Yodle, the New York-based startup that helps local businesses advertise more efficiently on the web, has secured $10 million in Series C financing in a round led by JAFCO Ventures and joined by Draper Fisher Jurvetson Growth, DFJ and Bessemer venture Partners. The company took the opportunity to add some facts and figures to the funding announcement, and they reflect that Yodle is doing quite well, thanks for asking.
The company, which started out in 2005, reports a whopping 700 % increase in annual revenue compared to its 2007 income. Of course, expressing growth in percentages is meaningless without actual figures, so we poked around a bit and got CEO Court Cunningham to at least share the run rate for last quarter (Q4 2008), which amounts up to $30 million. Also telling is the reported growth in employee count and signed customers: Yodle had 9 people on the payroll in 2006, it now has about 250, and the company now boasts 5,000+ customers which is up from 125 in 2006. Yodle expects to turn a profit in about six months.
In essence, Yodle is a lead generation company focused on aiding small businesses advertise their wares in search results for all major search engines. If customers have a website, the ad will point directly to it and Yodle will track and optimize actions starting from clickthrough to phone calls, etc. If there’s no web presence yet, the small business can opt to work with Yodle to create a custom so-called AdverSite which acts as a basic call-to-action website or landing page for the advertisers. Pricing for Yodle’s suite of services includes keyword bid management and optimization, website / landing page creation, and analytics ranges from under $1000 for small local business owners to over $5000 for larger businesses.
We understand that Yodle is quite persistent in generating a constant stream of new customers by using aggressive sales techniques, to the extent of local small business owners threatening to sue the company for harassment. Cunningham didn’t exactly dismiss these claims, but stated the whole thing concerns questionable methods used by isolated sales representatives who tend to “end up having a short career at Yodle”.
Yodle competes against a number of similar, venture-backed companies such as ReachLocal (which raised a substantial $65 million in funding to date), MerchantCircle (which raised its $10 million in Series B funding round in November 2007), Ingenio (acquired by AT&T, also in November 2007), WebVisible (total funding: $17 million) and a plethora of smaller companies trying to get their piece of the pie.
Pay per call (only pay when you your phone rings with a sales lead) is a brilliant model for small busineses and Court is a great leader. These guys are going to do very well.
Bookingangel.com
This isn’t pay per call!!!! I worked with this company and just terminated my relationship with them. They give use statistical averages to “guarantee” calls. You give them a minimum $500/month and they use that on PPC (google, yahoo, msn, superpages). They then tell you that by spending this money you will get x number of calls from those clicks. I ended up spending the money with yodle only to find that the majority of my clicks came from way outside my service area (sometimes in different countries) but I was charged for all of these clicks. When all was said and done I had paid $750 and had received 0 calls, thats right ZERO. So as for being Pay Per Call, that is absolutely incorrect.
That is right don’t trust them.You better spend your money buying books about effective online marketing strategy from book stores. (not e-books)
Yodle is no better than their biggest competitor (Reachlocal) other than the fact that my understanding of Reach’s system allows reach to proxy the site and monitor what keywords actually get phone calls and get conversions where Yodle has to build a completely new website. Does Yodle actually optimize the website or the campaign? In either event, you are better off going with a local company that can use both SEO and PPC to get you a better return.
its not pay per call.. whoever told you was lying. its pay per click. TRUST ME I KNOW. Someone saying you only pay for a call is flat out lying to you, and you need to get the truth before you get your butt handed to you.
Glad to hear they’re doing well.
“We understand that Yodle is quite persistent in generating a constant stream of new customers by using aggressive sales techniques”
Sounds to me that the operation is nothing but an outbound call centre operation. In terms of success you state that the customer numbers have increased from 125 (2006) to 5000 at present.
Let us just presume that the current headcount of 250 is capable of generating the 5000 customers per quarter (since we do not know precisely how long it took to acquire this number of customers). That is equivalent to circa 1.6 new customers per week for each employee. If we look at customer acquisition beyond 3 months the metric looks even more absurd.
Call centre operations in Europe (especially those on no cure no pay agreements) certainly can beat this metric – they are quite good at outbound calling.
With $100K (per employee) staked on the present number of employees within the company, I think we need to see longevity in their agreements with their present/future clients. I also wonder about the risk of no cure no pay competitors coming into this arena.
Sorry to be cynical, but on a lighter note I find the homepage advertising “Get YOU calls, and measure your success every step of the way” quite nice.
Loopy, I know for a fact that not every single member of the 250 employees (I’d guess it’s easily less than half of that) are in outbound sales, so already your figures of 1.6 new customers per week per employee is, as you put it, absurd
Greg, I think we must all agree that the cost of Acq. for each customer may be fairly high.
