Why Local Is So Damn Hard For Startups: Foursquare Borrows $41M To Try Again

curtwoodward writes "It's one of the biggest, scariest graveyards for Internet entrepreneurs: Small, local business. Sure, a few companies have gone public trying to harvest this huge market — Groupon and Yelp, for instance — but even those big names aren't anyone's idea of a knockout corporate success story. Consider Foursquare, the 'check-in here' smartphone app that leads the latest wave of dreamers trying to strike paydirt among the mom-and-pop set. The company has now raised more than $100 million in private investment, including a fresh $41 million loan. It's just started trying to make money. And the CEO acknowledges that it'll take a massive new product overhaul to get there. Google's tried this market too, with nothing to really show for it. Same with Facebook. If these deep-pocketed techies can't crack the local business advertising nut, is there any hope for Foursquare — not to mention the countless smaller startups?"

Comments

Small business don't advertise that much

[White Flame]

Many small business which are suppliers establish themselves already having a customer base from their prior life. Word of mouth is best for small local businesses. Sure, some advertising is often necessary, but many of them also know that they don't have the infrastructure or manpower to handle a large customer influx.

Plus, many small businesses run on tight margins and just barely pay for themselves, if they're lucky. Trying to make it big selling advertising to small businesses is like trying to bleed a turnip.

Re:Small business don't advertise that much

[White Flame]

Case in point, from TFA:

"Businessweek also reported that today, the business brings in about $2 million in annual revenue.

That’s not chump change, especially if you consider Foursquare’s assertions that it hasn’t spent any money on advertising, has a tiny sales staff, and actually blocks some big accounts from buying ads on its service"

Re:Small business don't advertise that much

[Bieeanda]

I really wish I had mod points, because White Flame hits the nail right on the head. Small local businesses need the Internet like a fish needs a bicycle. A blogspot page for events, maybe a simple '90s style page to show off bits of inventory and provide contact information, and that's really all they need at most.

Re:Small business don't advertise that much

[Anonymous Coward]

I disagree entirely. Small businesses need customer acquisition, messaging, reputation management and social engagement just like any other business. What they don't have is the budget to hire people dedicated to these tasks. The person managing these is likely to be someone whose main job function is something else entirely, if not the actual owner of the business.

What small businesses need is a turn-key simple solution that requires almost zero ongoing effort. It doesn't need to be perfect--it shouldn't be--as others have said, unlike big business, working too well can be problematic too since they don't have the capacity to handle that much more than they already do. But some way of getting their name out in a positive light and customers finding them beyond word of mouth is essential. And possibly more essential is keeping current customers engaged and coming back for their products and services.

Re:Small business don't advertise that much

[Anonymous Coward]

"Small businesses need customer acquisition, messaging, reputation management and social engagement just like any other business."

* acquisition: make sure you are found on search engines.
* messaging: just supply the stuff I order
* reputation management: there are independen 3rd party sites. A business shouldn't have to manage reputation, just do a good job delivering my stuff.
* social: Why would I want to have a social relation with a business? Supply the stuff I order.

Re:Small business don't advertise that much

[wolrahnaes]

I can't agree. More times than I can count I've had a question about a local business which I've tried to find an answer to on their web site, something like what their hours are or often restaurant menus, but searching their name only results in a listing on one of the many useless yellow pages type sites. Many of my customers are small one or two person businesses, they'll tell me their email address and it's some random @aol or @hotmail which was clearly their personal account long before the business. It's entirely unprofessional these days to have absolutely zero internet presence and puts them in a position of having an uphill battle for me to respect them as a business.

It's not rocket science to have a domain with email and a basic web site. It's trivial to get a domain and the absolute minimum level of hosting required for such things, why people consider it acceptable to not do this I can't understand.

Re:Small business don't advertise that much

[Jane Q. Public]

" It's entirely unprofessional these days to have absolutely zero internet presence and puts them in a position of having an uphill battle for me to respect them as a business."

