The day before Affiliate Summit East in NYC, last Thursday, I attended a ULS get-together on Local. There were almost 100 people there– perhaps half from start-ups looking to network or pitch their product.  Entry fee was $20, but $10 if you do a 60 second pitch.  I am cheap, so I did the pitch.

After the pitching, there was a round table with Court Cunningham, CEO of Yodle– then the CEOs from outside.in, growthspur, and 8coupons.  Clearly, I was there to meet Court, as he is a competitor in the local space.  Panelists agreed that:

• the local space was a growing share of the $500 billion dollar advertising market
• the weak economy and low cost to make a website was initiating entrepreneurship on a scale never before seen
• the traditional media channels (radio, TV, print) are getting hammered, as ad dollars shift to local
• the cost of producing content is decreasing– we don’t need union writers, as anyone can blog.  Consider the Iranian revolution broke via twitter, not the traditional media

I was overall impressed with the quality of the networking– at the same level as Silicon Valley, with a touch less pretentiousness. The free pizza, provided by Seamless Web, was also a nice touch.

Afterwards, I had the pleasure of meeting Graham Lawlor, founder of of Ultra Light Startups.  The concept of being ultra light is that you don’t need venture capital– just a couple folks with a great idea and a lot of resourcefulness. Looking forward to seeing how these informal groups (including TechStars and YCombinator) help young entrepreneurs achieve their dreams.

If you’re looking to start your own business, want to network with other startups, or perhaps need a bit of inspiration, I’d recommend that you attend one of these events.

Yodle and Ambassador, both out of NYC, were featured in a Kelsey Group press release.  Yodle was founded by a friend of a friend of mine and just raised $10MM.  And ReachLocal’s $300MM valuation is insane.  Funny that these guys, Orange Soda, Webvisible, LocalLaunch, Marchex, and other folks are getting into the local advertising game, but that the engines and yellow pages themselves aren’t making significant innovations here.  It’s still early and it may be years before any one of these companies, BlitzLocal included, has a full suite of offerings that truly helps local companies get more leads– not just on the web, but via any channel.

The risk of trying to grow quickly in a new market is hiring over-aggressive sales people, hiring too quickly, spending your newfound venture capital money and putting growth ahead of true success.  I’ve seen big players put marketshare ahead of both profitability as well as client success.  The result of that, as discussed by the major players at the Kelsey Conferences, is high customer churn.  You can automate creation of websites and pay-per-click marketing campaigns, but it will take a lot more than that to truly deliver results to local service businesses that they can appreciate and understand.

It will be interesting to see who the leaders are 6 months from now, or even 3 years from now.  The tightening economy will only accelerate losses that “fast growth” companies are experiencing, plus reveal flaws in the business model.  I anticipate a bubble in local search within the next year, though it won’t be on the scale of the dot-com bubble.  Business fundamentals, my friends– you have to make money at some point.  And you have to do it while still providing superior results to your small biz clients and compensating your people.  Doing that is ultra hard– client acquisition is easy.

I first heard of Yodle about 4 years ago, back when it was called NatPal, by Nathaniel Stevens out of UPenn, a friend of Brad Twohig, who is our joint friend.  Since then, I’ve seen the company grow from a few dozen clients to a reported 5,000, bring in a CEO (Court Cunningham), and a whole executive team.  Of anyone in the marketplace, I see these guys as the leaders so far, even though Webvisible and ReachLocal are far larger in terms of customer base, revenue, and staff.

The local advertising game is far from won—- the mainstream has yet to see a dominant player emerge, much less be able to recall any name brands.  As much as we’d like to believe the yellow pages will die an instant death, change occurs slowly.  And I see the most efficient player being able to win.  Yodle.com sells less on force of sales and more on the performance basis of calls driven.  Call tracking is powerful, as clients can see measurable impact.  But the game is early.  Nobody yet has figured out a true multi-channel marketing play that delivers pure ROI for local, even though the search engines, yellow pages, newspapers, radio stations, agencies, and other guys are trying to build their own and partner with others.  Expect to see some consolidation as a result of the economic downturn.

The eventual winners (and I believe there is room for many large players) will be the ones that deliver great value to the clients (transparent results and a large share of the client dollar actually going to marketing spend), plus take great care of their sales, operations, and engineering teams.  Social media is increasingly important, for example, Facebook advertising for local. Trouble now is that building such a team realistically costs $5-10MM, depending on how it’s done.  It takes, by my estimate, a team of two dozen folks for two years to build this out.  The fully loaded cost of a person is about $125k in a major metro.  Add in some marketing and sales expense and you can see how the numbers shake out.

Kudos to Yodle.com for being able to raise another round in a difficult environment.

Google placed in beta yesterday a new service to create free display ads.  This is a cleaner implementation, in my opinion to what Yahoo and AdReady have with MyAds.  Slowly, Google is moving from text-based to true self-serve advertising.  This is going to put a lot of low-value designers out of business.  This service allows you to fill out a form with text and then be able to customize colors and effects, plus upload an image.  It automatically creates banners in a variey of sizes, saving you time and effort.

So now you can count on Google for your local advertising needs– plus get free analytics tools, email services, and other items– all free.  Now all they need to do is provide a local listings tool that submits to all the directories to round out the whole package.