cdixon - Latest Comments in The problem with online “local” businesses

Re: The problem with online “local” businesses

Marcos Polanco — Fri, 25 Dec 2009 11:35:35 -0000

Google Goggles is the game changer here. To take the point of restaurants, you'd better believe owners will get religion when they see families "goggling" in front of their establishment and choosing accordingly. The "drop dead simple" CRM is certainly the way to go, but critically it will largely be under the control of the "C" in CRM.

Re: The problem with online “local” businesses

brooksjordan — Tue, 17 Nov 2009 16:53:38 -0000

I met with the CEO of an SMB last week with about 20 locations and $35M in revenue.

He said ReachLocal has been delivering him about 400 phone calls a month, about half of which became paying customers.

You should have seen his face light up.

And on top of that, he was using all of those recorded calls to do trainings with his employees. He visits one of his stores, pulls out his laptop in the conference room and goes through the calls with the employees there.

It seemed like a great example to me of "online local" coming into focus.

Re: The problem with online “local” businesses

Thomas Aabo — Tue, 03 Nov 2009 00:01:59 -0000

Local is tough, tis true. Our project (focused on local staycations and requiring participation from activity providers AKA small service businesses) has a longer than anticipated sales-cycle for signing up businesses. Primarily providers only sign up when the promise of 'FREE' meets the potential for 'UNLIMITED NEW BUSINESS WITH ZERO OPERATIONAL HEADACHE'. This is a hard pitch to make, but frankly, is what technology is all about. Changing the good old paradigm is still why most of us participate - and Local is one of the last challenges the big boys struggle with - partially by virtue of who they are (wink, wink).
In either case I don't believe local will be solved by a quickly scalable approach (we've tried - as has many others) - it will require significant investment and patience beyond most fb/twtr-infused investors attention spans. There are two shining examples other than Yelp that have taken an incredible (and I'd dare - more sustainable) shot at this. The old dog is Chuck Templetons Opentable.com that finally managed an IPO earlier this year - and is still not given valuations like google, but run a good, healthy bricks'n'mortar business as a service provider to restaurants. Sure it took time, but they were in the game long before Saas was even an acronym. The other is Andrew Masons GroupOn, spin-off from the brilliant, but hardly monetizable Thepoint.com. Both found ways to create significant value for the local business AND the consumer - and thus are paving the way for a) acceptance in the small business community and b) investors re-ignited interest in and appreciation of the potential in local.
And - of course - let's not forget that Facebook, Twitter and before them - the dear boys at the Google-plex were there to open the door to local in the first place - and further back 10-12 years ago - the onlinization of yellowpages by Citysearch, Digital cities, etc.Thanks to those early days SMBs today understands the power of online, oh, but they do!
They are simply waiting for someone to show the right path forward.

I do believe that's a challenge lending itself quite nicely to visionaries, fools and entrepreneurs in general!

Re: The problem with online “local” businesses

Ethan Anderson — Sat, 17 Oct 2009 18:59:40 -0000

Re: The problem with online “local” businesses

Tyler Willis — Tue, 13 Oct 2009 23:41:40 -0000

Hey Chris, I wrote about my take on this for MediaPost after SXSW: http://bit.ly/mpfoursquare

It's a little over half a year old, but still valid in my mind. I still contend that this is the right business model for them (use the badges as promotional incentives that solve the model of "proving" people went to the venue), I'd also note that most small business owners like to ask "how do I know that person wasn't gonna come in here anyway" which could be answered by analyzing user history.

My belief that 4[] has a good market opportunity in front of them doesn't make the argument that local is rife with problems any less valid. If you don't have an innovative approach that is going to solve the problem of acquisition and retention, you should just hand your investors their money back.

Re: The problem with online “local” businesses

Tyler Willis — Tue, 13 Oct 2009 23:14:52 -0000

I'm really interested in this space, would love to learn about both urban radar and hungry garden. willis.tyler@gmail.com

Re: The problem with online “local” businesses

hometowntimes — Mon, 05 Oct 2009 13:25:45 -0000

Being able to aggregate revenue nationally, and from national brand companies that don't have the attrition rate at the local level that independents have, is a model that works. That's why Hometowntimes.com is a successful franchise system, leveraging a national footprint, but adding value to the local community, advertisers, and publishers. This extends beyond advertising to also answer, "What's next for local news?", which is better solved with what's next for the community, as well. The correct business model, particularly online, needs to address the career path for the local publisher as well as the content of relevance to both community, readership, and advertisers - local and national brand trying to reach their local customers. Delivery of news, and even great journalism can then be supported and thrive within that context. At hometowntimes.com, we chose a franchise business model to present a proven news site format, combined with the business opportunity for either editors, reporters, or local businesses.

