Commentary

Marchex Renews YP Deal For Now

Marchex filed an 8-K this week with the Securities and Exchange Commission to update its status with YP, a spinoff from AT&T. The company said in the filing it renewed its Pay-for-Call Distribution Agreement with YP through 2016. There's more.

The deal also obligates YP to pay Marchex certain minimum fees from July 1, 2015 through June 30, 2016, and provides YP additional flexibility to migrate active accounts to itself or a third-party provider prior to the end of an advertiser contract, per the filing.

Piper Jaffray Senior Research Analyst Gene Munster estimates that YP represented about 26% in Q1 2015, which declines slightly sequentially. "Although YP revenue is call-driven revenue, we believe the growth trajectory of the YP business is significantly different than the remainder of the company's core call-driven revenue," he wrote in a research report. "Excluding the YP business, we believe the company's call-driven revenue grew around 20% in Q1. We expect YP to decline as a percentage of the overall business through 2016."

RBC Capital Markets analysts met with Marchex CEO and Co-Founder Pete Christothoulou, CFO Michael Arends, and IR Trevor Caldwell, along with Senior Product Leads. The group published a research note early in June that explains how Marchex looks at click-to-call as a major acquisition channel on mobile.

Marchex execs believe "inbound phone calls are a strategic customer acquisition channel for brand advertisers and SMBs, and a natural performance marketing channel at the intersection of several secular trends — mobile, search, and local," wrote RBC Analyst Mark Mahaney. "[The] CEO believes that offering channel specific solutions such as 'Call Analytics for Search' allows the company to shorten its sales and deployment cycle from roughly 6–12 months in the prior generic solution model to 1–3 months in the case of a channel-specific model."

Mahaney said Marchex execs also see early success in a product the company calls Call Analytics for Search, which includes integration with third-party search engine marketing companies such as Marin and Kenshoo.

A couple of interesting facts: Marchex sold $34.8 million in domain names to GoDaddy and other buyers earlier this year, as it turns its attention to mobile advertising analytics. An SEC filing in September 2014 states it received notice of termination from Allstate Insurance Company, losing its third largest customer at the time. Analysts believe it continues to recover as the company company's focus continues to sharpen.

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