• by Tameka Kee , November 29, 2007

MerchantCircle has partnered with IAC/InterActiveCorp's Citysearch for a multifaceted deal aimed at scaling out its local business marketing network.

Financial terms were not disclosed, however, IAC has made an investment in Los Altos, Calif.-based MerchantCircle as part of the deal--with IAC Media and Advertising CEO Peter Horan taking a seat on the smaller company's Board of Directors.

MerchantCircle's strength is its automated local business acquisition and social media platform--a tool that the company has used to recruit over 300,000 merchants since its founding two years ago.

In addition to a standard business listing with the company contact info, members of MerchantCircle can upload pictures, blog, create coupons and aggregate user reviews without needing to host their own Web site. The social networking aspects of the service foster a viral adoption by small town merchants--amplifying the power of the company's 10-rep sales team. Citysearch will have full access to MerchantCircle's self-serve platform, using it to reach local business owners in less populated areas.

"We built the bulk of our network by acquiring merchants in a very personal way," says Jay Herratti, president of Citysearch. "From writing ads for them to uploading their listings, to helping them manage their account, our reps have been big on manual intervention. With MerchantCircle, business owners literally invite each other to become part of the network, so it's a very different approach to merchant acquisition--but one that has clearly been successful."

Meanwhile, MerchantCircle will beef up its advertising services, integrating Citysearch's Pay-For-Performance (PFP) ad engine throughout its network, and working with the larger company's local sales team and national advertising resources. MerchantCircle will also be able to leverage Citysearch's wealth of content including editorial copy, user reviews and video.

According to Ben Smith IV, chairman and co-founder of Merchant Circle, the two companies have begun developing a co-branded video ad product--one that has a low-priced entry point and makes the production process as simple as possible. "The thought of creating a video ad and the expenses associated with it can be scary for a small business owner, so we've been through a few experiments," he says.

Citysearch and MerchantCircle members will be eligible for inclusion in either company's business listings, as well as upgrades for paid services.