That works both ways. It's entirely unprofessional to expect a web presence from a company that isn't interested in doing business with you.

Don't misunderstand me: I have myself had plenty of experience with the former. But the latter do exist, and they may be more common than you think.

Re:Small business don't advertise that much

[rtb61]

Small business is an interesting market having dealt with the a lot, there a couple characteristics worth mentioning. They often do not play well with others, the reason they are in small business is they are often unemployable otherwise. They often have a cheap greedy streak that makes doing business with them painful. The typical statistic for small businesses is that 9 out of 10 fail in the first two years. So churn is huge and the actual size of the small business market is, likely, 90% smaller than it appears because who wants to deal with the ones destined to go belly up. Apart from of course those brutal Westfield shopping mall types, where they have to be paid upfront to refurbish the rental space to suit the new small business, they get paid first out of a percentage of 'turnover' and eviction is super fast so as to set the trap for the next 9 out of 10 small businesses.

As far as the internet is concerned, small business was often about supplying a specialist product to a limited market. The internet allows manufactures to supply direct to that specialist market globally, making the internet more of an enemy of small business rather than as it is promoted a useful tool.

The internet tends to favour medium and large business as it more readily enables direct relations with end users, thus squeezing out the position that used to be filled by small business. Unless of course small business is being preserved by medium and large business in order to shift liabilities on questionable products or practices. Small business is very like the pot of gold at the end of the rainbow, it might look like something from afar but as you try to approach it, it keeps shifting.

Re:Small business don't advertise that much

[Anonymous Coward]

* Acquisition is more than just search engines. Referral programs, promotions and targeted ad buys for starters.
* Messaging is about creating repeat customers. Once you get their contact information, you use it to incent them to come back.
* Your idea of reputation management will leave you with damaging negative reviews or at the mercy of companies like Reputation.com to try to clean it up. Smart businesses will have an automated service that triggers solicitations for reviews from customers whenever they use/purchase from the business. Most customers are satisfied and a couple of negative reviews will be mostly ignored when drowned out by a ton of positive reviews.
* Ever heard of a twitter feed? If you can get followers, it can be a great way to publicize sales and other promotions. Facebook pages are also good ways to connect with customers.

Re:Small business don't advertise that much

[Intrepid imaginaut]

No, and google and foursquare are making the same mistake. I deal with a lot of small businesses (one to twenty people) and I'll tell you, there's no such thing as the small business sector.

Every small business has its own needs and strengths but more importantly it revolves entirely around the owner. A family run shop thinks and operates differently to one where some guy ploughed his inheritance into it, or someone with a business plan got a loan from the bank, or a place that's been run by the same guy for decades, or whatever.

Further the business might be capable of bouncing along forever even if the owner doesn't really understand the needs and strengths of their business, especially if there isn't much local competition, you can't walk in expecting to be greeted by a logical decision making process. A collection of idiosycracies, is how I'd describe the sector, and the less investment and organisation required to run the business the more idiosyncratic it tends to be. Tradesmen and taxi drivers for example, good luck trying to make any headway into that market.

I'm not trying to belittle small business owners by any stretch, I am one, but if you don't recognise these realities you'll founder on the same rocks as the big boys.

Sales reps cold calling are the best entry to that sector, but even then they aren't likely to part with enough money per successful call to make it worth your time or the rep's time if they're on commission, one sale in ten is what I'd call a decent rate. One sale in five is heady stuff indeed.

The lone self employed contractor, preferably local, will have by far the best success rate among local small businesses.

Re:Small business don't advertise that much

[Anonymous Coward]

advertising is like throwing money at a wall and hoping some of it sticks - only if you have a broad target market, and theoretical profits (for example if u make a loss but it sounded reasonable at the time you can hold ur hand out for more money)

Re:Small business don't advertise that much

[jonbryce]

I don't really agree with that. It depends on your business of course. There are many small ebay traders who's business wouldn't exist if there was no internet. They sell a niche product that doesn't have a huge amount of demand, but having access to the whole world gives them the scale they need to make it a viable business.