But if they have a run rate of $30M (Q4) we are in the wrong jobs. Let’s get aboard this magical money maker.
Run rate extrapolation is a notorious deceptive metric, but if they have had a bloody good sales day and extrapolated that to three months, bully for them.
I hope the Yodle guys do well and I agree with many readers here that results driven lead generation will sell well, but I fear a spam (calls) type of marketing happening as new entrants get into the same local sectors.
Lead generation (CPA) is going to be the preferred model for small businesses. I just hope that Google does not acquire the company.
Great for YODLE! Great for the Industry!
CPA however is a very difficult measure for the SMB is an “A” a phone call, a consumer profile, a webiste visit, a request for quote? The SMB’s are not as savvy as the Larger online spenders (Auto Dealers) who understand lead generation and have CRM and lead management tools in process. A company called Caffein (Owned by ePrize) was challeneged at getting the SMB “leads” or “A”’s
At the end of the day this starts with Exposure thorugh SEM and ends (in the SMB mind) with a phone call – thats the one tangible thing to agree on between provider and SMB as Yodle or anyone else in not tied to the POS. Court and his team are doing well and the industry will shine this year – even in a challeneged economy
I hope google doesn’t get this company…
Pay per action is the way to go in the current recession, congrats to Yodle
Yodle is pay per click – they mark up the price per click from googles price to make their money. They may track your calls, but they still charge per click.
The local business advertising space is one area that still offers a lot of growth. Expect lots of VC interest.
in the very near future garbled search engine algore style results and ads will be a thing of the past. giving way to strategic niche market natural language location based social networks. entering search terms will be a thing of the past. tapping keywords and keyphrases for finding what you want will take over.
how will yoodle confront these issues?
AdvertiseLocal.com – get located
If what you’re saying comes to fruiting, the bigger question is, “How will Google confront these issues?”, and everyone else will follow. =)
If they’re making all this cash, why would they need measly $10M which comes at a huge price (lots of equity)???
It doesn’t smell right.
Daves…. it doesn’t smell right… i agree!
Yodle is not CPA based. You pay an upfront fee and give them a budget which they burn through in Adwords. I am not sure why everyone keeps saying they are pay-per-lead or pay-per call. That is not their model.
I’m pretty sure that you pay them a monthly upfront fee, and they promise to deliver a set number of calls in that month. So it actually is pay-per-call, but you front them the cash at the beginning of the month rather than paying after the call occurs. They use the cash to manage your keyword bidding & optimize your site to generate the number of calls that they have promised.
That is not pay per call. Pay-per-call would be like ingenio where you bid X per call and don’t pay more than that. Do they reimburse you if they don’t hit your call goals? This reminds me of another ad network that claimed to be CPA-based but in actuality they charge CPM and show you your effective CPA. Sounds like with Yodle you aren’t paying per call – you are giving them a budget and they try to hit your goal.
Nope – they are pay per click. They told me they would charge me $59/month fee and then they mark up the clicks to generate their profit.
Definitely not pay per call. I worked with this company and it was hell. They promise you a lot of things but don’t deliver. Be aware, they claim they make their profit elsewhere but it really comes from their marked up PPC prices.
I’m not an expert on Yodle’s model, but it seems to me that the long-term prospects of Yodle rests on the contribution margin of Yodle’s revenues (pay-per-call revenues less pay-per-click costs required to generate those calls). There doesn’t seem to be much scale to this math. How they are doing now in terms of contribution margin is more or less how well they will do in the long-term. That’s the piece I’d be most interested in. If they have a high contribution margin percentage, then they should invest in acquiring as many advertisers as possible. If it’s a low margin, then the bar for sustainable profitability is higher (doesn’t discount the business model entirely, just makes the bar higher for an outsized return).
All in all, I’m a big believer in local online advertising. The Yellow Pages and newspaper classifieds are deteriorating faster than most people believed 3 years ago (particularly, when the LBO’s started happening in succession – so in retrospect, bad a priori assumptions on future cash flows by the buyout pros). Also, for the most part, Yellow Pages salespeople haven’t had to “sell” any new advertisers for years. All they had to do was get their existing advertisers to renew. They are the opposite of an aggressive salesforce, which is why Yodle and companies like it are growing. And as the primary information resource, the Yellow Pages could dictate pricing. Not anymore, especially with Google at everyone’s fingertips. Yodle’s in the right area. No one searches in the yellow pages anymore, so a local advertiser needs a search engine presence. Companies that help deliver this for them can make nice businesses for themselves. I like Yodle also because it was founded from a college dorm-room by a talented, young entrepreneur.
