Why not to do a local + online startup (and what to do instead)
crashdev.com
crashdev.com
So there's a fourth reason: there's enough of these startups that small business owners are sick of you.
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.
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.
SMB's get it and we don't need to educate them at all.
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.
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.
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.
Square = credit card processing. Sure, a local businesses can use them but calling Square is a play in the "local" space is a stretch.
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.
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.
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.