Then there are local service businesses. If you are a restaurant, it is a good idea to be on google local search so people can find you, and a brochure website with details of opening hours, what you do, and how much it costs can be useful.

Re:Small business don't advertise that much

[Anonymous Coward]

Case in point, from TFA:

"Businessweek also reported that today, the business brings in about $2 million in annual revenue.

That’s not chump change, especially if you consider Foursquare’s assertions that it hasn’t spent any money on advertising, has a tiny sales staff, and actually blocks some big accounts from buying ads on its service"

No, $2M is chump change. That's barely enough to keep the lights on at a software company 5% of the size of FourSquare -- they have ONE HUNDRED employees, three offices, and significant capital and operational costs for their servers.

Re:Small business don't advertise that much

[Anonymous Coward]

The typical statistic for small businesses is that 9 out of 10 fail in the first two years.

The number I've often heard is 6/10 in two years, and it's more like 35%.

Re:Small business don't advertise that much

[Grishnakh]

If we're talking about mom-n-pop local brick-and-mortar businesses, like the local deli, no, they don't need any of that crap. All they need to do is produce a good product/service consistently, so people living nearby will go buy stuff from them regularly.

What they CAN benefit from, on the internet, is showing up on mapping services (like Google Maps), so that when someone searches "deli near 90210", their deli shows up, and people nearby go check it out. It also helps if there's reviews on there, as Google Maps does, so that customers can leave positive or negative comments about their experience there; if there's lots of positive reviews, people are more likely to try them out. It also helps if they communicate their business hours to Google Maps so that when you look at the "more info" for that business, you can see if they're still open today.

None of this actually requires any internet work, aside from the initial work of making sure your business actually shows up on the mapping service, and the hours are correct. You don't need "social engagement" or "reputation management": just do a good job providing for your customers and that stuff will take care of itself. If you have to expend a lot of energy "managing" your reputation, it's because you've earned a bad reputation because you suck, and now you're trying to use underhanded tactics, such as creating shill accounts, to improve your business's image.

Re:Small business don't advertise that much

[Grishnakh]

I will add, however, that a small and simple website can be very useful for many local businesses. For instance, for a restaurant, a small website with some photos of your dining area and your menu are very helpful.

Re:Small business don't advertise that much

[Grishnakh]

* Messaging is about creating repeat customers. Once you get their contact information, you use it to incent them to come back.

So you think spamming your customers is going to make them think highly of you?

* Ever heard of a twitter feed?

Yes, the whole thing is total bullshit. At least Facebook can be potentially useful, but Twitter is a total waste of time. Any business that wastes their time with a Twitter feed is immediately demoted in my mind. And no, Facebook is not a good way to "connect" with customers. When I buy something from a business, I want to hand some money over, and get a good product. I don't want to waste my time fucking around on Facebook talking to them or seeing a bunch of ads. I'm already a customer; why would I want to see more ads?

Re:Small business don't advertise that much

[Grishnakh]

I agree mostly with what you wrote, except the bit about the internet favoring medium and large businesses. The internet has been a boon to many small businesses, just not the local old-fashioned brick-and-mortar kind. For small businesses that exist solely on the internet, selling products or services directly to people, it's been a boon, because it lets your little mom-n-pop business sell directly to people across the country and even around the world, if what you're selling is something that can be shipped easily (or doesn't require shipping).

So yes, many local small businesses have been hurt greatly by the internet (because these businesses were middlemen between producers and consumers), but many other small businesses have done very well.

Re:Small business don't advertise that much

[Anonymous Coward]

Stop thinking about a business as simply selling things to people...that's a very limited view of the world. Lots of small businesses sell services, not products.