Btw, ReachLocal is considerably bigger than Yodle, even before their last round of financing.
My question is… Why do they need 250 people to operate this business? What do all of these people do?
That’s a burn rate of close to $2 million per month in salaries alone. In theory, that $10 million investment is gone in 5 months. What next?
The difference between Yodle and the rest of the field is that they give a dedicated account manager for each client, not just some sales rep who is more interested in getting sales.
Doing pure CPA in the local space (where merchants pay only for leads or calls) is tough as the main, good quality, online publishers (aggregators with local content/directories/local search) primarily work on a cpc or cpm basis. Unfortunately you have to work with these big publishers as they have the traffic that can drive a meaningful amount of leads/calls to an advertiser.
Since we don’t arbitrage, we have had to turn away lots of local advertisers.
The problem with Yodle’s model (taking an upfront fee, subscription/placement fee, or a percentage of cpc / cpm spend and not operating on a pure cpa basis) is that advertisers are quick to leave you if the performance / conversions are not there.
Sean
Does anyone have any idea of their valuation after the most recent round?
Good job Yodle. Why is everyone giving this company crap. They have a 700% increase in annual revenue during a horrible economy. Somebody else show me some equivalent numbers for another company.
Hey this pretty great!
Eventually, local businesses will ditch yodle.
It’s only a bridge.
A bridge to what? Managing search marketing and site optimization themselves? That seems pretty far-fetched. The local doctor, chiropractor, etc doesn’t have the time or expertise to maximize their online marketing expense
I don’t think local business will ditch Yodle for one reason that you have an expert who is taking care of creating brand awareness for your business and products. After a while the client becomes depended on them (Yodle). Of course if the return is not there, you ditch them. and look for independent internet marketer who may not be any cheaper.
Kudos to Yodle. Of course, they are losing money. All of us are in the local space are. It takes more scale to make the economics work. Question is, how far can we scale those efficiencies?
I know the big guys are around 50% of spend– meaning that half of the client’s dollar actually goes towards PPC. If the sales folk and marketing expense eat 25%, and management and operations eats 20%, is there much room for debt service and profit? I’m making up these numbers for example, sake. The big boys like reachlocal are paying hefty sales expense in this “winner take all” mentality. Is that sustainable?
$30M revenue last quarter with 5000+ customer now. This is $6K per customer per quarter. You sure the numbers are correct? This is huge for local advertising. If we know how much per call, we can estimate # of calls per day per customer.
Is there a typo with the #s? Maybe their customers are chain stores or the number is actually 50,000.
$30M revenue last quarter with 5000+ customer now. This is $6K per customer per quarter. You sure the numbers are correct? This is huge for local advertising. If we know how much per call, we can estimate # of calls per day per customer.
Is there a typo with the #s? Maybe their customers are chain stores or the number is actually 50,000.
That number does sound a bit high, but I believe most (or very many) of their packages run above $1K per month per customer, which works out to $3K per quarter.
@ Kevin
I´m asking myself the same question. The figures do not add for me as well.
Let us assume that their total revenue from Q1-Q3 is $40 million if the figures from Yodle are correct.
I wonder why they´re raing a $10 million round from VCs now if the business is doing $30 million in the Q4.
$30m run rate in Q4 means that if you ANNUALIZED the 4th quarter it would be $30m for the year (eg a $7.5m quarter)
I have used both products and there is a reason I believe ReachLocal is way ahead in the market. I like many aspects of Yodle that they got right but at the end of the day ReachLocal delivers me 5x the number of online leads and that is what I am paying for with my marketing budget at the end of the day.
Mr Hentin,Thats great you have used both products! The best thing about the web and SEM is that it is NOT an either/or; in this space it is a Both/And in that you can use Reach, Yodle, Merchantcircle, yellowbot, LocalBizNOW the IYP’s and other platforms to maximize your exposure and ROI. Kudos to you and others like you
This is just great and predictable because eventually the off line companies have to start advertising online. The Internet keeps growing and the user base does too.
Thanks for the update,
Greag
I used to work for Yodle’s Competitor…ReachLocal.
The average client in this space, at least in NYC is $1500/mo.
They usually steer away from anything below $500, mainly because the margin on these products only leaves so much to be used toward ads.
Of course the technology doesn’t work perfectly and they do work better in certain verticals than others, ie; dealerships, dentist and cosmetic surgery, anything with a high enough margin to offset the lack of poor ad copy, website and positioning in addition to the ability in providing healthy enough budgets to survive after agency fees are deducted.
