BARRY KARLIN: Internet Play CRC’s Best Acquisition

-ATIN- -06/14/08 – CRC Health Corp.’s purchase of behavioral health Internet marketing powerhouse has turned out to be the best acquisition from among the dozen or so the company has effectuated, said CEO Barry Karlin on Thursday at an investment conference in New York, according to a source who was at the conference and heard the remarks. The source also said that Karlin informed the conference attendees that CRC’s Internet marketing operations are generating about 100,000 calls a year into the company’s National Resource Center call center.

CRC bought, which at the time was the leading player from among a trio of established addiction Internet marketing platforms, shortly after Karlin closed a $140M deal in 2005 to acquire Sierra Tucson, a transaction that was then by far the largest in the history of the addiction treatment industry.

The Sierra Tucson deal catapulted CRC into a world in which it had previously been only a bit player, the world of high-end private pay addiction treatment. Karlin at the time was no doubt aware that to fill about 140 high-end beds – CRC planned to sharply increase the number of beds at Sierra Tucson to pay for the huge cash flow multiple in the transaction – he’d need to have a very big presence on the Internet, an annual marketing spend that would probably have been in the millions of dollars.

So instead of laying that kind of money out as an expense, Karlin apparently decided that owning the Internet marketing vehicle would make more sense, especially given that he planned to make a lot more high-end addiction treatment center acquisitions. CRC also approached Jon Heller, the founder of, but passed on that deal in favor of, which was then owned by its founder Howard Brown.

Brown, a former counselor, had painstakingly built 4therapy into an Internet marketing platform with hundreds of thousands of pages of content that gave the site high natural search engine rankings, which in turn helped drive big consumer traffic. According to SEC filings, Brown got $9M for in a series of payments from CRC, a massively high price given the fact that 4therapy had only $750K in revenue.

While Karlin said that 4therapy would continue to take non-CRC centers as clients, sources inside CRC say that Karlin never had any intention of doing anything other than remaking 4therapy into a CRC-only marketing and promotion engine. And, indeed, no non-CRC addiction treatment centers have appeared on the site in years.

After CRC took 4therapy into its fold, and Howard Brown came on as a top CRC marketing executive, has emerged as by far the leading independent player in addiction Internet marketing, routinely showing up as number one on many common addiction search terms. Jon Heller has stepped aside from active business management of the site, reaching a deal with an elusive West Coast Internet industry player, Drew Palmer, to handle sales and business management.

According to several sources, Palmer has been looking to sell with an asking price of $4M.

Newswire Staff

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