Give Bankrate Some Credit

If there's a financial services crunch, you wouldn't know it by watching Bankrate (Nasdaq: RATE  ) . The financial rates publisher already set itself apart last month, when it posted a head-turning 72% increase in second quarter revenue. Now it's bucking the trend of bankers selling assets by buying assets.

Last week's purchase of CreditCardGuide.com isn't going to break the bank. Bankrate is paying just $32 million for the company, with another $2 million for the site's working capital and as much as $10 million in future payments based on the website's performance over the next two years.

CreditCardGuide.com has only one employee: its entrepreneurial founder Rafael David. His site has became one of the definitive one-stop resource centers for plastic-seeking consumers. It allows credit-hungry visitors to compare deals side by side and links them to online applications to complete the process. Issuers then pay CreditCardGuide.com for the leads.

Getting paid for financial leads is something that Bankrate knows well. It carves a living out of charging financial services providers for ads and hyperlinks on its rate comparison pages.

It's also familiar with CreditCardGuide.com. Bankrate acquired Nationwide Card Services last year, the site that runs a credit card affiliate network for hundreds of sites, including Credit Card Guide.

The credit card industry has held up far better than its financial peers. Visa (NYSE: V  ) and MasterCard (NYSE: MA  ) are trading well above their 52-week lows. They run a surprisingly steady business, as issuing banks take on the credit risk while they simply collect a piece of the processing action. American Express (NYSE: AXP  ) shares haven't fared as well, given the company's more hands-on approach and exposure to the financial services market.

This doesn't mean that Bankrate and its latest buy can grow forever. If stingy credit markets and volatile banks dissuade borrowers and savers, it will sting. HouseValues (Nasdaq: SOLD  ) wasn't strong enough to weather the residential real estate market storm. Growth has slowed for wedding services lead generator The Knot (Nasdaq: KNOT  ) as consumers scale back.

For now, at least, you have to give Bankrate some credit. It hasn't only earned it, it has acquired it.

More on Bankrate:

American Express is a Motley Fool Inside Value recommendation. Bankrate and The Knot are Motley Fool Rule Breakers picks. The Fool owns shares of American Express. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz has been known to chase yields on the Bankrate.com site from time to time. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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  • Report this Comment On May 17, 2009, at 6:28 AM, corporateslave77 wrote:

    OK, I worked for one of Bankrate's subsidiaries, I can tell you that Bankrate did not do their homework prior to purchasing CCG. In fact, CCG was well-known for their black-hat SEO marketing, and Bankrate did NOT do their homework before purchasing them.

    Credit Card Guide ended up being a huge failure once the black hat problems were discovered AFTER Bankrate acquired them. Bankrate even admitted to their folly during their year-end 2008 conference call. How sad. Bankrate sucks, actually.

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