RH Donnelley Buys Business.com for $350 Million

RH Donnelley has won an auction that included many of the high profile Internet brands. The purchase price was a $350 million “in cash and deferred purchase consideration.” According to the press release:

Through this transaction, R.H. Donnelley will add to its existing interactive portfolio a rapidly growing and profitable business-to-business company, with online properties that include Business.com, Work.com and the Business.com Advertising Network. These online brands attract an audience of highly qualified and motivated business decision makers. Business.com optimizes the revenues from these properties through the use of its Performance Based Advertising (PBA) platform, which is considered to be one of the most advanced systems in the marketplace

In addition, R.H. Donnelley’s Triple Play business-to-consumer integrated marketing solutions will also benefit from a significant infusion of leading-edge search and directory technology and interactive thought leadership from Business.com, particularly in the areas of performance based advertising technologies and corresponding ad network capabilities.

Business.com employs approximately 100 highly-skilled technologists, strategists and businesspeople and serves more than 6,000 business-to-business advertisers and their agencies. The company is profitable and is expected to generate revenues of greater than $50 million in 2007. It is widely recognized as a leader in the online business-to-business commercial search space and has been named to the “Inc. 500” and BtoB magazine’s “Media Power 50”.

This is quite a bit different than when AT&T (then BellSouth and SBC) paid an estimated $100 million for YellowPages.com. Why? The company arguably bought the URL/brand “yellow pages” and then rebuilt everything from the ground up.

RH Donnelley is buying a profitable set of online properties that it won’t need to rebuild and diversifying its online investments. Indeed, this is much more like the NY Times buying About.com — a non-core asset that will contribute to the bottom line and help the company broaden its (advertiser) appeal. It also acquires some technology that will help the yellow pages property too. As an “ad network,” Business.com is ranked in the top 50 (35) according to comScore (click to enlarge):

The release also says that Business.com CEO Jake Winebaum will become the new head of RH Donnelley’s Internet unit “RHDi”:

Winebaum will be appointed as President of R.H. Donnelley’s interactive unit (RHDi), which will now include DexKnows.com, LocalLaunch! search engine marketing company, Business.com, Work.com and the Business.com Advertising Network. Winebaum will lead RHDi from Santa Monica, Calif., and will report directly to Swanson.

This acquisition won’t immediately help the competitive position of DexKnows.com vis-à-vis consumer traffic and usage. However, over time, the learning and technology from the acquisition – as well as the addition of Winebaum – could be significant. Donnelley will need to make life interesting enough for Winebaum to retain him of course (beyond the initial contract period).

Regardless investors and investment firms will like the acquisition because it represents a strategic shift for the company that indicates a serious interest in growing online revenues in a diversified way.

Here is the Q2 earnings announcement that includes mention of the acquisition.

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Related: Here’s the WSJ (sub req’d) piece on the acquisition. Here’s a Kara Swisher interview (plus video) interview with Jake Winebaum, CEO of Business.com.

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