By Sunshine K. Mugrabi

A couple of months ago, many observers were wondering whether Insider Pages would survive. Up against such competitors as Yelp, Judy's Book, and Yahoo Local, the Redwood City, California-based online directory was recently forced to layoff two-thirds of its staff.

Insider Pages’ luck changed Thursday when Citysearch, a division of Barry Diller’s IAC/Interactive, announced it was acquiring the company for an undisclosed sum. Insider Pages’ small crew will be moved to Citysearch’s San Francisco, California office, and the site will continue to operate independently.

That may be good news for Insider Pages, but the deal also serves as a reminder that lucrative Web 2.0 exits are the exception rather than the rule despite all the venture community hype. No one can forget Google’s $1.65 billion acquisition of YouTube last fall, but most startups would be lucky to score a $10 million to $100 million exit.

“It’s not anything on the scale of what the Internet was in the 1990s. There were a lot more big, standalone companies coming out of that era than the Web 2.0 era,” said Marlboro, Massachusetts-based consultantPeter S. Cohan.

Insider Pages has amassed 600,000 reviews and claims to have a special system for developing relationships with local organizations and community members. It garners about 2 million monthly unique users—about twice as many as Yelp, according to comScore Media Metrix. And of course, user-generated content is all the rage, even among big corporations.

Insider Pages was backed by some of the most high profile venture capitalists in the Web 2.0 space. Roelof Botha, a partner at Sequoia Capital who also backed YouTube, and industry veteran Eric Hippeau, managing partner at Softbank Capital of New York City, both sat on the company’s board of directors. Bill Gross, founder of Idealab backed the project from the get-go by incubating it in his office. The three venture firms backed the company at $8.5 million in March 2006. Yet TechCrunch is estimating the acquisition at a mere $13 million—not exactly a home run.

Overall, lucrative exits in the Web 2.0 space have been somewhat thin on the ground. Dow Jones recently found that in 2006, only four companies that fit the Web 2.0 model were acquired. Other than YouTube, they were small scale acquisitions. This adds just one more to that list.