Peter Krasilovsky covers a Boston website today, CitySquares. Many interesting points…
Boston-based CitySquares, which just celebrated its second anniversary, is getting about 70,000 unique visitors per month and now has a base of 700 advertisers, averaging $1,200 per year, reports CEO Ben Saren… Roughly a third of the existing advertiser base is in the downtown Boston area, while the others come from adjacent communities… As with most other city guides, the best categories are restaurants and vanity sites –beauty salons, spas etc.
The hyperlocal company, which has raised under $2 million, has seven full time sales agents working for it, and has really built up a well-known brand in Beantown, says Saren. He believes that a large part of the recognition is due to innovative advertising efforts, such as local event sponsorships; quite a bit of viral marketing; and an exclusive deal with Boston Pedicabs. There are 17 Pedicabs cycling around Boston all day and night, and a CitySquares banner is on the back of each one – shared with various CitySquares advertisers, who help foot the bill.
Hey! I drove a pedicab in Washington, DC years ago… Boston must be a good spot for that.
To Saren, the high awareness factor puts the company in good position to “own” the market. He says, in fact, that it is a fallacy that local advertisers are being deluged by a wide group of hyerlocal opportunities. Sites associated with major local media and directory firms, such as The Boston Globe’s Boston. Com, Gatehouse’s Wicked Local and Idearc’s SuperPages, never come up in conversations with potential advertisers, he says. Yelp and Outside.in don’t either. Only IAC’s Citysearch comes up, and Saren believes he is gaining a bead on it.
I wonder about “owning” a region. It’s a tough slog to become the defacto place that local folks turn to on the web. Seems to me that once someone has that spot, they’d be dug in deep… hard to dislodge. This is an opportunity for genuinely local efforts — like CitySquares in Boston, iBrattleboro, Front Porch Forum and others — to get firmly rooted before the giant WalMart/McDonald versions of “local” come to town.
CitySquares is currently looking to expand its hyperlocal approach beyond Boston’s “Route 128” divider. Starting June 16, the company will launch automated versions of communities throughout New England and New York, easily accomplished using its data feed from Localeze and maps from Maponics. Saren acknowledges that the “expansion” won’t be fed with feet in the street and local editorial staff, at least initially. Those will be restricted to Boston. But if Manchester, NH suddenly starts giving us a lot of traffic, he says, “we’ll start a direct marketing campaign and provide prelaunch discounts to advertisers.”
If I had to bet on where they’ll win, I’d pick towns geographically very close to CitySquares early success… and places where they decide to invest real resources. “Build it and they’ll come” won’t cut it.
Mike Boland writes today about Yelp, including…
The company is moving in some interesting directions and the $15 million it just received will provide the fuel. Much of it will be put towards sales & marketing to seed reviews activity and bring in SMB advertisers. Its 10 person sales office in New York City is the first such move and will be staffed with new and existing inside sales reps.
To clarify a point made in the last post, most of the company’s efforts to generate new reviews involve moving into new cites, rather than into new categories. Categories, according to Stoppleman, have to happen naturally and the company takes a hands off approach when it comes to the direction of the content. It’s geographical expansion plan also interestingly takes a stepping stone approach that branches out from existing cities and take advantage of the word of mouth and cross pollination of people between nearby cites like L.A., San Diego and San Francisco, in order to organically grow its branding and base of reviews.
Not trying to steer content makes sense. As does the “stepping stones” expansion approach.
Ahmed Farooq writes an interesting piece today about not taking investment money for his local review site called iBegin Source. He says, in part,…
When we had originally launched iBegin, I think about a dozen VCs came to us in the first 3 months or so. They all liked the idea of local social search, and wanted to expand on it. Quickly. Yelp was gaining steam, and with Judy’s Book and InsiderPages all growing too, they were convinced that untold amounts of money was to be made.
Thankfully, I had a philosophy, and I stuck with it.
And it became clear relatively quickly that the sales channel and the review channel did not mesh very well. A vice-versa catch-22 – if a business had good reviews, why bother advertising? If a business had bad reviews, why bother advertising?
By not funding and deciding to take my time, I was able to re-assess without having fire being breathed down my neck. Heck I even went on a one week vacation to clear my head.
TechCrunch reported this week…
Yelp, the popular local review site, will soon announce a new $15 million dollar round of financing led by DAG Ventures. The valuation is rumored to be in the $200 million range. Yelp says that they will be using the money to expand geographically, add onto their sales team, and establish an office in NYC (they are based in San Francisco). This is Yelp’s fourth round of funding since their founding in 2004. Yelp is also boasting some impressive stats: 8.3 million uniques in the past 30 days and over 2.3 million review.
