Whether Google buys Yelp for more than half a billion is still an uncertainty. But one thing is for certain, Yelp, the local business review site that launched in 2004, is in the spotlight, begging the question: What's so hot about local now? Over the years I've covered the Internet, businesses focusing on local seem to go in and out of favor.
Next year may very well be the year startups focused on local may get some increased attention, if for only the fact that Yelp is creating buzz around local opportunities. Let's hope for a big Yelp exit, and a successful IPO for ReachLocal, a service that helps small businesses acquire new customers online, which recently filed its S-1.
Sharon Wienbar, VC partner at Scale Venture Partners, is an expert on the local market. Scale has investments in three startups positioned to capitalize on the small business and local market opportunities. They include MerchantCircle, Reply and Hubspot.
In this segment of our three-part interview series, Sharon talks about why she thinks Google is so hot and heavy over Yelp and other opportunities in the local market. This is great news for the many companies emerging in the local space. Thumbtack, notable because it was the overall winner in the JuicePitcher competition in October, is a startup that helps consumers find local services and transact online. Redbeacon is a similar company and notable for winning the TC50 award a few months earlier. Both Thumbtack and Redbeacon are competing in Vator's Splash competition.
Here are some highlights:
- Sharon talks about how large and yet untapped the local advertising market is online. ReachLocal's S-1 cites Borrell Associates, small- and medium-sized businesses spent $60.5 billion in local advertising in the U.S. in 2008.
- Google likely wants to buy Yelp because 25% of searches are for local services. Google makes money by selling sponsored links for those searches. But it doesn't make any money off the organic search results. Essentially, Google wants to improve the returns on the clicks off the search results it displays. In other words, by owning Yelp, Google could start monetizing the organic searches as it drives consumers to its own property.
- Google could better service local businesses by combining the services Yelp offers.
- Yelp has a lot of unique content about local businesses that other companies don't have, creating a valuable library of content.
- Many companies are still using the feet-on-the-street model of acquiring new customers. ReachLocal has nearly 500 sales reps. Acquiring new customers can be costly - $200 to $2000 per customer. In the old days, this cost could be justified when a local customer would buy an add in the Yellow Pages for $2000 per month. But today, those costs need to come down.
- Opportunities around local businesses include:
Services that help businesses manage their marketing/advertising budgets
Services that change the sales strategy for how to get small businesses to buy services
Hello,
I have to agree that the local business is going to have a tremendous opportunity for growth starting in 2010 and beyond. One (of many) secrets will be in the convergence of Mobile Marketing and Local Business Listings.
Having the local business with a powerful tool like local business listings will allow them to get their business, products, services, coupons, offers, discounts, promotions into the hands of local consumers that are going around town using their hand held devices.
As you can imagine it's not about having your local business listing updated on one location (e.g. Google), but to have your local listing updated at multiple locations. The mobile application developers will decide what database of information they will use and therefore being only on Google Local Business Listing will not suffice. Equally, the local consumer will decide what local directory website they will post their reviews and comments about the business.
This will also eliminate the traditional yellow pages once and for all. We can stop wasting the paper and using these blocks as a door stop. The local business will now be able to update their "yellow pages" 24x7x365 and push their information out to the local consumer at anytime. No more waiting one year before the next update.
Recently our website http://www.smartfindslocallisting.com/ for this service offering that we are adding was reviewed by KillerStartUps and you can read their 3rd party perspective at their web address at:
http://www.killerstartups.com/Search/smartfindslocallisting-com-be-found-online
Please keep in mind that this is not only for the start-up or the small local company, but would also include national chains, franchises, banks, and everything from plumbers to flower shops.
It is a changing world and one that will benefit the local market tremendously by having the local listing data available on mobile devices.