Shrink To Grow: Citysearch And Urbanspoon Parent Company CityGrid Lays Off 15% Of Its Employees

Online media and advertising company CityGrid, the parent company of properties like Urbanspoon, Citysearch and Insider Pages, is announcing a round of layoffs today that will affect about 15% of its workforce. The company, which is part of the IAC network, currently has around 450 employees. As CityGrid CEO Jason Finger told me earlier today, the reason for the layoffs is a general shift from cost-per-click (CPC) advertising in the local space to a subscription-based and cost-per-acquisition (CPA) model. CityGrid, which is made up of some of the oldest companies in this space, based its revenue model around CPC.

As Finger told me, today’s cuts will affect a variety of CityGrid’s groups, but primarily employees in technology and support functions. He stressed that this decision was made in an effort to reduce cost, but “so we can make appropriate investments going forward.” The company wants to “shrink to grow” its CPA-based model and its existing consumer properties. Indeed, Finger argued that today’s layoffs will help the company “accelerate the innovation cycle” and allow it to focus on mobile and social. “We are extremely excited about the opportunity in local and remain committed to investing to grow our business,” Finger said.

Earlier this year, CityGrid, acquired Yext’s pay-per-call ad service Felix for a rumored $30 million. This, said Finger, shows the company’s commitment to the CPA model and CityGrid plans to layer this model on top of the categories it currently serves. Because of the strategic shift in the local advertising market, Finger noted, merchants now want to pay for the actual customers they receive or prefer a high ROI subscription-based advertising model.

It’s also worth noting that when Finger, whose background is in CPA advertising, took the job as CityGrid’s CEO in April, he found a company that had strong assets, but that also still had a significant technical debt due to its reliance on legacy technology. The company has now, for the most part, migrated off these old legacy dependencies.

CityGrid is a relatively new construct inside of IAC. In 2010, the company merged Citysearch, Insider Pages and UrbanSpoon to form CityGrid. According to IAC’s latest quarterly earnings report from July, CityGrid and ServiceMagic, which the company groups together in its report, had revenue of about $84.5 million in the preceding quarter. Compared to other groups inside of IAC, these local services saw lower growth rates than the company’s other segments.