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Web.com to Acquire Yodle in Cash Deal Worth Roughly $340 Million

Late this afternoon Web.com announced it was acquiring Yodle in an all cash deal worth roughly $340 million. This comes two years after Yodle filed to go public but was not successfully able to launch its IPO.

In its release, Web.com said that the combined company would have had more than $765 million in revenue in 2015. Yodle had roughly $200 million in revenue, up from $162 million in 2013.

Web.com also said Yodle has “approximately 58,000 subscribers at an average revenue per user (ARPU) of approximately $300 per month.” Web.com sees Yodle’s platform, customers and sales assets as complementary to its own: “[It] creates opportunity to up sell and cross sell across a 3.4 million subscriber base.”

Web.com is paying for the acquisition with lines of credit and bank loans. There will be an immediate $300 million payment and then two subsequent smaller payments. The deal is expected to close by the end of Q1 and comes not long after the $1.1 billion acquisition of Constant Contact by Endurance International Group. We may see other acquisitions in the local/SMB space as companies look for scale and other cost advantages.

While the combined Web.com-Yodle will have much more scale and a more diverse array of services, the larger company will have to maintain quality and customer service. Indeed, Yodle and many others selling local digital marketing services have in the past struggled with advertiser retention.

Yodle addressed this issue in its S-1 filing with the Securities and Exchange Commission and presented a picture of strong advertiser retention by excluding customers that hadn’t been with the company for less than a year. In so doing it reported 97.5% revenue retention.

Sales, product and SMB retention will be at the center of discussion at LSA 16. If you haven’t registered yet make sure you do.

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