Those in the short-term loan lead space had heard the rumors for a little while, but today the announcement made it official. London Bay Capital (out of San Francisco) "announced today that a newly-formed affiliate of LBC has acquired Selling Source." "Plainfield Asset Management LLC ("Plainfield"). A fund managed by Plainfield provided a significant portion of the first and second-lien indebtedness in the transaction as well as making a significant equity investment alongside London Bay." (see release here).
In a rather surprising move of transparency the release both hinted at the purchase price but more enlightening the companies revenues and profit. For those wondering at the profitability of marketing service companies in the subprime financial space, Selling Source "revenues in 2007 exceeded $125 million with pre-tax income of approximately $21 million, representing an organic growth rate of more than 50% compared to 2006."
There are some well run companies in this space, which people might not assume given the audiences they serves and penchant for Florida and Las Vegas locations. One of my favorites has only been Swish Marketing. As for Selling Source, I remember seeing their amazing booth at the SF DMA show and being surprised. This was 2006, and up until then, I had assumed that those in that space were small shops not business builders, the exact opposite of the image that Selling Source presented given some of the talent they hired from within the industry and the unexpectedly robust product offering.
That said, there are some natural risks, which makes me think it was a smart move by the Selling Source folks. Payday loans aren't going anywhere, but there has been severe margin compression over time for the lead buyers and outside the lead practices that they rely on for their own margin. The FTC will most likely start to put some pressure on the tactics (Mark Meckler will have more on the FTC investigations in next week's DMConfidential.com) and they (not Selling Source per say) have a less diversified traffic mix than some other verticals. Again, feels like a good time to take on a larger partner with deeper pockets, much like AzoogleAds did in 2004.
