Building a Fast-Growth Local Advertising Business: Yodle Co-founders Ben Rubenstein and John Berkowitz (Part 6)

Sramana: Do you have any other serious competitors who target small, locally owned businesses?

Ben Rubenstein: The former Yellow Pages would be. In terms of PPC and bid optimization on the local market, the only company that could compete with us is ReachLocal. They are at a higher price point than us and they are a public company now. They are all outside sales, and their average price point is $1,500 to $2,000 per month. Given their high cost of sales, they can only sign on customers at that price point. Some of our bigger spenders and their lower spenders might overlap, but in terms of scaling we are focusing on the $200 to $800 dollar per month world.

Sramana: How did your business scale after you reinvested in technology?

Ben Rubenstein: In terms of scaling, there were starts and stops. We would scale and sell a ton of clients, and then we realized that churn was important. We would then beef up product and customer services. We had a leaky bucket problem that we had to fix a few times. Fortunately, now we have a strong sales and service process and now we just need to hire more sales people. In Austin we are hiring 40 people a month. We are in super ramp mode again.

John Berkowitz: We have been doubling the business for several years. We are in constant growth. The percentage growth goes down as you get larger. We had 6,000% growth, whereas now we are in 70% to 80%. That does not change the fact that we are growing like a weed.

Sramana: What is the revenue level of the company today?

Ben Rubenstein: We did $3 million in 2007, $19 million in 2008, $46 million in 2009, $63 million in 2010, 88 million in 2011, and $135 million this year.

Sramana: Fabulous growth rate. What has been your financing strategy?

Ben Rubenstein: We have raised three additional rounds of financing. The next round was from Draper Fisher Jurvetson, the next round after that was from Jafco, and our final round was an internal round from our current investors.

John Berkowitz: In the second round, Bessemer invested as well. In the third round they all participated. The total amount raised is $38.5 million. We have happy investors because we have turned that into 200 million of recurring revenue.

Sramana: What is the exit strategy? Are you going to go public?

Ben Rubenstein: That is the big internal question. The real stance is that we do not have a specific desired outcome be it stay private, go public, or get acquired. We have stayed constant on maintaining our culture and achieving our goals of total local online domination. We have less than 1% of the small businesses in the United States as clients. We need to continue growing and innovating to acquire them. We know you have to be over $100 million to be a public market player. There are players out there that could acquire us. The nice thing is we are fast growing and profitable, so staying private is an option.

This segment is part 6 in the series : Building a Fast-Growth Local Advertising Business: Yodle Co-founders Ben Rubenstein and John Berkowitz
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