ReachLocal acquires DealOn for $10M

The acquisition gives ReachLocal access to DealOn's 18 U.S. markets

Financial trends and news by Faith Merino
February 15, 2011
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Online marketing solutions provider ReachLocal announced Tuesday afternoon that it has acquired rising Groupon clone DealOn. The deal was sealed for $10 million and provides LocalReach with a turnkey daily deals business in 18 U.S. markets.

DealOn was founded in 2009 as one of many startups looking to cash in on the group buying/daily deal phenomenon pioneered by Groupon. But DealOn raised the stakes by not only unlocking deals when a minimum number of people purchased them, but actually dropping the purchase price as more people signed on. For example, a deal might start out at $30 for $60 worth of food at a fine dining restaurant, but as more people sign up, the price drops incrementally, and might end at $28 or $29, which is what all of the consumers will get the deal for. The price typically drops 5-10%, but has occasionally dropped as much as 15-18%, said former DealOn CEO Rich Razgaitis in a December interview with VatorNews. Razgaitis is now the General manager of ReachLocal Deals. 

Additionally, ReachLocal will be snagging DealOn's unique OfferEx platform, which allows other daily deal sites and publishers to supply or resell deals on an open platform. DealOn’s research found that 95% of consumers are not going to sign up with more than 3-5 group buying sites, so a single platform could spread the wealth much more efficiently. The merger with ReachLocal will help boost that aim by allowing local businesses to market their services by simply plugging into OfferEx. 

“We’re excited to combine our technology platform and emerging publisher network with ReachLocal’s significant expertise and reach into the SMB marketplace through its market leading digital sales force of Internet Marketing Consultants,” said Razgaitis in a prepared statement.  “We believe this combination will provide SMBs with another valuable outlet for acquiring new customers as part of an integrated online marketing budget and, at the same time, enable online publishers to source, brand and deliver local deals to their customers.”

ReachLocal, a publicly traded company on NASDAQ, currently offers a suite of online marketing solutions for small to midsized businesses, including its SEM product ReachSearch, ReachCast for Web presence, ReachDisplay for display advertising, TotalTrack for online marketing analytics, and TotalLiveChat for assisted chat service. 

“The rapid growth in the local deals space further demonstrates the magnitude of the shift of dollars from offline to online.  We believe that local deals are here to stay, will become ubiquitous, and will become an important way for publishers to monetize local users online,”  said ReachLocal co-founder and CEO Zorik Gordon in a prepared statement.

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