The management entered into a new agreement with the Cobalt Group, a provider of marketing services to more than 40% of the auto dealers in North America.

- Under the expanded partnership Cobalt is using the company’s call tracking and call-based products and services to enable their auto dealerships across the country to measure the effectiveness of their online and offline advertising campaigns and place call-based advertisements across several search engines and websites.
- This relationship between Marchex and the Cobalt Group is representative of the kinds of partnerships that will drive local online leadership and we expect Marchex will continue to enter into partnerships with leaders in other relevant verticals.

The management is focused on prioritizing brand consolidation and growing the local search network during the year.

- The company will launch phase one of the brand consolidation in the next few months with focus on brands in the local advertising services areas.
- The goal with brand consolidation is to make it easier for advertisers to utilize multiple Marchex products and services through a single media buy and a single Marchex point of contact, while also more focally lining up products and brands with Marchex.
- The management considers this to be a critical component for unlocking additional budget from national advertisers and agencies.

- The management is also focused on continuing to grow the local search network.
- Significant progress has been made in the first quarter by launching tools that enable local consumers and merchants to contribute content to the company websites in a manner that enriches the utility and relevance of the local business information.

Local Advertising Services:

- Quarterly revenue was $22.3 million. Year-on-year growth was driven by the continued increase in the number of new advertisers using the company products and services.
- During the quarter, the company added more than 10,000 new advertisers through its local aggregator partnerships and direct sales channel.
- The company now has more than 65,000 advertisers using its products and services. Based on current growth rates, the company is updating its forecast to reflect that it now anticipates that it will have more than 100,000 advertisers using its products and services by the end of 2009, an increase from a forecast of 80,000 advertisers previously.

Local Search Network:

- For the first quarter of 2008, revenue from the company’s proprietary traffic sources was $14.7 million.
- The company attracted more than 30 million unique visitors for the month of March 2008 and delivered more than 85 million revenue generating events and referrals during the quarter.
- The management advised that unique visitors statistics are based on internal traffic logs which calculate unique Internet Protocol addresses on an unduplicated basis during a given month.
- As in Q4 of 2007, the growth was particularly strong on the local reference websites. These are sites in the company network that help consumers find local businesses and services, including OpenList.com, yellow.com, and targeted geo-vertical sites such as ChicagoDoctors.com.

Fiscal 2008 Guidance

- Revenues are forecast to be at least $152 million.
- The adjusted operating income before amortization is anticipated to be $22 million or more.
- For adjusted EBITDA, the company expects add-backs of about $9 million in additional depreciation and amortization to its adjusted operating income before amortization range. This implies an adjusted EBITDA of $31 million or more for fiscal 2008.

Second Quarter Guidance

- Q2 revenue is estimated to be approximately $37 million.
- The adjusted operating income before amortization is forecast to be about $5 million.
- The company expects add-backs of approximately $2.3 million in additional depreciation and amortization to its adjusted operating income before amortization range implying an adjusted EBITDA of $7.3 million for the second quarter.
- While the company anticipates continued momentum in the growth of new local advertisers using its products and services, the management expects a seasonal impact from certain categories of advertisers lowering their budgets with the seasonally slow summer months.
- The company anticipates revenue from proprietary traffic sources to be in a similar range or slightly better than Q1 of 2008. This is based on anticipated increases in consumer usage on Marchex’s Local Search Network with certain offsets from the company’s ongoing efforts to increase direct sales of proprietary advertising inventory.

Key questions and answers from the first quarter fiscal 2008 earnings call conducted by Marchex on May 6, 2008.

Christa Quarles (Thomas Weisel Partners): You indicate that the $85 million unique look-ups were due to yellow.com. Could you dissect the performance in that area further? Was there a particular category within the local side that showed particular strength or particular partners that helped there?

Russell C. Horowitz: As it relates to the look ups, those are revenue-generating events. When you look at what’s driving it, we notice specifically, they’re business look-ups, which is what our OpenList content engine supports and what yellow.com supports. It’s helping consumers find their way to find the businesses they need. We’re therefore continuing to do a good job of that and we’re continuing to do a better job of fulfilling, which comes down to matching increased demand from local advertisers and aggregators with the growth in our traffic. Those are therefore key themes.

Christa Quarles (Thomas Weisel Partners): You had indicated that economic arrangements from third parties improved in the quarter, but yet you’re also trying to reduce your reliance there. Were they a decent year-over-year benefit?

Russell C. Horowitz: It wasn’t a factor. If you look at Yahoo in Q4 of 2006 we disclosed them as 38% of our revenue. In Q4 of 2007 it was 21%. Clearly, one of the strategic focuses of the company has been to take ownership of monetizing our traffic. The focus is to work with partners where it makes sense and they’re an important partner. What’s therefore driving our growth and opportunity is us taking more control of both sides of the whole local eco-system.

James Leahy (Morgan Joseph & Co., Inc.): Could you give more detail on who or what verticals are the ones that are lowering their advertising budgets at this point?

Russell C. Horowitz: In terms of verticals, we’re in an environment where some are stronger and some are weaker. We noted that retail categories are seasonally weaker than usual. That’s not a big focus for us because our growth is being driven by local. However, they are players in our marketplace. There are other categories like finance that have been noted as weaker. But in the context of what’s driving Marchex, these aren’t defining and so they’re not worth highlighting.