publishers of PC World, CIO magazine, and MacWorld), Ziff Davis Enterprise, and Banks.com, among others. Simply put, Adhere unites the pay-per-click search engine, Enhance Interactive, with the ad network, Industry Brains to provide a single source for advertisers to reach the local market. It will be competing head to head with Google’s AdSense; the question is, can they pull it off?