Yelp has become a poster child for how to build a local reviews site and has become a clear favorite of the twenty and thirty-something urban “foodie”.
And Greg Sterling offers…
Yelp’s success is about its “personality” and “transparency.” The site has managed to create a brand as a result of offering content that people have come to value and trust.
This brand identity is what now lifts it above many or most of its competitors.
But it’s the comment area on TechCrunch that starts to get at the most interesting points. E.g.,
Comment No. 12 says in part…
Local interest websites are always non-viral, because they operate in the disjoint “internets” of each metropolitan area. So one needs to wait a very long time before they reach decent size. For Craigslist, it took 7-8 years. VCs will not wait that long. To accelerate this, you can throw money at the distribution/marketing. I do not know what the timescale for them will be in NYC, but VCs may get impatient, especially because this business is very recession-prone, and the recession is coming.
Comment No. 15…
i’m no expert, but $200mm for sub-$10 million revenue, no profits, and difficult to scale growth (building a community in a new metro area takes time and local ad sales takes sales manpower) seems really generous. i guess yelp is essentially the market leader and probably does get high return traffic from those who do use the site… maybe you can argue a decent ltv for each user?
And comment No. 37…
I helped start a review site that was funded at the same time as Yelp, InsiderPages, Judysbook, etc. After building the feature set, we set forth to capture the YP advertising market. Kelsey Group and other industry pundits were playing up the pending “massive” migration of local advertising from offline to online. We all wanted to be there to capture it.
There was one big problem with capturing those ad dollars: the cost of sale. Reaching out to local businesses costs money, a LOT of it. I’m not sure what Yelp’s rate in customer-review-leads-to-advertiser equation looks like, but here’s some back-of-the-envelope math:
2.3 million reviews
Assume average of 1.5 reviews per business location (this is generous)
yields
1.5 million businesses reviewed to dateBreak down those businesses:
60% local, 40% regional or chain (some split along those lines)The ad dollars are in the “national-local” or “regional-local” businesses. They have bigger budgets, and they’re familiar with the web play. But if you’re in the local review business, how many of your users will enjoy ads from Applebees and Home Depot?
So, you go after the “local-local” businesses, because that’s what brings the value of your site (Yelp) over the big guys (Yahoo Local, Google Local). Reaching out to these folks? You have to put feet on the street, and the cost of the sale just doesn’t pencil out.
Because of this, Yelp’s strategy is obvious acquisition. But at those numbers and a fourth round, they need to be eclipsing the {portal-name-here} Local properties in traffic. In short, good luck.
Front Porch Forum is not a local review site (although many of our subscribers do use it for reviews), but many of the points above apply. We launched in our pilot area about 18 months ago and it gets a little easier every day in ways that money can’t buy.
Andy Sack, founding CEO of now-shuttered Judy’s Book, offers this advice for folks looking to get traction in the “local reviews and word of mouth referrals business”…
i) GET TO CRITICAL MASS
- Do this by limiting geography — stay in one geography for 3 years. Yes, 3 years. Do not expand geography for the first 36 months. Every successful online local business has been in one geography for 3 years.
- Do this by limiting the number of categories or professions you’re trying to get word of mouth on. Do not try and do the entire yellow pages. Choose at most five categories. I might suggest: restaurants, dentists, doctors, auto mechanics, and real estate.
- Do this by aggressive customer acquisition. Whatever your strategy for customer acquisition, get aggressive about. Do not sit in an ivory tower and expect to get to critical mass.
- Aggregate content from other places on the web so you can avoid the empty database problem
- Spend as little money as possible
ii) Go back to step i
Congratulations to the Everyblock team… they just launched this new service in Chicago, New York and San Francisco…
EveryBlock filters an assortment of local news by location so you can keep track of what’s happening on your block, in your neighborhood and all over your city.
Powerful stuff. I might subscribe to an RSS feed of my neighborhood if I lived in a large city… but I doubt I’d visit regularly. Also I wonder if the info flow will be appropriately scaled. That is, if Everyblock delivers a phone book worth of minutia every day for one neighborhood… that’s too much. And too little info flow doesn’t work either.
Looks like they’re on to something powerful. They seem to be making good use of the free $1.1M gift given by the old newspaper money people at Knight.
Ghost of Midnight is an online journal about fostering community within neighborhoods, with a special focus on Front Porch Forum (FPF). My wife, Valerie, and I founded FPF in 2006... read more