Phone Directory Giant Donnelley Buys Business.com

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Santa Monica-based Business.com, an online business search engine that hosts 6 million visitors per month, last week was acquired for $345 million in cash by R.H. Donnelley Corp.


Business.com founders Jake Winebaum and Sky Dayton bought the domain name in 1999 for $7.5 million in stocks, a price many in the industry felt was too high back then. Now, the site reaches 30 million users a month across its advertising network that includes Business Week, the Wall Street Journal, Forbes and CNET.


R.H. Donnelly, based in Cary, N.C., produces the Yellow Pages and runs Web-based phone directories. The company’s chief executive David Swanson said in a conference call that Business.com is profitable and is expected to generate more than $50 million in revenue for 2007.


Winebaum said the acquisition makes sense because the technology developed for Business.com as a directory can easily be applied to Donnelly’s directory of local services.


Business.com derives its ad revenues from queries that list relevant links to both advertising and information sites. Advertisers pay for ads in an auction system, in which they bid to pay a price for each click of a text ad. The pay-per-click price determines where the ad appears on a relevant search results page.


“We put decision makers in front of more than 6,000 B-to-B advertisers,” Winebaum said. “These are decision makers shopping for products with very high value, like big complicated software packages, not someone who wants to buy a digital camera.”


The company became a major online business directory when the B-to-B advertising sector was just recovering from a slump, he said.


“It was not nearly as competitive as the consumer market and during that period, the critical mass of users and advertisers kept growing until it reached a point that was not just viable, but profitable,” Winebaum said.


Nielsen/NetRatings puts Business.com as the No. 1 site for people buying office supplies, No. 4 for attracting corporate senior managers and No. 2 for entrepreneurs thinking of starting a business.

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