Paid-inclusion’s future is questionable.
Marchex (NASDAQ: MCHX) saw its revenue plunge 44% this quarter compared to the same one last year, and the Yahoo-Microsoft search deal could make a further dent when it goes into effect.
On its earnings conference call this week, Marchex CFO Michael Arends said:
Furthermore, during the second quarter, Yahoo! Search Submit Pro, also known as Paid Inclusion, which is a product that provides distribution within the Yahoo algorithmic search results, accounted for a little less than $2 million in revenue. While the situation remains fluid with Yahoo and we don’t expect any changes in our relationship in the near term, visibility with this product and associated revenue may be impacted by what ultimately happened with the new Yahoo/Microsoft search relationship. Demand for this product for advertisers as part of a diversified budget fulfillment approach continues to be solid, but we did want to share some specific data here in light of some of the recent changes in the search landscape. These conversations are ongoing and we will update you on subsequent calls as appropriate.
If Microsoft starts providing its search results as planned, then Yahoo! Search Submit Pro effectively goes away. It’s possible that Microsoft will offer a similar service, which would be even more valuable than Yahoo’s because of higher combined search volume. So it’s unclear exactly what effect this will have on Marchex’s revenues, but it was a big enough risk for Arends to mention it on the conference call.
The product is low margin for Marchex, but the company says it’s an important part of its product mix for clients. Either way, Marchex needs to bolster its relationship with its neighbors in Redmond.
The company also gave limited details about its $900,000 in domain name sales for the quarter. The purchases totaled 20 domain names, or about $45,000 each.