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Clarke: Ups, Downs, Growing Stability for Local Search Site

Clarke: “We believed in what we were doing, so we decided to stick it out”

Local.com Corp. cofounder and Chief Executive Heath Clarke stuck it out when others might have thrown in the towel.

“If you are an entrepreneur, you never say die,” he said. “You’ve got to have tenacity.”

Irvine-based Local.com runs an online search engine that directs users to local businesses based on general requests, such as “flowers in Irvine.”

Users also get search results that include offers from local businesses, reviews, links to local websites, maps, driving directions and other features.

There were stretches when the company was in serious trouble.

“There were plenty of times where we thought, ‘Gosh, are we going to make it?’” Clarke said. “The situation was dire.”

At one point, the company didn’t have enough money to make payroll. It was on the chopping block and nearly sold itself.

These days, Local.com is on firmer footing.

The company saw $84 million in revenue last year, up 49% from a year earlier. Local.com saw a profit of $4 million, versus a loss of $6.3 million a year earlier.

Last week, Local.com had a market value of about $60 million.

Clarke was one of six entrepreneurs honored at the Business Journal’s annual Excellence in Entrepreneurship award luncheon held March 17 at the Hyatt Regency Irvine.

Early Days

During Local.com’s early days, it had a tough time drumming up enough money to grow.

It raised about $7 million in financing from various investors.

When the tech bubble burst around 2000, Local.com got derailed.

“We had to scale back,” Clarke said. “Basically we clung to life until 2003.”

The company had a Canadian angel investor who kept the company going, though just barely.

Local.com looked to sell itself. A handful of potential deals fell through.

Giving up wasn’t an option, Clarke said.

“We believed in what we were doing, so we decided to stick it out,” he said.

The company—then called Interchange Corp.—filed for a public offering in 2004. In 2005, the company acquired the Local.com domain name and adopted it for the company itself.

Shares of the company initially surged on the coattails of search superstars Google Inc. and Yahoo Inc. Some on chat boards called the company “baby Goog.”

But shares fell off a cliff in the ensuing years—plummeting nearly 90% by 2006.

That set Clarke on a rebuilding path that saw the company hone its focus on local searches.

Global Upbringing

Clarke, 42, had a global upbringing.

His parents are British. He was born in Toronto and moved to England as a kid. He spent 20 years in Australia, on Queensland’s Gold Coast.

Clarke was introduced to the Internet when he worked for Australia’s version of the Home Shopping Network.

He made his way to Orange County when he took a job at LanguageForce Inc., a defunct maker of language translation software.

The idea for Local.com came when he was settling into his new home. Clarke was looking for a reading chair.

“I found one at Pottery Barn, but it was tremendously expensive,” he said. “I wanted to buy it directly from the manufacturer. I went to a search engine and couldn’t find it.”

Local.com was born out of the thought that it should be easy for a consumer to find a product, service or nearby business on the Internet.

Being public hasn’t always been easy for Local.com

Last year, the company was the subject of a critical web story that sent shares plummeting.

TheStreetSweeper.org published a story that questioned the credibility of the company’s current and past executives.

Local.com refuted the assertions, calling them “loose implications” designed to benefit investors who short the company’s shares and profit when they fall.

The company has sought to add more institutional investors to help minimize volatility, Clarke said.

Local.com also has made small acquisitions in a bid to diversify.

In February, it picked up Boston’s Rovion Inc., a unit of Irvine’s DigitalPost Interactive Inc., for up to $7 million in cash and stock.

Rovion creates and tracks online video advertising for local and national advertisers.

In January, Local.com picked up Los Angeles-based iTwango LLC for undisclosed terms. ITwango’s technology allows online advertisers to submit discounted offers to targeted consumers via e-mail.

“We are trying to differentiate our product portfolio from just being a search engine,” Clarke said. “What that gives us is a more defensible business.”

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