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PART I
Forward-Looking Statements
Part I of this Annual Report on Form 10-K includes statements that constitute “forward-looking statements.” These forward-looking statements are often characterized by the terms “may,” “believes,” “projects,” “expects,” or “anticipates,” and do not reflect historical facts. Specific forward-looking statements contained in Part I of this Annual Report include, but are not limited to, our (i) belief that local exchange carrier, or LEC, billing will continue to be a significant billing channel in the future; (ii) expectation of increasing revenues through our national accounts programs, fulfillment contracts, web hosting and other arrangements; (iii) belief in the continued growth of Internet usage and demand for online marketing; (iv) belief in the growth of the local search and information market; (v) belief that existing cash on hand and additional cash generated from operations together with additional cash obtained from other sources will provide us with sufficient liquidity to meet our needs for the next 12 months, such other sources of cash possibly including stock issuances and loans; (vi) belief that we would be able to obtain advances from our existing LEC clearing houses through their current advance programs; (vii) belief that we could obtain other forms of financing secured by or leveraged off our accounts receivable based on existing programs in place that are being offered to companies similar to ours; and (viii) belief that existing facilities are adequate for our current and anticipated future needs and that our facilities and their contents are adequately covered by insurance and (ix) belief that our gross profit margin and selling, general and administrative costs will support the company’s business plans and opportunities.
Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in Item 1A. Risk Factors, as well as other factors that we are currently unable to identify or quantify, but may exist in the future.
In addition, the foregoing factors may affect generally our business, results of operations and financial position. Forward-looking statements speak only as of the date the statement was made. We do not undertake and specifically decline any obligation to update any forward-looking statements. Any information contained on our website www.livedeal.com or any other websites referenced in this Annual Report are not a part of this Annual Report.
ITEM 1. Business
Our Company
LiveDeal, Inc., a Nevada corporation (the “Company”, “LiveDeal”, “we”, “us” or “our”) provides online marketing internet directory services for small businesses. LiveDeal, through our wholly-owned subsidiary Velocity Marketing Concepts, Inc., offers an affordable way for businesses to extend their marketing reach to local, relevant customers and manage their online presence.
Summary Business Description
LiveDeal first started in the online marketing industry as YP.com. At the time, YP.com was the first company to bring the print yellow pages to the Internet in 1994. From there we moved into the online classifieds business when we merged with LiveDeal in 2007. Subsequently the company sold YP.com in March 2009 and discontinued the classifieds business in June 2009.
LiveDeal develops and markets tools that help local businesses manage their online presence. These tools include a variety of cloud-based solutions that help businesses extend their marketing reach to local, relevant customers and manage their online presence.
Originally founded as YP.com in 1994, LiveDeal has traditionally provided affordable, entry level, online products to local businesses. Today, we have adapted and adjusted our company goals to reflect the latest online trends in internet marketing with the aim of reaching as many small and medium-sized businesses as possible. In March 2010, we adopted the strategy of developing successor products to our directory business and rebuilding our customer base through mass market sales using LEC billing channels and moving away from the higher-end direct sales products offered through Local Marketing Experts, Inc. (which focused on search engine marketing and website creation services together with additional add-on advertising products.) Since July 2010, the line of business historically known as our yellow page directory service was rebranded and upgraded to the InstantProfile ® product and marketed under our subsidiary Velocity Marketing Concepts, Inc. This new product, which is part of the InstantAgency suite of products, provides online subscription tools and services to broadcast information about a business to the top (based on popularity) Internet directories, search engines results, social media networks, and Points-of-Interest (POI) databases embedded on the leading navigational devices. This ensures that our customers are distributed to sites such as Google, Yahoo, Bing, Facebook, Twitter and others through our distribution network. Additionally, customers receive a communication suite that allows both conference call hosting and electronic fax services. We are focusing our efforts on increasing our sales under Velocity Marketing Concepts, Inc. and expanding the range of products offered to the market through this sales outlet by selling the Instant Profile and Instant Award products. This strategy has culminated in the cessation of all new sales under the Local Marketing Experts, Inc. subsidiary (Direct Sales) on December 1, 2010. In May 2011, the Company assigned its remaining Direct Sales customers to ReachLocal. Also Velocity Marketing Concepts, Inc. sales were paused on July 15, 2011 while the Company evaluates its sales program, products, distribution methods and vendor programs.
