Deal Radar 2009: Reply!com

As more small and medium-sized businesses adopt online marketing techniques for local advertising, it’s no surprise that there are an ever-increasing number of companies focusing on local advertising and Web analytics that are eager to offer their services. Over the past few months, Deal Radar has featured notable players in this space. Today’s company, Reply!com, is an online marketplace that targets local and category-specific consumers on a per-click or per-lead basis. The company aims to provide a highly profitable alternative to the online marketing solutions offered by major search engines and ad networks by eliminating the need for complex and expensive online marketing infrastructures. It offers a system for gathering data and distributing information about potential customers from online traffic.

Reply! was founded by Payam Zamani, chairman and CEO, a serial entrepreneur who fled religious persecution in his home country of Iran as a teenager in the quest for a brighter future. In 1994, Zamani and his brother founded Autoweb.com, the first online car buying service. He raised $12 million in venture funding for Autoweb.com in just four years and grew the company to over $20 million in annual revenue. In March 1999 when the company went public, the stock went up sharply and Autoweb.com raised over $80 million, ultimately reaching a market cap of $1.2 billion. Zamani later started PurpleTie with the aim to create a national brand for dry cleaning. The company needed $400 million to go national, but when financing for startups dried up, PurpleTie had to shut shop. A few months later when Zamani learned that CarClub.com and iMotors.com had gone out of business and had raised a total of $.5 billion in capital, he purchased their remaining assets for about $100,000 and formed Reply!

Zamani initially invested $2 million in the company. Additional funding came from a $10 million Series A led by Scale VP in the summer of 2005, a $6 million Series B led by Outlook in the spring of 2007, and $4 million in venture debt raised from ATEL. The company does not see the need for additional financing at present.

Reply! boasts a patent-pending platform that makes Internet marketing consumable by advertisers of all sizes who are interested in locally targeted consumers. The company sees a large unaddressed market of approximately $100 billion. Their top target segments are automotive, real estate, home improvement, education, insurance, and mortgages. Early traction was gained by relationships that were built with large national buyers of locally targeted traffic for categories the company had already launched. A smaller sales team focused on signing local service providers who typically chose Yellow Pages to advertise. Reply! also penetrated the market through channel deals, taking advantage of existing sales forces focused on signing on locally targeted advertisers.

The company aims to differentiate itself from others in the space by simplifying category-specific and locally targeted online marketing. This is delivered to advertisers precisely targeted almost 100% of the time. Advertisers are charged on a per lead or Enhanced Click™ basis. The cost-per-click charge depends on the type of click and level of geo-targeting. As the buyer sets more filters and tightens geo-targeting, clicks provide more value and are thus more expensive. For example, automotive Enhanced Clicks with city-level targeting have a CPC of $3. The cost-per-lead also depends on the lead type and whether or not it is exclusive. For example, the charge for an exclusive, city-level targeted automated lead is approximately $22. The company transacts over 300,000 leads per month and over 500,000 Enhanced Clicks.

Reply!com claims that its marketplace is the only platform that allows buyers and sellers to transact both Clicks & Leads. Unlike other online ad exchanges that aggregate buyers and sellers of display advertising to improve publisher yield, Reply!com’s exchange focuses on the advertiser-side margin. Advertisers exchange poorly-targeted traffic acquired from online channels without changes to acquisition processes, thereby eliminating wasted spending, which allows for reinvestment in profitable online channels. The conversion rate is over 50% better than search or display ads.

The company has grown 70% year over year in the auto and real estate categories. Over a third of their customers are large brand names such as Nissan, GM, Ford, Cars.com, RealEstate.com, Hearst Newspapers, RE/MAX, Chrysler, Kia, Infiniti, Coldwell Banker and many more. The rest are independent car dealers and realtors.

The company plans to grow by going deeper into existing categories and launching additional categories. It also plans to look at international markets for further expansion. When asked about his exit plans, Zamani said, “We’ll keep on building as strong a business as we can and that will take care of itself…there is nothing wrong with building a strong independent enterprise”.

Recommended Reading:

Deal Radar 2009: OrangeSoda
Deal Radar 2008: Coremetrics
Deal Radar 2009: Enquisite

This segment is a part in the series : Deal Radar 2009