Is it spam for a dentist to send a reminder email 6 months after your last cleaning soliciting you to make another appointment? Is it spam for a CPA to send their clients tax advice? What if a landscaper wanted to offer discounted inspection and repair of sprinkler systems they've previously installed? What about a computer tech that sends out notices about the serious viruses so they don't have to worry about all the scare emails that end up in everyone's inbox?

Yes, lots of people don't want to receive these kinds of emails, and they should definitely be allowed to opt out, but these communications are legitimately useful to others and small businesses would be stupid to not be sending them. They'd also be stupid to rely on manual work to send them...there are systems that hook into the back end systems (Quickbooks and such) that will automate customer communications.

And Facebook can be a really good way to bring word of mouth into the 21st century. Apart from having a facebook page, you can also incent customers to refer their friends through Facebook...there are businesses that do this very successfully. I'm sorry you feel that Twitter is useless, but it's a good substitute for newsletter-like communications that are light on content. The virus alert emails mentioned above, for example, are a great candidate for tweeting. As long as your tweets are helpful, people will follow you.

I'm sorry you seem so annoyed by this, but the fact is that it is being done and it's useful. My company's service enables even technophobe luddites to leverage these online tools and our customers love us. And guess what...our customers' customers love the service too, though they don't realize it's us. They just think that the business they're dealing with sends them helpful reminder emails and uses modern tools to make themselves available on the systems they use everyday.

Re:Small business don't advertise that much

[Grishnakh]

Apart from having a facebook page, you can also incent customers to refer their friends through Facebook

Ok, you just lost me there with that word. You're a marketer, not a real human.

Re:Small business don't advertise that much

[Anonymous Coward]

Somebody's been taking business courses
and doesn't know squat about small business.

Re:Small business don't advertise that much

[Anonymous Coward]

> Small businesses need customer acquisition, messaging, reputation management and social engagement just like any other business.

Says the SEO salesman.

Re:Small business don't advertise that much

[Anonymous Coward]

While true, it still amazes me at how local businesses don't take low or no cost steps to allow people to discover that they exist. For example, updating your information in Google Maps. AFAIK, it doesn't cost anything, only takes a few minutes, and offers a lot of convenience. If you're a restaurant, upload your menu to Urbanspoon (or whatever's big in your region). If you're an apartment complex, it's not costly to have a simple website with a few pictures and your housing application.

sounds more like they have too much money

[ThorGod]

Their idea doesn't sound like it requires 100M to get going off the ground. It also doesn't sound like it'd ever raise 100M all that quickly.

Google?

[jbolden]

Google seems remarkably successful in cracking the small business advertising nut. Arguably that is Google's core business. They have been successful. But the thing is most of the time when people are searching for a product on the web they are ready to buy and many times when people are buying they start by searching.

Foursquare would need to have something like local groupon type deals. Something like "I want to buy gas where is a good place" "I want a good meal" with some advantage for the customer in following their advice something like groupon.

Small local business

[Synerg1y]

Have all the power to list themselves just about anywhere and be found...

The ones that haven't probably don't feel they need to. That's all fine and dandy till you get down to food... the good ones focus on their food rather than advertising and I've seen good ones go out of business as a result of a lack of customer base despite their food being 10x better than the deep fried garbage they served around it. It would be just to draw business to these places, but everybody else... like mechanics, CPAs, mom n pop shops should decide for themselves what level of exposure they want. It's not like it costs money to google how to advertise your business.

This is probably the reason these services aren't what the creators envisioned in regards to yelp and groupon. Also in regards to groupon, you have to offer a deal, and from experience the good ones are established and don't negotiate pricing, only the desperate ones do.

Privacy

[nairnr]

Everything seems like a good idea until you actually get to do it, especially when it comes to the next social wave. I think people are reconsidering what it means to be on social media, and what the companies get from you using the service. Most importantly, it is the commoditzation of yourself as data points. In the end, these companies are raising gobs of money on the prospect that they can turn you or your information into revenue for them. Free services are not free, they have a cost - hidden or not- to you as a consumer.

