RedChip's  Instablog

Are the Yellow Pages going the way of the 8-track tape and the floppy disk? Quite possibly. With the advent of the Internet, more and more consumers are abandoning the bulky yellow books for Google, Yahoo and other search engines. A 2010 study from BIA/Kelsey found that 97% of consumers use online media to shop locally. Steve Marshall, director of research at BIA/Kelsey, stated, “The data suggest we’re at an inflection point where the balance of power in local shopping is shifting to online.”

What are the implications of this shift? For one, expect to see more consumers recycling their Yellow Pages into stepstools, booster seats and funky living room furniture. Second, local businesses are adjusting their advertising strategies accordingly. Over the next five years, 39% ($5.1 billion) of the ad spending on print yellow pages will vanish as small businesses shift their marketing budgets online.

Since its founding in 1999, Local.com Corp. (NasdaqCM: LOCM) has been a major beneficiary of the trend toward online advertising. The Company started out as a hyperlocal search engine, growing revenues at a 40% CAGR by connecting local businesses with online consumers. While this growth was briefly interrupted in the first half of 2011 due to issues related to the Yahoo/Bing integration, LOCM appears to be back on track to achieve strong revenue growth and profitability. In recent months, the Company has signed a deal with Google and also diversified its revenue stream with the introduction of several new product offerings:

• Spreebird, a daily deals website we’ve discussed previously
• Exact Match, a recently expanded suite of advertising solutions for small- to medium-size businesses
• Krillion, which provides real-time information on where specific products are sold, which local retailer has them in stock, and at what price
• Rovion, which enables businesses to quickly build their own rich-media ads without the use of Web code