Hyperlocal Web Sites Are Becoming Major M&A Targets

 |  Includes: AOL, GE, GOOG
by: The Deal Economy

While newspapers have been decimated by the economics transforming today's media industry, Web sites that report news and deliver other content at the neighborhood, or "hyperlocal," level, are bursting with life, with many of them becoming sought-after targets by big media and big tech companies. In December, Google (NASDAQ:GOOG) tried -- and failed -- in its reported $550 million bid to buy Yelp Inc., a user-generated review site that has raised $31 million from investors including Bessemer Venture Partners, Benchmark Capital and DAG Ventures since its inception in 2004.

Successful acquisitions in the sector in 2009 included MSNBC.com's buying EveryBlock.com for undisclosed terms and AOL Inc.'s (NYSE:AOL) purchases of Patch Media Corp. and Going Inc.

Meanwhile, hyperlocal startups continued to get funded. In December, Outside.in Inc., which pulls together neighborhood blogs and other local content, announced it had closed a $7 million Series B round of funding, led by existing investor Union Square Ventures, with participation from new investor Turner Broadcasting System Inc. As part of Turner's investment, CNN.com will use Outside.in's aggregation and curation tools to power hyperlocal news across all of its sites. The new round brings Outside.in's total raised to $12 million.

Over the summer, one of the most competitive early-stage fundings the VC industry saw all last year was that of FourSquare Labs Inc., which encourages people to share their whereabouts from local restaurants and businesses via their mobile phones. Union Square and O'Reilly AlphaTech Ventures won the honor of funding FourSquare's $1.35 million Series A, announced in September, with Jack Dorsey, a co-founder of Twitter Inc. and the mobile payments startup Square, serving as an angel investor in Foursquare. (Watch The Deal's behind-the-scene video tour of Foursquare and our chat with CEO Dennis Crowley.)

Underscoring the increasing importance of location in online interactions, popular microblogging service provider Twitter announced in August it would soon add the ability to detect and display where users are when they tweet. - Mary Kathleen Flynn