There are so many bubbles of tech companies trying to be the next big thing, people trying it our, and then getting bored with it. With so much money invested, how could they possibly get such a return on it?

Re:Privacy

[Anonymous Coward]

When every intelligence agency in the world are interested in "your" data, it becomes as profitable as it is difficult to obtain the same information elsewhere.

Re:Privacy

[Anonymous Coward]

Everyone needs a WiFi enabled buttplug!

Small Markets

[Archangel Michael]

are small. For a reason.

There are basically two types of Mom and Pop (aka Local) stores, those barely surviving on what they are doing, and those doing very well and don't need more help.

Which of these are these apps targeting?

Re:Small Markets

[Anonymous Coward]

Not only that, but they are activily blocking the big companies who want to purchase bulk ads.

"Will you walk away from a fool and his money?" Paul McCartney

Re:Small Markets

[loneDreamer]

Those who are not old enough to be either. New or growing small buseness IMHO.

Re:Small Markets

[Archangel Michael]

That market, in between, is smaller than most people realize.

Re:Small Markets

[loneDreamer]

Sure, but they grow to be the stable ones over time. The question becomes how do you produce something of value for the new businesses that they want to stay with you over time.

As someone living...

[Lordfly]

...in a mitten-shaped flyover state, I think part of the problem might be that these businesses don't realize that most of the US doesn't look like LA, San Fran, or New York City. Therefore their idea of useful or exciting really isn't to someone living in Herpaderp Iowa, population 4,354. Maybe if they tooled their services to be a little more useful to people who can't just hop on the subway to the latest gastropub, they'd be a bit more successful.

Re:As someone living...

[ThorGod]

and what would people in smaller cities use location aware devices for?

Re:As someone living...

[DerekLyons]

Not just that... but even in the bigger metro areas they also need to be useful for people who aren't hipsters looking for the latest gastropub or trendy cuisine hotspot. We've had bad results with Yelp and Urbanspoon, and always thought that was because we weren't in a big/dense metro area - until two weeks ago when we spent a weekend in downtown Seattle... and they were *still* pretty much useless because we aren't in the hipster demographic.

Re:As someone living...

[Anonymous Coward]

I learned about Herpaderp Iowa through Friendster and its now my favorite vacation spot.

Re:As someone living...

[TaoPhoenix]

Well, except for your unfortunate slang term for a small city, you might be right that the services need retooling. If the town is small enough, you can get the entire list of businesses into an app. So then make it customer-driven: (Parody of Clippy meant for humor only!)
"I see you want to go somewhere. Pick by name or by category?"
"I see you are going to Joe's Hardware store. What do you need there?"
"I see you are intending to get a new garden hose. Did you feel like trying out the new expandible host as seen on TV?"

Damn maybe I better become a consultant to these local biz'es.

Re:As someone living...

[roman_mir]

population 4,354

- definitely. What do you do to help a small business in a small town like that? Advertising? I don't think so, everybody already knows you there.

I spent a few years building software to run retail chains, manage the supply chain, collect all the data, allow quick good analytics, manage a single store with part of the system, manage cash register, price checkers, etc.etc. It's all tied together, gives suppliers access to their sale data (this depends on their contract with the chain). At the end it's about the price, it's about really really low price. Beyond that it should be simple enough to use, versatile enough to handle whatever, it should prove its usefulness in business, allow managing many more products with the software with only a few people, allowing the same few people expand their product catalogue, centrally control prices everywhere, discounts, whatever.

The really hard part is getting the foot in the door in any small business, they really don't have the money most of the time so you have to be creative, very creative and persistent and not get discouraged easily.

Offering advertising to tiny businesses in tiny places? Wrong product. Even offering supply chain management may not be the right product everywhere, question is: what can you really offer and what can you offer in terms of price and support and price of support?

