This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Groupon's Halo Effect

Stocks in this article: GOOG AMZN EBAY DEXO SPMD TZOO




By Julia Boorstin, CNBC Correspondent

With last week's ongoing rumors of Google's (GOOG) hopes to buy Groupon for $6 billion, there's been a rash of interest in local companies; this could be the beginning of a a mini local bubble.

On the heels of the announcement that Amazon (AMZN) is investing $175 million in Groupon's #2, LivingSocial.com, and that eBay (EBAY) is buying Milo.com, local advertising stocks were red hot Friday. Google, Amazon and eBay are stoking the interest in companies that focus on marketing small businesses.

More from CNBC
A Silicon Bubble Shows Signs of Reinflating
Berliners Throw Nude Parties to Protest Rising Rents
Amazon Invests $175M in Groupon Competitor

Three small-cap companies soared on Friday. Dex One Corporation (DEXO) ended nearly 49 percent higher, boosting its market cap to $335 million. It owns Yellow Pages and White pages directories. Meanwhile Supermedia (SPMD), which pushes Superyellowpages.com and other local ads, soared 20 percent on a huge spike in volume. Its market cap is still just around $105 million. And Local.com (LOCM), a business search engine and ad network, added 8.3 percent with a $90 million market cap.

Potential takeover interest is one factor driving these companies higher, but that's not all. Investors are starting to realize what Google, Amazon and eBay have clearly been thinking about: It's been very hard for small businesses to market themselves online.

While clunky Yellow Pages and classified newspaper ads are old news, nothing has really taken local merchant ads to the next level. Small businesses can advertise on Google, but it's much harder to proactively reach new customers than in the day and age when everyone subscribed to a local paper. Companies like these three small-caps, along with Groupon and Livingsocial, allow small businesses to better represent themselves in the digital landscape.

These small-caps aren't the only companies that will benefit from the spotlight on local deal companies. Travelzoo (TZOO) continues to thrive -- adding nearly 12 percent over the course of last week. Though it sells travel deals, it derives part of its revenue from one-a-day deals like Groupon's.

And don't be surprised if we see more investment or even acquisitions of private companies in this space: Tippr.com and Buywithme.com are the next group buying deal companies, in terms of size. We can bet they're engaged in talks with deep-pocketed investors. And think about a company like Zagat.com, which has flown beneath the radar -- could that be a valuable brand for the local restaurant biz?

CNBC is a world leader in business news, providing real-time financial market coverage and business information.

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,672.60 -141.38 -0.79%
S&P 500 2,051.82 -11.33 -0.55%
NASDAQ 4,757.8790 +7.4820 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs