

Why not to do a local + online startup (and what to do instead) - ct
http://www.crashdev.com/2012/01/top-three-reasons-not-to-do-local.html

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Harkins
I was at a comics store (Chicago Comics) yesterday when a pair of startup guys
came in to pitch what sounded like a loyalty program. (I didn't catch the
name, but they said something about users getting points called "pixels", if
anybody recognizes it.) The owner politely but firmly brushed them off saying
that he'd heard from a dozen similar startups and he was just going to wait a
few years to see which survived and became worthwhile.

So there's a fourth reason: there's enough of these startups that small
business owners are sick of you.

~~~
zecho
It's not just startups, either. In many markets, you've also got embedded
competition from newspapers, radio, TV, and local magazines. And, of course,
there's the national players like Groupon, Living Social, Google... The market
is very likely disproportionately crowded for the amount of money you could
feasibly extract from SMBs.

~~~
ig1
Local businesses in the US alone spend around $100 billion/year in
advertising. I think you're underestimating the size of the market and how
many companies it could support.

Small businesses often don't have the expertise to analyze things like ROI so
often end up spending large amounts of money inefficiently (that restaurant
with a 2 column 10-inch ad in the local newspaper typically pays around $80
per customer gained), there's a huge opportunity in this space.

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MengYuanLong
This analysis is painfully similar to the last (start-up?) company for which I
worked.

A huge chunk of my time in client acquisition was first dedicated to
education. Things like impressions, clicks, CTR, and god forbid CPM are all
jargon to most small business owners. Further, the concepts of geo-targeting
or limiting delivery rates while possibly advantageous just make this first
step a problem of too many choices. They wanted to be able to open the site
(like opening a newspaper) and know they would see their ad and pay a fixed
amount.

The second problem was then the same that we consistently see on Hacker News
about pricing. Because it is a digital medium, shop owners expect the price to
be much cheaper than that brick called the yellow pages.

Looking back, I can't blame the SmB owners for their resistance to give me
their money. If I owned a small business, I would much rather use the money to
help fund some community event or provide discounts to loyal customers. I
personally believe that SmB owners are better served avoiding most traditional
advertising and instead creating ways to better interact on a personal level
with their community/city.

The only exception I can think of are artists. It would be really beautiful if
all the medium rectangles and half-pages were tasteful ads for galleries. If
that were the case, I would definitely turn off Adblock again.

~~~
enjo
The education component is where the disruption comes in. We have a solid
business selling phone calls. Our sales pitch is "we make your phone ring and
you really never have to worry about it."

SMB's get it and we don't need to educate them at all.

~~~
Rariel
How long have you guys been up and running?

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harryf
This is so wrong it's hard to know where to begin. I work for a very
successful local company in Switzerland - have written about it before here -
<http://news.ycombinator.com/item?id=2053665>

The problem with local + is not local, it's us - us geeks. We don't understand
it. We expect it to play out like the rest of the Internet - grow community,
B2C, performanced based etc and we're wrong. And we're not listening...

Some of the fundamentals of local + are;

\- don't waste an SMEs time. You really want to tell, say, a hair dresser they
should spend a morning a week managing their ad campaigns (or similar) instead
of cutting hair?

\- be on the ground with a sales force - 75% of SMEs aren't interested in the
logic of why yours in the best idea ever; they'd rather talk to someone they
like and hear a sales pitch they can relate to

\- bring genuine value - i.e. help them generate leads - stop trying to screw
money out of them - I'd argue Groupon are an offender here

To the idea there's no money to be made, I can only smile.

I could write loads more on this topic but already started that here
<http://news.ycombinator.com/item?id=2053665>

Ultimately SMEs are those that need the Internet's help the most and are also
those we're failing the most and IMO we're the ones to blame.

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AznHisoka
I never understood the appeal of doing a local online startup. The conversion
rates are not much bigger in local, and your visitors are scattered all across
the USA. So suppose you got a 1% conversion rate, and 1 million uniques.
That's pretty good: 10,000 buyers. At 1% conversion rate and 100 uniques in 1
city, you're down to just 1 buyer. That stinks. But it doesn't scale because
no local advertiser is gonna get excited over 1 buyer.

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pygorex
This analysis is spot-on. Especially when it comes to getting small businesses
on-board. Groupon, one of the champions of local, spends massive amounts on
educating and selling local businesses on the value of daily deals.