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Our current strategy is to market to small office/home office businesses as well as local businesses across the country. Our products are affordable and useful to a large portion of the small business market. Our customers include retail businesses such as restaurants, home repair and services companies, as well as professional firms providing legal, accounting and medical services. All share the common challenges of managing their online presence and acquiring customers online.
We rely on telemarketing and online lead generation to drive customer acquisition. We partner with companies that are highly automated and specialize in creating, deploying and managing telemarketing campaigns quickly and efficiently. Our partners have a strong ability to quickly build and scale programs tailored for small businesses.
In recent months, LiveDeal has reworked its product offerings and company structure around this mass-market business model. In the past fiscal year, we have greatly reduced expenses and streamlined the company. LiveDeal managed the expense of acquiring a new customer base while reducing operating losses to their lowest levels in several years. Presently our focus is acquiring additional investment and working capital that will allow us to continue to grow our revenues. The company stopped new sales under Velocity Marketing Concepts July 15, 2011 to improve the current Instant Profile Products and develop new products as we look for additional investments.
Industry Overview
According to BIA/Kelsey, U.S. Local online/digital advertising revenues will rise to $23.3 billion in 2011. “Local search,” that is, searches for products, services and businesses within a geographic region is an increasingly significant segment of the online advertising industry. Local search allows consumers to search for local businesses’ products or services by including geographic area, zip code, city and other geographically targeted search parameters in their search requests. According to a May 2011 study The Kelsey Group estimates that the local search market in the United States will grow from $5.1 billion in 2010 to $8.2 billion in 2015. Consumers who conduct local searches on the Internet (“local searchers”) tend to convert into buying customers at a higher rate than other types of Internet user. As a result, advertisers often pay a significant premium to place their ads in front of local searchers on websites like Local.com or our Network partner websites. Additionally, local small and medium-sized businesses that would not normally compete at the national level for advertising opportunities are increasingly engaging in and competing for local advertising opportunities, including local search, to promote their products and services.
Local search is still relatively new, and as a result it is difficult to determine our current market share or predict our future market share. However, we have a number of competitors that have announced an intention to increase their focus on local search with regard to U.S. online advertising, including some of the leading online advertising companies in the world, Google, Yahoo!, and Microsoft, among many others with greater experience and resources than we have.
We believe that small businesses that can take advantage of emerging Internet capabilities will be able to acquire customers with greater efficiency than before and those that cannot will suffer in comparison. It is becoming widely recognized among small business owners that mastering the Internet arts is essential.
These new Internet services are inherently technological. They require a deep dedication of time, technological skills, language and presentation expertise and other masteries that few small business operators have, or have the intention of acquiring. We recognize that, to succeed, a small business person needs to remain intensely focused on the fundamentals of his/her business. Small businesses therefore need a partner with the necessary expertise and understanding to manage emerging Internet audience acquisition services on their behalf. They need this partner to operate quickly, proactively and at the lowest possible cost.
To that end, we have strategically created and delivered a suite of products and services designed to deliver agency quality products at an affordable cost. This new suite of products delivers high end agency products and services without the costs typically associated with a high end, online, agency firm. The suite of services has a variety of online products and various price points. These products allow LiveDeal to become the small business audience acquisition partner.
LiveDeal customers are small business owners who work long hours to deliver real value to their customers in their own communities with little time left over to develop and master the powerful, multi-faceted, online marketing and advertising programs that today’s world demands. LiveDeal has stepped up to this challenge, drawing from a decade of experience as a directory provider.
Products and Services
InstantProfile. As described above, our Internet Advertising Product (“IAP”) package was discontinued in 2010 with the launch of the InstantProfile and InstantProfile premium products. All IAP customers were moved to InstantProfile to take advantage of the new product and features. Under this package, the advertiser pays for exposure utilizing our InstantProfile product. The advertiser enjoys the benefit of having its business distributed to top Internet destinations (based on popularity), including search engines, top directories, and social media networks. This gives the advertiser the ability to manage its business information in one location and maximize its reach to many locations, as a consumer may search broadly for local business services. InstantProfile customers also enjoy additional benefits with tools to communicate directly with their customers and employees. The InstantProfile platform includes: