Los Angeles Business Journal

CityGrid Lays Off Workers as Business Changes

INTERNET: Under new model, advertisers will pay for contact, not just clicks. By Natalie Jarvey Monday, October 29, 2012

About six months after taking the helm at CityGrid Media, the new chief executive has unveiled his vision for the local advertising company.

Earlier this month Jason Finger announced that the West Hollywood company has laid off 15 percent of the staff and is changing its advertising model.

CityGrid, which operates a local business advertising network and runs consumer review websites Citysearch, Urbanspoon and Insider Pages, is looking to develop an advertising model that’s more likely to generate business for local businesses.

As part of the transition, CityGrid, which is owned by Barry Diller’s New York Internet conglomerate IAC/InterActive Corp., has laid off about 67 of its 450 employees.

The layoffs come from the company’s technology and support divisions. Those employees had been helping CityGrid transition from an old technology platform to a new one. Now that the transition is complete, CityGrid has shrunk those divisions to reallocate the resources toward growing its ad network and consumer websites.

Finger told Silicon Valley blog TechCrunch earlier this month that the staff reduction allows the company to “make appropriate investments going forward” to “accelerate the innovation cycle” for its products geared toward its small business customers.

The layoffs did not affect staff at CityGrid’s website properties. In fact, Urbanspoon, which is headquartered in Seattle, has job openings listed on its website.

CityGrid has traditionally offered its small business clients a cost-per-click ad model where the advertiser, such as a local hairdresser or dentist office, pays a nominal fee every time someone clicks an online ad. While it will still provide some CPC advertising options, it is now focusing on offering a cost-per-acquisition model where advertisers pay a higher fee for an action such as a phone call from a potential customer or a booked dinner reservation from a new diner.

Although the CPA model is more expensive for advertisers than the CPC model, it theoretically does a better job of bringing new customers to that client, said Brandi Willard, the company’s director of communication.

“Local advertisers are looking for more customers and a CPA model is more transaction oriented,” she said.

But Peter Stabler, an IAC analyst for Wells Fargo Securities in San Francisco, said moving from one ad model to another might not result in more revenue for CityGrid. The company might be able to charge advertisers more for a call from an interested customer, but those calls are less frequent than clicks on an online ad.

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