Judy's Book Sell-Off Signals Investor Impatience

Just as the holiday selling season is ramping up, Judy’s Book is winding down. The local shopping deals site is cutting full-time employees and seeking a buyer. In the interim, the company and site will continue to operate.

Disappointed CEO Andy Sack shared his big lesson learned during an interview with ClickZ News: “There’s no question that doing something local on the Internet is really friggin hard.” Still, others are already expressing an interest in trying it out themselves. “There have been a solid six inquiries to date” from potential buyers, said Sack yesterday.

Although the company’s full-time employees will be let go, some staffers will continue working for Judy’s Book on a contract basis until an acquisition goes through.

“They never had a chance to walk, let alone run,” said Greg Sterling, principal analyst of Sterling Market Intelligence. The local media consultant suggested the company’s investors didn’t have the patience to wait to see if its new local shopping business model would take hold. “They didn’t see the revenue curve going up fast enough,” he said. “The investors were fatigued.”

Indeed, Sack titled his sell-off announcement posted to his blog Monday, “Time is the enemy.” The serial entrepreneur has employed his “A Sack of Seattle” blog as a sounding board and confessional as the company has transitioned from local business review site to local shopping deals and coupon provider.

“Local clearly was going to take a long time to execute, and the investors were tired and impatient, and frankly, so was management.” So, he said, they decided, “Let’s sell it now.”

Judy’s Book launched in 2005 as a local reviews site, taking Sack’s mother-in-law’s little green book of recommended doctors and plumbers and turning it into a business with enough potential to score two rounds of investor green totaling $10.5 million.

Discovering that wooing small business advertiser clients was a daunting challenge, the company switched gears. Between August and September 2006, the firm altered the way it characterized itself in press releases from “the free online community for sharing local opinions,” to “the free online community for smart shoppers.” But even the local shopping deals and coupons model didn’t grow fast enough.

“Startups have much less room to screw up in this space because monetization is so challenging,” said Sterling, who believes operations with larger backers and parent companies with more local resources may fare better when it comes to fostering the necessary long-term experimentation it takes to find what works in the local space.

ShopLocal is one such firm. Owned by big newspaper publishers Gannett Company, Tribune Company, and McClatchy Company, the local shopping deals site may have the support it needs to work out the kinks of its business model.

Besides having significant support from its newspaper parents, ShopLocal attracts far more unique visitors than Judy’s Book, as reported by audience measurement firm Quantcast. Compared to approximately 500,000 estimated uniques visiting Judy’s Book each month, ShopLocal.com garners about 10 million. Insider Pages, which is closer to Judy’s Book’s original local business reviews model, also has strong backing and ready-made local market presence since being sold to IAC/InterActiveCorp’s Citysearch earlier this year.

As for who might buy Judy’s Book, an entity with a foothold in local markets and the dollars to devote to development and integration with media properties, such as a newspaper or yellow pages publisher could be a good fit. Suitors that have shown an interest in acquiring the site are “all players in the online local space, big and small,” said Sack.

No matter who bites, the company would prefer for the sale to be lock, stock and barrel rather than piecemeal. “We believe our existing customers’ and investors’ interests will be best served by finding a home for the entire operation at a strategic acquirer with a long-term commitment to the ideas we’ve been pursuing,” Judy’s Book COO and co-founder Chris DeVore told ClickZ News.