Equity Research

Brian Bolan Research
13 June 2011

Initiating Coverage
Company Overview and Key Data
ReachLocal (Nasdaq: RLOC)
Share Price: Price Target: 52-Week Range: Shares Outstanding: Market Capitalization: Dividend Yield: $16.30 $18 $12.00 - $28.39 28.8 million $507 million NA

Hold

ReachLocal (Nasdaq: RLOC)
Investment Concept
ReachLocal has found a sweet spot by aggressively growing its Internet Marketing Consultants despite the recent recession. These feet on the street drive the company’s growth by acquiring small and medium sized business (SMB) clients and aiding them in advertising the client company via search and display advertising.

ReachLocal, Inc. is an online marketing company that helps small and medium sized businesses, or SMBs, acquire, maintain and retain customers via the Internet. The Company offers a comprehensive suite of online marketing and reporting solutions, including search engine marketing, display advertising, remarketing and online marketing analytics, each targeted to the SMB market.

Approximately one year ago, I initiated coverage on ReachLocal just a few days following the IPO. The published report contained my estimates for 2010 & 2011. This report looks back over the last year and how my estimates were able to hold up. Then we take a look at the future This report is only a preview of the complete report. Full edition reports are available for $79.95. Follow up reports following the earnings release will be priced at $29.99 and can be purchased in bulk. Email for payment options.

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The full price version has over 20 graphs. Includes earnings estimates for 2011, 2012. Includes one free hour of consultation with author

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13 June 2011

DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED AT THE END OF THE REPORT. Investors should consider Brian Bolan Research as only a single factor in making their investment decision.

Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

Inside

Investment Thesis Company Background ReachSearch ReachDisplay TotalTrack TotalChat ReachCast ReachDeals Acquisitions Where the Growth Comes From Segment Breakdown Comparable Companies Industry Discussion Management Headcount Stock Trading Traffic Analysis Income Statement Active Advertisers Active Campaigns Sales Staff Grows Campaign ASP Advertiser ASP Revenue per IMC Direct Local vs NBAR Analysis of Key Metrics Cost of Sales to Decrease Balance Sheet Investment Risks Recomendation Appendices

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ReachLocal (Nasdaq Global Markets: RLOC)

Investment Thesis
ReachLocal has demonstrated a clear path to profitability, good growth history and good growth potential. A tight float and little selling from Venture Capital has played a role in the stock moving to its recent highs. The recent partnership with Google has cleared the way for future investment in eight foreign countries over the next three years. Over the last year, the company has added a key product, ReachCast, to its search and display offerings. ReachCast is the social media marketing tool that includes Facebook, Twitter, and SEO services for the site. Through 1Q11 the company has sold approximately 1,100 ReachCast’s to new and existing clients. Having launched in November, the retention rates for ReachCast will be a primary concern. Growth is predicated on the continued hiring of Internet Marketing Consultants (IMC’s) As the company adds more IMC’s the distance to profitability is likely to be shortened. We have used some conservative hiring estimates for 20112 and relied on company guidance for 2011.

Company Background
Search remains the backbone of the internet and small businesses realize that they need to be on the internet. Most small businesses recognize that they can be on the internet with little effort directly through Google AdWords, but add in the complexity of Yahoo!, Bing, Ask.com and AOL and the task becomes too large for many small businesses. The company generates revenue from four segments. We have provided a brief summary of each below: ReachSearch is the company’s search engine marketing product places clients’ advertisements among the search results on leading search engines such as Google, Yahoo! and Bing, as well as an extensive network of local search and directory sites, called the ReachLocal Search Network. ReachDisplay is the company’s display advertising product which broadcasts an SMB’s message to a specific target online audience. ReachLocal offers more than 20 different display advertising products across a wide variety of publishing partners, including Yahoo!/Right Media, Google, Collective Media, Facebook, Fox Interactive Media, and Kelley Blue Book. In 1Q11 RLOC added Remarketing to all ReachDisplay campaigns. Remarketing a remarketing product allows the company to target consumers who have previously visited a specific SMB’s website through a ReachSearch or ReachDisplay campaign. TotalTrack. Powered by a reverse proxy technology TotalTrack allows clients to see exactly how much online and offline activity, including phone calls, is generated by their online advertising campaigns. ReachCast. As the Social Media Marketing tool for small businesses, ReachCast posts content to Facebook & Twitter and allows for an RSS feed to post to other blogs or sites. Through SEO back linking, the ReachCast site will often climb the organic listings for three or five desired keywords. ReachDeals The result of the $10M purchase of DealOn on 2/15/11, ReachDeals has yet to be launched and is still in beta. It is expected to fully launch in 2H11. As part of the Bizzy platform, ReachDeals will compete with Groupon, LivingSocial and others in the daily deal space. A detailed breakdown of each product is available via the full report.
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Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

