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Comment by davemc500hats | Hacker News Reader

while the #'s are a guessing game, the observation that there's a shitload of customer acquisition cost here isn't.

the main point is that lots of [mainstream] users + lots of [mostly offline] businesses are required to really make LBS services worth serious money.

this in turn requires lots of money to scale, and it's my assertion that the current players are wildly under-financed currently to achieve the necessary scale.

anyway, i might indeed be full of sh*t but the post isn't way out of bounds imho. your mileage may vary.

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why do you think this will take so much money to scale? you don't think getting businesses to put up 'coupons' can be largely automated? I'm not sure that it's all that much more complicated than selling other ads.

Btw, I do think that you are correct in asserting that location based systems require coupon type discounts to be compelling long term. I'm just suggesting that might be cheaper than you think.

if they were online businesses, maybe it would only be modestly expensive and take 3-5 years to scale... but the market is LOTS of OFFLINE and SMALL businesses, which will take for-fking-EVER to scale organically.

thus, you either need to a) already have lots of users (FB,GOOG,AAPL,TWTR) to motivate businesses to participate, or b) you need to have enough cash to pay them to do so.

ergo, shitload of capital rqd, and/or get bought by bigger player who has users, cash, or both.

how many small, offline businesses participate on Yelp? participating on some location based service seems like it wouldn't be any more difficult.

Yelp may seem like it's pretty dominant, but it's still somewhat sparse even in its most popular metros like SF, NYC, LA. it's very sparse in other less-well known major metros, and smaller towns.

takes time to build a comprehensive, online local search presence... particular one with good social coverage and activity.

is anyone doing better than yelp, when it comes to engaging small, offline businesses?

It's possible that the best way to engage with small offline businesses is to hire a small (okay,maybe medium or large) army of salespeople, and pitch to each business individually. If that it the case, you are absolutely correct. It will take a long time and an incredible amount of money.

However, I think it's possible that someone may come up with a better, cheaper way to do it. I don't know what that better cheaper way is, but I'm not convinced that an army of salespeople is the only solution to that problem.

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