Re: The problem with online “local” businesses

Ethan Anderson — Sun, 04 Oct 2009 21:50:35 -0000

Chris, I think this is changing faster than you're giving local businesses credit for, and that it is possible to make money in local with the right product and business model. Of course I'm biased, but consider these two facts.

First, the penetration of digital/online media has now exceeded that of traditional media among small and medium-sized business advertisers for the first time. Penetration of digital/online media increased from 73 percent in August 2008 to 77 percent in August 2009 (Source: http://www.foxbusiness.com/....

Secondly, consider ServiceMagic, which most people in the industry agree is a poor experience for consumers and service providers alike. Consumers get called (and sometimes harassed) by multiple service providers who paid $50 for the lead. Since ServiceMagic generally sends the lead to 3 providers, they clean up with $150 in revenue while (at least) 2 of the 3 providers are left holding the bag. ServiceMagic is doing 100x the revenue of Yelp per user. My estimate from the IAC 10Q is that they're making $60/user and making about $148M in revenue/year. Also, despite the recession, ServiceMagic is on track to grow about 14% this year (Source: http://ir.iac.com/secfiling....

Re: The problem with online “local” businesses

restaurantzoom — Sun, 04 Oct 2009 06:39:34 -0000

We find that with restaurateurs there is a learning curve involved like one would expect. There seems to be a lot of confusion out there. Also, they are constantly bombarded by salespeople who are arrogant as well as ignorant.

Re: The problem with online “local” businesses

hungrygardener — Sat, 03 Oct 2009 21:39:59 -0000

Jeff: I am working on a 'geosocial' web applications that I believe leverages twitter and facebook exactly as you describe in your post. I could not find Urban Radar in a Google Search. I would love to read more about your research or project and share information about Hungry Garden. Help@hungrygarden.com

Re: The problem with online “local” businesses

ShanaC — Sat, 03 Oct 2009 17:19:08 -0000

I really honestly don't think for foursquare that's the end goal. One of the most innovative parts of FourSquare is that there are essentially badges being given out.

Who says the badges have to be tied to anything in particular in the points system? What about secondary badge markets?

Re: The problem with online “local” businesses

Greg Gentschev — Sat, 03 Oct 2009 16:20:13 -0000

Yeah, seems like businesses with highly perishable inventory and customers open to booking online are a no-brainer in hindsight. The local dry cleaner or clothing store should be a much harder sell.

Local services (e.g., nail salon, massage therapist) probably make more sense online with something like time-based specials to fill open capacity, but it would be hard to tell whether you're really attracting incremental customers or just making people time-shift to cheaper periods and hurting your profitability.

Re: The problem with online “local” businesses

ShanaC — Sat, 03 Oct 2009 14:43:04 -0000

Certain things aren't hardware- you are mentioning OpenTable, yet my favorite cafe is self-seating.

All of this is a huge pyschological shift as well. One of the reasons there can be huge amounts of churn in hyper-local businesses is that hyper-local businesses are relationship businesses: they are can be as much dependent on technical skills that have to be displayed well as they are dependent on technologies.

Craft local jobs have to be cultivated and displayed, it's one of the major reasons there is churn. I don't, and no one I know, judges a dry cleaner purely on when I get a shirt back...It's whether the owner is nice, and if the shirt is pressed correctly with no stains, in a convenient location to what I need to do, and priced correctly. Perhaps it would be nice to be text messaged about picking up my shirts, or that the other guy press shirts for a somewhat cheaper price. At the end of the day, I'm still particular about the men shirts I "borrow" to wear as tunics over dresses, or my women's dress shirts that I get from Jcrew, and who's handling them. Convenience is not the only triumph here.

Re: The problem with online “local” businesses

ShanaC — Sat, 03 Oct 2009 14:22:18 -0000

Honestly, I think this is true for every business. What business wants to just advertise? That would be strange.

Re: The problem with online “local” businesses

ShanaC — Sat, 03 Oct 2009 14:20:42 -0000

I just was talking to someone about GroupOn and the relationship it is having to his local Business (IWish.com)

Both of you are on the mark, it is very clear that all of these newer services have to be very clearly driven by good understandings of local metrics. And those are very different than say national metrics.
One of the reasons something like Groupon works is that a SMB knows how many people bought the coupon for Groupon. Their is a minimum starting point for that churn to measure against. Most businesses don't even get that.

