It's hard not to like Marchex (Nasdaq: MCHX). The online baron is unlocking the value of its portfolio of more than 200,000 valuable domain names, populating what once were generic ad-laden parking pages with rich content.
Revenue climbed 13% to $37 million, even though the company's local advertising initiative -- which now accounts for 69% of its revenue mix -- is growing twice as fast. Marchex posted a small loss of $0.02 a share, though it's actually a profit of $0.08 on an adjusted basis. On that non-GAAP basis, Wall Street was expecting a profit of $0.06 a share on $36 million in revenues.
The move to deck out its sites with 1.3 million user-generated reviews -- some coming from its OpenList.com directory, and others from content partners like Health Grades (Nasdaq: HGRD) -- is making Marchex a bigger player in the growing realm of localized search.
Marchex attracted 26 million unique visitors in December, generating 50 million leads for its sponsors. The company now has 55,000 advertisers, with a goal of 80,000 sponsors by the end of next year.
The company won't have to get there alone, thanks to a posse of blue-chip friends. Whether it's reaching out locally with aggregator partners like AT&T (NYSE: T), or turning to Yahoo! (Nasdaq: YHOO) to outsource the direct-navigation advertising it doesn't sell on its own, Marchex may be one of the biggest Internet companies you've never heard about.
Growth could always be a little healthier. The company's 2008 guidance calls for adjusted EBITDA of at least $30 million -- potentially lower than the $33.3 million it generated last year, and the $39.5 million it rang up in 2006. Revenue will grow by at least 8%, lacking the top-line spurts that dot-com investors crave in online market darlings like Google (Nasdaq: GOOG) and Baidu.com (Nasdaq: BIDU).
That's OK -- Marchex doesn't have to be a sprinter. With all the virtual real estate it owns, the company can afford to take its time. Now it simply needs to develop its cyberspace turf into stickier, lead-generating workhorses.
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