16 Jan 2009

The upcoming Bubble in Local Search

4 Comments local advertising

The Upcoming Bubble in Local Search 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, BlitzMetrics 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.

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written by
Dennis Yu is the CTO of BlitzMetrics. He is an internationally recognized lecturer in Facebook marketing, having been featured in The Wall Street Journal, New York Times, LA Times, National Public Radio, TechCrunch, Fox News, and CBS Evening News. He is also a regular contributor for Adweek's SocialTimes column. Dennis has held leadership positions at Yahoo! and American Airlines. He studied Finance and Economics from Southern Methodist University and London School of Economics. Besides being a Facebook data and ad geek, you can find him eating chicken wings or playing Ultimate Frisbee in a city near you. You can contact him at dennis@blitzmetrics.com, his blog, or on Facebook.
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4 Responses to “The upcoming Bubble in Local Search”

  1. Reply Mike says:

    Hi Dennis, i’d be interested to understand a little more of what you mean when you say “bubble”. Is the point that there are a lot of players in this relatively immature market and as a result of it being “hard”, many will fall out in the coming years leaving one or two key players standing/successful? Regarding the economy, I actually see it somewhat helping the pure plays in that the value prop is more about measurement and clear ROI (or not). Small businesses are looking to spend their dollar smarter as opposed to not spending it at all and that plays into the hands of the online players. Of course, everyone would rather be in an uptick…

  2. Reply Jeff Werner says:

    Good post Dennis. The next year will be very interesting in this space.

    You’ve hit the nail on the head here in terms of challenges to the industry delivering results that make sense to the local business owner (i.e. help him or her leverage the Internet to generate new/additional opportunities). Clearly one of the biggest challenges when targeting a large number of relatively low-spend local business marketers is the ability to cost-effectively scale a solution to tens of thousands of customers and deliver ROI that clearly shows the value of their online advertising.

    At WebVisible, we’re very cognizant of this and have concentrated on building out our technology platform, first and foremost. With more than seven years of development, we’ve got a highly scalable platform that enables us to do more with less… delivering quality results and campaign reporting that keep our local business customers coming back, and a low-risk and profitable business opportunity for reseller partners to grow top-line revenue with predictable net income.

  3. Reply stephanie says:

    Very interesting perspective. Looking forward to your progression with this!

  4. Reply Internet Business says:

    Hello Dennis, I too would be interested in understanding a little more what you mean when you say “bubble”. It is the point that there are plenty of players in this relatively immature market and as a result of it being “hard”, many will fall in the coming years, leaving one or two key players-standing successful? Regarding the economy, in fact helps me to see something fresh in the works that the property value is clearer about the measurement and return on investment (or not). Small businesses are looking to spend their money smarter instead of not spending all that plays into the hands of players online. Of course, everyone prefer to be on an upswing. Cheers

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