------
viandante
Salesforce is charging my company 1000 euros per month per sale person for
what appears to be a rather simple crm. SAP is charging hundreds of thousands
of euros for an ERP that is anyway too complex for small businesses.

Maybe it is me, but I believe the real problem is that start ups don't take
the time to understand the businesses they want to disrupt. They like to
discuss about scalability, nosql, complex software stuff, but guess what,
probably a simple application in mysql that does know the business is worth
1000 times more.

And just to give a practical example about my point, look at how much
discussion has generated a rather simple problem on linkedin:
<http://tinyurl.com/89ocf8x>.

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T_S_
Stores are a marriage of a logistics business and a marketing business. The
split is about 75%/25%. That marketing component is ripe for disruption that
directly connects the original sellers (brand, manufacturers, authors) to
their end users (consumers, readers).

Letting the stores control the decisions about how that connection gets made
is not in the entrepreneur's best interest. Making that connection efficient
by using your great idea is not in their best interest. That's disruption for
you.

The winners will figure out how to separate the logistics of local
availability from mobile/local marketing.

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pbreit
This strikes me as terrible advice. Local remains wide open for new ideas.
Some of the very brightest current startups are local-driven (eg groupon,
square). Local is far from "done". Entrepreneurs who can crack the local nut
will be rewarded handsomely.

~~~
kappaknight
Please do share some of these "new" ideas. The only ones I've seen are Groupon
clones and each seems to get worse than the next. (Not to mention SMB's hate
Groupon after using it.)

~~~
pbreit
Off the top of my head: Ness, TinyReviews, FourSquare, Stampt, Perkville,
Giftly, MotionLoft, Savored, Gobble, Farmigo, Rewardli, Prism Skylabs, Zaarly,
Local Hero, Red Beacon, SeatMe, ZeroCater.

~~~
kappaknight
Sadly, I don't think any of them are popular with the general public; even big
names like foursquare and possibly Zaarly.

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ootachi
Of course, if this is true and all the local startups fail (which is likely),
we're headed for another 2000-era dotcom bust.

~~~
samstave
Not necessarily.

There needs to be real innovation on business model, but there are local
services from 2000 era that are BETTER suited to today than then.

Kozmo.com is my prime example.

There is need for a local delivery site where you can find affordable delivery
of anything in your area. They need to employ all the bike messengers and
others, adopt the task rabbit scale of service and branch out to delivery,
errands etc.. on an affordable scale.

I flew to NYC with one of the founders of Kosmo back then and expressed how
much I loved the service and wished I could use maps (something like google
maps which didnt exist) to be able to view various stuff near me; "Show me all
indian restaurants within 1 mile" etc..

He didnt think that there was any value in such granular searching.

Anyway - I still want these services, but I think this nation needs a rude
awakening on how much shit should cost.

~~~
T_S_
Please explain your last sentence.

~~~
samstave
>...Anyway - I still want these services, but I think this nation needs a rude
awakening on how much shit should cost.

What I mean is that I think that everything is overpriced.

While the market seems to support current costs - I also think that costs are
out of balance with value. For example, when I look for freelancers both
programmers and designers - it appears that every single freelancer believes
their value to be ~$200K per year, i.e. they are all asking for $100 per hour
or more.

While I think that there are a lot of talented designers and
programmers/developers out there, I am skeptical that EVERY one of them is
worth 200K.

I also think that a lot of menial tasks seem to be overpriced.

Most task rabbits seem to want $20+ per hour, I just dont think that errands
and what-not really are valued at $20 per hour, even though everyone seems to
want to be paid that.

I think this is a symptom of everything being too expensive, from food to
services.

~~~
T_S_
I think the task rabbit price drops when the density of task rabbits is high
enough in a locale to make the marginal cost drop. If I am right you should
see this happen for certain tasks that don't make people deviate much from
their ordinary course. Data gathering while shopping, for example, should be
cheaper than delivering furniture.

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dbkbali
A very interesting and timely article coming right at the time when I am
reevaluating the launch functionality for my Asian "yelp-like" startup
what2do.asia and after just having a series of meetings with seed/vc
investors.

The interesting thing is that the Asian local search market has never really
been cracked, it is highly fragmented and travel patterns and local search
needs are very different. Anyway thanks for posting this and sharing, it has
provided some great insights.

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sambeau
Local is a fine place to start as long as it is universal in scope and has
scalable reach: Facebook started local.

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rokhayakebe
The only successful startups/companies serving local businesses are those that
focus on verticals; for example see what Zocdoc is doing.