Those are very hard, small business is not like the giant business where players like Oracle, SAP, etc. dominate everything at very high prices.

The reality is most of what Oracle and SAP do for huge businesses can be done much cheaper but that doesn't matter to those businesses much, however in small businesses it is pretty much the only thing that matters.

Re:As someone living...

[Hognoxious]

I spent a few years building software to run retail chains, manage the supply chain, collect all the data, allow quick good analytics, manage a single store with part of the system, manage cash register, price checkers, etc.etc. It's all tied together, gives suppliers access to their sale data (this depends on their contract with the chain).

You must be very smart to have done all that in the few spare minutes between running your huge web of sockpuppets.

Can you tell us the name of this software, so we can avoid it like a sword-wielding leper on PCP?

Local vs. global

[Todd Knarr]

The Internet's good for global reach. But someplace like Rudford's? If you don't live in the area, you probably aren't going to make a trip to San Diego just to eat there and they aren't really interested in paying to make you aware they exist. And the whole checkin thing fails when it trips over the simple fact that it mainly tells me where my friends are at and if they're at Rudford's I probably already know because they pinged me asking if I was interested in dinner.

So what exactly does Foursquare bring to me? Not much. And since I'm the product it's selling to advertisers, if it's not bringing anything to me then why would I be showing up there to be sold?

Re:Local vs. global

[Anonymous Coward]

This. I live in a small town. Local is local. I know what is local. I know where my friends go. Everyone in town knows when a new restaurant opens, and just go at least once (unless one of their friends gets food poisoning on opening night). I don't need help. Most small businesses in small markets primarily survive on local traffic, and none of these services can hold a candle to word of mouth.

So if I am a small business owner, how do I invest my precious little marketing budget? Some local/social internet crap that hasn't take off yet, or do I pay everyone's favorite waitress an extra 50c and hour so she doesn't quit and go work at Joe's diner down the street?

Re:Local vs. global

[tukang]

You get free coupons to local businesses for checking in and local businesses pay Foursquare to distribute those coupons. If they can keep their costs low enough so small businesses can afford the service, they have a good chance of building a nice businesses.

Re:Local vs. global

[chihowa]

So small companies trying to make it through the initial lean years pay a third party to make their prices go down? I bet they make it up in volume, right? (and that volume is an insane spike that generates loads of unhappy customers)

I think Groupon showed how bad of a strategy this was. These "Local"-targeting companies' business model seems to be to siphon money out of failing small businesses. I can't imagine there's really that much money to be had there.

Re:Local vs. global

[Todd Knarr]

Why would they pay Foursquare? There's the local newspaper and several local tabloids, they can put coupons in them cheaper than Foursquare and almost everyone local who's looking for coupons is already reading one or more of those. Better local coverage, lower cost, again we're back to what exactly is Foursquare giving a local business that doesn't need to reach the entire world?

Re:Local vs. global

[tukang]

You're assuming that Foursquare will cost more and be less effective than local print media but I don't know if those assumptions are right because delivering coupons electronically can be cheaper and more effective than advertising in a paper. Foursquare can target their ads based on your check ins, so they should be able to achieve higher conversion rates and it's more convenient for users to just get a few targeted coupons vs having to find a paper and then searching through all coupons. If I were into using coupons I would definitely prefer getting my coupons electronically than from a paper.

I'm not saying that their model is a slam dunk but I can also see how they could provide a useful service that's more cost effective than what's currently out there.

Re:Local vs. global

[Todd Knarr]

Local, remember? If I'm checking in at a place, they don't need to offer coupons to get me in. I'm already going there and know them. If they want to distribute electronically to repeat customers, all they need's a mailing list and a server to send the e-mail through. To attract new business they need to get the offers to the people who live in the area who aren't checking in. Except those people probably already know about the place from driving past it every day, right?

