ReachLocal’s S1 filing to raise $100 million includes valuable details about the company. With grosses of $146.7 million for the first nine months of 2009, and operations in the U.S., Canada, the U.K. and Australia, the local search and display reseller has become one of the biggest bets in local.

According to the S1, ReachLocal, which was founded in 2004, has 14,500 active advertisers and 17,600 active campaigns. Most advertisers spend between $500 and $3,000, and represent  a wide swath of local verticals, including home repair and improvement, automobile sales and repair, medical and health services, legal services and retail and personal services.  “Our target market is SMBs that spend at least $5,000 per year on advertising,” notes the company.

A little more than two-thirds of revenues — 68 percent — come from ReachLocal’s sales force, while the rest come from more than 350 third-party agencies and resellers. But the direct sales force is more profitable, and the company’s intent is to focus on bringing in more sales consultants.

Sales consultants that survive the first year (“upperclassman”)  bring in substantially higher revenues than new consultants (“underclassman”), who spend much of their time in boot camp (one week) and other training activities.  The company says it has 438 salespeople in North America and 87 salespeople internationally, and roughly 40 percent  are “upperclassmen.”  The pool of upperclassmen is a little shortchanged right now, however,  as the company slowed down new sales hires in 2009 on account of the recession.

The company suggests that its costs and search costs in general could go up as the economy recovers and more advertisers increase their quotient of Internet advertising.  “An increase in the cost of media in these marketplaces without a corresponding increase in our media buying efficiency could result in an increase in our cost of revenue as a percentage of revenue even if our business expands.”

It also notes that its media costs have already gone up from 52.7 percent of revenues to 55.6 percent, mostly as the result of Google’s 2008 action to  terminate its publisher rebate program in North America.  Google gets the lion’s share of ReachLocal’s spending, although the company also works with Yahoo and Microsoft, and has recently begun providing display ads, and expects to move into mobile ads as well.

Looking forward, the company says it will work aggressively to “address new segments of an SMB’s marketing activities, such as digital presence, reputation management and customer retention.

What do we think? One way to look at ReachLocal is to think of it as a “game of outside sales versus inside sales,” notes BIA/Kelsey President Neal Polachek. “To the credit of Reach, they have gone out and put in place the more expensive channel,” he says. “They can add a telephone channel to assist the outside channel and their economics will actually improve. The other players who are currently inside only (Yodle, Yext) will see their economics deteriorate if they add an outside channel. Also, Reach has worked aggressively in the top 30 markets and been cream-skimming the best Yellow Pages customers.”

But there are other issues, namely churn. “For years, lack of churn in both these areas has been the strength of the incumbent YP players,” notes Polachek.  Now it is more complex.

“The question going forward for incumbent YP players is whether or not they will have the products that advertisers want;  a transformed channel, which can offer them these new products; and the discipline to watch their print dollars erode at the expense of their own proprietary interactive products, even as they are likely re-selling someone else’s interactive products,” says Polachek. “For the newbies like Reach, the question going forward is whether or not they have the ability to aggregate a product set which appeals to the local advertiser and the patience to endure a challenging and path to profitability — only time will tell.”