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Directory Donnelley Calls on Business.com For $345M

Looking to add to its online telephone directory assets, R.H. Donnelley agreed to purchase search and advertising provider Business.com for $345 million in cash.

Business.com, formed by Internet entrepreneurs Jake Winebaum and Sky Dayton in 1999 after they purchased the domain for what was then considered a princely sum of $7.5 million, lets users search for business services.

Business.com makes money from its sites, including Business.com, Work.com and the Business.com Advertising Network, by sending potential business traffic via the Web to service and product providers. Business.com is profitable and is expected to generate more than $50 million in 2007.

R.H. Donnelley Chairman and CEO David C. Swanson said Business.com Inc.'s performance-based, pay-per-click ad platform will boost its Triple Play business-to-consumer marketing offerings, which help local business attract customers through print Yellow Pages, Internet Yellow Pages and search engine marketing/search engine optimization (SEM/SEO) tools.

Specifically, Swanson said on a conference call today that Business.com's ad platform and corresponding ad network "will allow us to improve margins by provisioning search engine marketing advertisers on our own sites and our partner sites first as opposed to just the major search engines."

Swanson added that Business.com will enable Donnelley to provision partner advertisers on its DexKnows.com site, so that Donnelley can better monetize site traffic away from its footprint and create a more competitive bidding marketplace on the site.

The deal is an example of how traditional print phone directories are looking over their shoulders at Web directories. Some believe that as search functionality becomes more user friendly via Web-enabled mobile phones, print Yellow Pages are being increasingly cast aside in favor of online directories.

After all, why rifle through pages when you can just call up a directory from your phone?

Business.com will build on the assets Donnelley gained when it bought rival Dex Media, a major provider of print directories and Internet-based local search for 14 states, and search engine marketing provider Local Launch, last year.

Should the new deal close in the third quarter as expected, Business.com's CEO Winebaum will be appointed president of R.H. Donnelley's interactive unit (RHDi), which will now include DexKnows.com, LocalLaunch search engine marketing company, Business.com, Work.com and the Business.com Advertising Network.

Winebaum, who managed Disney.com and ESPN.com as chairman of the Buena Vista Internet Group before forming Business.com, will report directly to Swanson.

In related Donnelley news, the company notched a second-quarter profit of $24.9 million, or 34 cents per share, compared with a loss of $79.8 million, or $1.15 per share, a year ago.

Internet.com, the parent portal for internetnews.com, is a Business.com partner.