Now, a non-social search site would work, someplace where I can search for businesses in my area with locality-specific information about them. But that's hard because the cost of acquiring that information's high (these are businesses you can't find much out about on-line, to get the info to populate the database you pretty much need actual people wandering around taking notes) and the target audience is small. Hence why Foursquare's having so many problems with generating revenue.

Yelp is fine

[rwa2]

Groupon is a pyramid scheme that isn't really sustainable.

I want to like Foursquare, but never really tried it because it sounds too social.

Yelp was great when it was included by default on Google Maps. Even if the reviews were inconsistent, I got great results from them.

I've been somewhat pissed since Google Maps Mobile started using Zagat. For their restaurant recommendations, Zagat puts way too much emphasis on appearance and 'chic', and not enough on food quality and novelty. So maybe they're a little more consistent, but I find myself having to consciously filter their ratings, like subtracting 5 points for Thai and Chinese and mainstream American, and adding a few points for any kind of obscure ethnic hole-in-the-wall.

Re:Yelp is fine

[milbournosphere]

This. Yelp does the local job just fine. I've yet to go into a venue and not have the overall Yelp opinion be far off from the truth. I don't need all that social capability, I just need to know if anybody got sick from the food at this Chinese takeout place.

Re:Yelp is fine

[milbournosphere]

I've yet to go into a venue and not have the overall Yelp opinion be far off from the truth.

Doh! Typo. Scratch the 'not' from that sentence.

Re:Yelp is fine

[Anonymous Coward]

The problem with Yelp is that they only get the highly motivated submitting reviews. With the exception of Yelp addicts, only people who've had exceptionally good or exceptionally bad experiences are motivated to leave a review. Without closing the loop to solicit reviews from actual customers that are simple to submit (i.e. no registration), you'll never be able to use Yelp reviews to get an accurate assessment of a business. Yelp has no way of knowing who is or isn't a customer of a business and they have no way of contacting actual customers to solicit reviews.

"Local" and "social" - FAIL

[Animats]

Basic truth: neither "social" nor "local" makes big money. Users, yes; profits, not so much. Compare Facebook's profits with Google, or Microsoft, or HP, or ... And Facebook is considered a winner in "social". Failures include AOL, Geocities, Myspace, Orkut, and Google's various tries.

As for "local", Yahoo was the original "local" directory service. Where are they now? There's "local.com". Does anybody use "local.com"? Yelp is probably the leader, but loses money. If you're the industry leader for several years and are still losing money, your business model is fundamentally flawed.

If there's a winner at "local", it's going to be somebody in the phone space.

Re:"Local" and "social" - FAIL

[sirlark]

If there's a winner at "local", it's going to be somebody in the phone space.

You mean like the yellow pages?

Re:"Local" and "social" - FAIL

[lgw]

I'd love to find a site that combined what Yelp does and what the yellow pages do with a map view.

Re:"Local" and "social" - FAIL

[Anonymous Coward]

The problem with that is the underlying data that all mapping companies use to put locations on their maps. I live in Near North Side of Chicago, yes the trendy area where there is a shit load of places to go. The number of time I have look at one of the map apps and noticed that the shit was a block away or closed 3 weeks ago is huge.

You all want a business model, for dense urban areas, think about micro focus. Chicago has lots of neighborhoods, like Manhattan or SF even. If I am downtown, I want to know about everything within 3 blocks, not 25 miles. In those 3 blocks could be over 100 restaurants. I might be looking for something quick, but better than say McDonalds. I also do not have time to go hunting for it in a building that might have an interior food court. Sure the address might 123 Main St, but it is on the 4th floor and the door to get there in on a side street. This is the kind of detail mapping that nobody is doing right now, because it would require a crowdsource level of mappers.

Then on top of the ultra detailed map, would be a level of restaurant/establishment. Starting with 7-11/Quickie Mart, then McDonalds/Taco Bell, then a step up then a waitstaff separation going all the way up to a 5 star fancy joint. So that I could then select whether I want Waitstaff or not and the level of quality I was looking for.