I see the main goal for these companies is to position themselves as agencies to expand into other locally focused ad formats, ie; video, banner, etc.
Also a major reason these guys are getting funding is that they are opening offices in all the major cities, getting sales teams together and gobbling up all the businesses who are fed up of yellow pages or are just not technically savvy enough to set up an EFFICIENT and EFFECTIVE ad campaign.
Its a good market, with LOTS of room for improvement. I give Yodle credit for acknowledging that no matter how well you optimize the distribution of ads on the search engines, getting the click is only a part of the sales cycle when customers are looking for local services through search engines.
Feel free to contact me about in depth questions, I have a pretty deep understanding on this topic.
why did you leave ReachLocal?
Richard – I’d like to contact you. I’m working with Yodle now and have a couple of questions. I’d really value your insight.
Jake
Richard give me an email address so that i can pick your brain.
Hi Richard,
If the invitation is still available, I’d love to pick your brain. What’s your email address?
Thanks,
Brett
It all sounds so great…. However no online company can do a better job than an informed business owner who “minds their business”. Companies like Yodle feed on the business owner who is clueless and shocked into using their services. In conclusion, local search is the easiest to optimize compared to generic nationwide search and Yodel’s change from SEO to SEM is pretty much just because they are lazy and have figured out the hard way (by failing the first time around) that good Internet marketing & advertising involves WORK and their switch to Search Engine Marketing is a bail out, smoke and mirrors, lots of bells and whistles.
Yodle’s first business venture failed and now they have put a big adhesive strip on it and they think it will work. People need to learn about the Internet, educate yourselves and be your own person it’s not that difficult to get the hang of.
Yodle is an enabler, much like someone providing money to a drug user, the more you use them the more your are reliant on them like a bad drug addiction. People of the world ! Think for yourselves… Yodle is just a very bad way to go !
Robby that is the 1st smart thing I’ve read in this post. I’m a small business owner and I am on the 1st page of my local google search page and I did it for FREE.
Richard could you send me an email? I would like to talk to you about your knowledge within this business segment– you seem to know what you are talking about.
Laverge1
Are you well versed in algorithms and computers and is that how you positioned yourself first on the local google page? How does a layman acheive this?
If anyone knows of a Vendor that we could hook up with in this area please let me know.
We have a large local sales force that could sell this type of service.
Bob Doran… where are you based out of? Contact me at bradcouz@gmail.com and we can connect. Check out http://www.link.../in/bradcousino
This is a great business! Yodle, ReachLocal, and other companies in the industry are scooping up the profits too at the expense of the customers.
If one of Reach Local’s customers asks to see their AdWords account, what do they say? I mean, if I was a customer of Reach Local and asked for my login and password to my AdWords account, would I get it? “It’s a platform thing”.. “it’s controlled by our system”.. “it’s making you money”…
OK, so what’s my login and password?
What about the microsite you built for me.. Can I have FTP access to it? Could you please zip the files and email my site to me? It is mine, isn’t it?
What are you trying to hide here? Why can’t I see where my money is going?
Robby and leverage1 – you’re right on the money. If you can’t do it alone, find a pro who can. If that company tries to block you from seeing how you spend your money, quit. The hours may cost money but at least you’ll know if you can trust them or not. Reach Local? I’m just a number to you.
I trust Google and agencies who try to help me succeed. Integrity is the key.
I have been on line with Yodle since June1st 2009 and to date have not recieved one single lead. ( I have a handyman service )All that I have gotten are calls through my site from marketers. Isn;t wonderful that I am paying for marketers to call me through my web site phone number that Yodle provides? They promised me the world but thus far have not delivered. I have expressed my concerns on several occasions and have been told how they are going to change search words and etc and still the same old thing. As far as I am concerned Yodle has taken me for a ride and after my three month agreement is over, I am through with them.
To get leads while I was waiting for Yodle to kick in, I posted on Craigs list for free and have gotten plenty of buisness.
I have been with Yodle for over a year and whenever we need to make any changes to our account, our account manager responds almost immediately, is polite and respectful. In the past year we’ve generated over 300 customers using Yodle!
We have been very satisfied with the results we’ve gotten from Yodle for our property management business. Additionally, our account manager, Cassie, has provided excellent customer service and always promptly returns our calls.
I signed up with Yodle because not only do they have a great advertising solution, but they record the phone calls coming into my spa, and this was something I valued. Now I go back and listen to how my staff and I handle the calls that come in. It lets me see how many appointments were made that day and how we handle our potential customers’ calls. We have been with Yodle for almost two years now and I have been just thrilled with the results.