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Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

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ReachDisplay Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1. . Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1. . Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1. . Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1. . Analysis
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ReachLocal (Nasdaq Global Markets: RLOC)

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ReachLocal (Nasdaq Global Markets: RLOC)

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Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

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Where the growth will come from
Ad dollars shifting from other sources to Online Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1. Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1. Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1

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ReachLocal (Nasdaq Global Markets: RLOC)

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Comparable Companies Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Local.com (NASDAQ: LCOM) - Local.com Corporation operates an Internet search engine. The Company assists users in finding local businesses and services. Marchex (NASDAQ: MCHX) - Marchex, Inc. provides technology-based services to merchants engaged in online transactions. The company's Internet marketing services, including paid inclusion, pay-per-click listings, conversion tracking and search marketing, help merchant customers sell their products and services online. Verto (NASDAQ: VTRO) – Vertro, Inc. owns a portfolio of products that allow users to search the Internet and display the results as they wish. The products allow users to search and then display the results in customizable toolbars, homepages, and desktop products. Constant Contact (NASDAQ: CTCT) – Constant Contact, Inc. provides web-based e-mail marketing tools and services to businesses, associations, and organizations to help them connect with their customers and members. Limelight Networks (NASDAQ: LLNW) Limelight Networks Inc. is a content delivery network for internet distribution of video, music, games and downloads. The company's advanced content delivery network provides the world's top media companies high performance delivery of digital media and software via the Internet.

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ReachLocal (Nasdaq Global Markets: RLOC)

ValueClick (NASDAQ: VCLK) ValueClick, Inc. provides Internet advertising solutions for publishers of Web sites and online advertisers. The Company offers performance-based Internet advertising solutions in which an advertiser only pays when an Internet user clicks on its banner advertisement. QuinStreet (NASDAQ: QNST) QuinStreet, Inc. provides Internet advertising solutions for publishers of Web sites and online advertisers. The company focuses on building lead aggregation websites for specific industry verticals.

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ReachLocal (Nasdaq Global Markets: RLOC)

Industry Discussion
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ReachLocal (Nasdaq Global Markets: RLOC)

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ReachLocal (Nasdaq Global Markets: RLOC)

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ReachLocal (Nasdaq Global Markets: RLOC)

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ReachLocal (Nasdaq Global Markets: RLOC)

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Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

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Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

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Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

As Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 numbers.

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Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

Analysis of key metrics for ReachLocal The Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 clients. On Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 international office expansions since that time. Cost of Sales to Decrease as a percentage of Sales Nearly Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Google. Costs Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 customer. There Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 clients. Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1

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Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

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Investment Risks
If the company experiences any or all of the following risk factors, as well as others, the company’s stock price may be affected.  Advertisers Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1.  A better Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1.  Competition Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1.  Future Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1

 Loss Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1.  One Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1. Implications of higher employee turnover / increases in commissions. Earlier in Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1
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Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 on margins. Recommendation and Valuation Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1 Paragraph1.

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Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

Appendix
2Q10 Earnings Review

3Q10 Earnings Review

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Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

4Q10 Earnings Review

1Q11 Earnings Review

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Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

ReachLocal Income Statement Forecast

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Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

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Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

Chart OMITTED in FREE Version
6 5 4 3 2 1 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

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Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

Balance Sheet

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Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

Statement of Cash Flow

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Brian Bolan Research

ReachLocal (Nasdaq Global Markets: RLOC)

ReachLocal (Nasdaq GM: RLOC) Historical Price Chart

Source Google

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Brian Bolan Research Important disclosures:

ReachLocal (Nasdaq Global Markets RLOC)

Analyst Certification:
The following analysts hereby certify that their views about the companies and securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report: Brian Bolan. As of the date of this report, the analyst has no financial interest in any companies mentioned in this report.

Ratings:
Buy: The stock’s total return is expected to exceed 15% over the next 6-12 months. Hold: The stock is expected to have a positive return of less than 15% over the next 6-12 months. Sell: The stock is expected to have a negative return over the next 6-12 months.

Disclosures:
None

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