• by Laurie Petersen , August 10, 2007

Local search marketing company Marchex took two big steps on Thursday that add the missing phone component to its advertising solutions and a senior executive who helped build the model for local user-generated content when he helped found About.com.

Seattle-based Marchex simultaneously announced the acquisition of call-based advertising services company VoiceStar and the appointment of About.com co-founder and CEO Bill Day as its new Chief Media Officer.

"Local search and locally developed and oriented content will be one of the key drivers for the search market over the next five years, and Marchex is in a phenomenal position to be a leader in this category," said Day, who will report directly to Marchex Chairman and CEO Russell Horowitz.

About.com was a pioneer in providing vertically focused consumer information and advice. Day helped grow About.com into a top 20 global online media network and pioneered contextual pay-per-click advertising through the launch of Sprinks Networks. Primedia bought About.com in 2000, and Day continued to run it until 2003. Since 2004 he has been the CEO of MeMedia, a privately held behavioral advertising network.

Meanwhile, Marchex said it expects to pay $28 million for VoiceStar in the form of about $12.9 million in cash consideration, and about $7.1 million in restricted stock subject to vesting over 2.5 years from closing. An additional $8 million will be invested in VoiceStar products, infrastructure and other items. The acquisition is expected to close by Oct. 1, and VoiceStar will continue to operate from its Philadelphia headquarters.

"With the addition of VoiceStar, Marchex offers one of the most comprehensive online advertising platforms and agency services for local advertisers at scale in the industry," said Peter Christothoulou, Marchex chief strategy officer. "We can now offer local aggregators a private label search- and call-based marketing platform with distribution for their advertisements in search engines, vertical Web sites, and on our network of local Web sites."

Marchex operates more than 100,000 sites with addresses people are likely to type in naturally, such as newyorkdoctors.com and bayareahotels.com. Links on these sites are created using technology that crawls specific resources. Day's arrival signals a ramping up of the content built around those listings.

"Our idea was to create really useful sites around local interests and supplement them with advertising," Christothoulou said. "The VoiceStar acquisition allows us to unlock the power of local voice and local search."

More than 30,000 advertisers are currently using Marchex's platform, which also includes digital agency services for the clients who need them.

The VoiceStar acquisition also adds more than 100 local advertiser aggregators--including Comcast, The Cobalt Group, R.H. Donnelley/Dex, and YellowBook USA--to Marchex's current partner roster, which already includes AT&T and Yellowpages.com. VoiceStar also increases Marchex's ability to directly monetize its proprietary network of Web Sites, lessening its dependence on third parties and increasing the revenue yield from its Web sites.

The Kelsey Group estimates the pay-per-call market will reach up to $4 billion by 2009. According to Piper Jaffray, only 42% of the estimated 20 million small- to medium-sized businesses in the U.S. have Web sites, and many others are still are at the early stages of online marketing.

A recent Kelsey Group survey reported that 71% of local advertisers would rather pay for phone calls versus clicks.