Re: The problem with online “local” businesses

paulbaudisch — Sat, 03 Oct 2009 11:46:31 -0000

Local SMBs don't want to advertise online. What they do want is leads and sales from the online channel. The difference is huge.

ReachLocal, Yodle and the online yellow pages enable small businesses to more easily spend money to advertise online. But they simply drive traffic to SMB Web pages that aren't designed to convert that traffic into leads and sales.

Those services fall short because they don't directly help SMBs generate prospects and sales. And that's why ReachLocal et. al. have the churn problems they do.

Until our industry makes directions connections between the online channel and SMBs' cash flow, "online local" will remain illusory.

Re: The problem with online “local” businesses

RichardF — Sat, 03 Oct 2009 05:24:45 -0000

I'm not sure its so hard, the small hotel industry was in that situation in early 2000, they embraced online booking pretty quickly and adopted supplier-side micro-payments alongside.

Re: The problem with online “local” businesses

RichardF — Sat, 03 Oct 2009 04:56:02 -0000

Mobile is definitely going to be where it's at as far as getting local business to embrace online technology. Much of the local economy is based on impulse purchase and the transactions are of a far more personal nature between the business and the consumer than the average internet transaction. Mobile fits that type of transaction far better than pc.

I don't think local business will be slow to embrace a technology once they see competitors and peers actually benefiting from it. If someone produces a killer app (the likes of foursquare are probably a good staring point) that produces tangible visible benefits to the small business owner then they'll jump on it.

We have several nightclub and bar clients that broadcast offers by sms on a given evening to try and drive traffic into their venues. Whilst the strategy works quite well the problem is that it is not location based. It would be far more effective if it was targeted at people who were actually out in the area of the venue on that particular evening and who were open to receiving a voucher for a free drink or entry to a club. There may already be an app for that but if there isn't .....

Re: The problem with online “local” businesses

Allen Burt — Fri, 02 Oct 2009 21:21:35 -0000

In your example, it sounds like a significant use of manpower and resources for a small restaurant to monitor all customers - for a marginal gain in profit. Would foursquare then receive a portion of that increased price of food? If so, the marginal gain in profit for the restaurant decreases that much more, further resulting in a decreased incentive to monitor and predict customer actions.

I understand the value of providing customer demographics and information. However, in the case of foursquare, the customers using foursquare are frequent customers that the establishments are aware of anyway - meaning they understand that demographic already. Where's the value in receiving information about what they already know?

I think foursquare is a fascinating business that is leading the charge of connecting the online and offline worlds. However, I have yet to hear a legitimate revenue model.

Re: The problem with online “local” businesses

chris dixon — Fri, 02 Oct 2009 19:13:32 -0000

very interesting. thanks.

Re: The problem with online “local” businesses

nikiscevak — Fri, 02 Oct 2009 19:12:04 -0000

Completely agree with everything in the post but Yodle and ReachLocal aren't killing it. They churn through an amazing amount of customers every year. Your 40% is actually conservative. Here is a report that estimates 80% annual churn: http://www.clickable.com/Corp/ContactUs.aspx?qT...

On Yext, it's the college kids making the calls: http://www.yext.com/recruiting/sales/

Re: The problem with online “local” businesses

Alan Pearlstein — Fri, 02 Oct 2009 18:22:09 -0000

It will be years before local advertising moves online - http://www.crosstargeting.c...

Re: The problem with online “local” businesses

vacanti — Fri, 02 Oct 2009 18:05:54 -0000

It's really hard for local businesses to understand the worth of a click on their website because that click isn't tracked to the person's eventual in-store consumption. One way to address this is to make consumers pay for things online and just pick them up offline. Then, biz owners would know exactly what clicks were worth and be willing to pay for them.

One way we are seeing this happen is the quickly growing number of sites getting consumers to buy coupons online for offline local transactions (see groupon.com, livingsocial.com). They aren't revolutionizing the local industry overnight but it's a step in the right direction.

Other sources of local affiliate links are sites like restaurant.com, seamlessweb.com and opentable.com. If people know of others, we would love to hear about them.

Re: The problem with online “local” businesses

khanan grauer — Fri, 02 Oct 2009 18:04:48 -0000

funny. good call

Re: The problem with online “local” businesses

chris dixon — Fri, 02 Oct 2009 17:44:13 -0000

yes, from what I can tell they are similar to reachlocal and yodle which are also killing it.

i suspect the home page is a headfake - this is their real business
http://www.yext.com/yextcal... which i bet you they promote via robocalls / call center