New York — Shares of Irvine, Calif.-based search provider Local.com Corp. escalated 24% to a 10-week high on Friday, just a day after the company disclosed a new two-year deal with global search engine titan Google Inc. for advertising and search services.
Haunted with unhealthy finances, Local.com, which has an online directory with information on more than 14 million businesses, delivers search results for local businesses, products and services, was under pressure after its largest client Yahoo Inc. moved to Microsoft Corp.’s Bing search engine earlier this year.
The company in its Form 8-K filing with the Securities and Exchange Commission said that it has agreed to provide advertising and search services through its local syndication network for Google. Besides, Local.com users also get search results that include offers from local businesses, reviews, links to local websites, maps, driving directions and other features.
The agreement between Local.com and Google commences from August 1, 2011, and runs through July 2013.
During last check, Local.com shares were trading 16.32% higher at $3.93, with volume up from daily average of 540,792 to 6.44 million, almost 10 times the issue’s trailing daily average of around 780,000. Year-to-date, the shares are down more than 40%, although Friday’s move provided a healthy bounce of a 52-week low of $3.17 on May 26.
However, Yahoo furnished about 37% to Local.com’s first-quarter revenue, down from 49% a year earlier. Google currently generates less than 10% to its revenue.
“The shares are moving because Local.com made a sensible move by switching to Google from Yahoo and the deal is expected to significantly improve its revenue per click (RPC),” David Kestenbaum, analyst at Morgan Joseph TriArtisan, said.
The company had been consistently profitable for nearly two years until its revenue from Yahoo took a hit after Microsoft’s Bing search engine began charging advertisers less for search traffic, which caused in less RPC than what Yahoo had paid prior to the integration of its search engine with Microsoft, according to earlier statements from Local.com officials.
In its fiscal first quarter ended in March, Local.com attained on an adjusted basis with revenue arriving in at $16.8 million, down 10% year-over-year, as both its network and search and advertiser services businesses saw sharp declines.
In addition, Local.com is scheduled to report its fiscal second-quarter results on July 25 with the average analyst estimate calling for a loss of 12 cents a share on revenue of $17.1 million in the June-ended period.
The agreement with Google comes at a time when the company was under intense pressure. Local.com attributed the loss expectation to its plans to invest in its Spreebird business, a deals site that competes with Groupon and others, and its acquisitions of rich media advertising technology companies Rovion and Krillion.
Interestingly, with local search engine and social media utilization is growing by the day, Local.com share holders may enjoy a very sunny summer. Shares of Irvine, California-based Local.com were up 19% at $4.00 in midday trading on Nasdaq after climbing as high as $4.18.