The company would create the servers, site and coding for people with smartphones to add the data to it. The store owners could even add their own sites but not categorize more than waitstaff or not. Like Yelp without out all the pretentious, foodie wannabes given bullshit reviews.

Re:"Local" and "social" - FAIL

[lgw]

Restaurants themselves can give detailed directions on how you get to them - that why I think you get a better product by combining both angles. I wonder what they do in Tokyo right now - higher density than Chicago, and addresses are nearly useless for getting closer than the block.

Local businesses?

[Anonymous Coward]

If you live in a city and don't know where to get food, then you probably don't have a head attached to your neck.

Re:Local businesses?

[Anonymous Coward]

head attachment services provided by
Charlie's: you cut em we sew em
located on Main street next to your friendly neighborhood ice cream shop

Parent poster just summed it all up!

[King_TJ]

The more I get successful businesspeople to tell me the story of how they got started, the more I hear that common theme. Advertising and marketing is pretty much *useless* for the small business. It simply doesn't make any sense to divert funds to it that are so desperately needed at that stage just to tread water.

Word of mouth is by FAR the most successful thing the small business owner can use effectively to grow the company. PROVE you're valuable by pleasing someone who actually wants/needs what you're trying to offer. Ask them if they'd be kind enough to refer you to to the people they know. (A surprising number of happy customers will do your "advertising" work for you at no cost to you at all. People like to feel like experts about things, including having an answer when their cousin or buddy mentions he/she sure would like to find a good source for "fill in blank".)

For someone just starting out, I'd even say they should scrap ANY kind of advertising idea that costs them more than $50 or so at a time. Print up a bunch of cheap business cards, perhaps, or make your own flyers and strategically mail them out to locations that make sense. But otherwise, invest in things that make your business better at doing whatever it does. If it fails and you have inventory or computer hardware or furniture or whatever -- at least those items have some resale value or can be reused for another business plan. The money you poured into someone's 30 second radio spots or billboards or signs on benches at the bus stop? It's just spent and gone.

Re:Parent poster just summed it all up!

[bhcompy]

I don't wholly agree. Traditional advertising is bad(web ads, tv, some radio). Local advertising(signage, newspapers, some radio) can be useful for certain local products(a paintball store, for instance, not someone doing web dev).

And more than anything else, if there are trade shows for your target demographic, spend the money to go and put up an exhibit. Over the first 10 years the software company I work for(60 people, a small business) existed the vast majority of sales started or closed at trade shows for the target industry(public safety). Trade shows are expensive to attend as an attendee, and even more costly as an exhibitor, but they work very well because your entire audience is your target demographic.

Re:Parent poster just summed it all up!

[Monoman]

I agree.

However i would like to add that some businesses can benefit greatly if you pick the right location as well. If you expect people to find you and/or come to you then location is VERY important.

Re:Parent poster just summed it all up!

[Anonymous Coward]

For someone just starting out, I'd even say they should scrap ANY kind of advertising idea that costs them more than $50 or so at a time. Print up a bunch of cheap business cards, perhaps, or make your own flyers and strategically mail them out to locations that make sense. But otherwise, invest in things that make your business better at doing whatever it does. If it fails and you have inventory or computer hardware or furniture or whatever -- at least those items have some resale value or can be reused for another business plan. The money you poured into someone's 30 second radio spots or billboards or signs on benches at the bus stop? It's just spent and gone.

Advertising, no, but make sure all your listings are up to date, you're in goddamned Google Maps, you have your hours and directions to your site, etc. All of that shit can be done for free, and if you don't have it, your customers are just going to go elsewhere.

Re:Parent poster just summed it all up!

[Grishnakh]

I think the bottom line here is: the type of advertising that's effective for your business, if any, depends entirely on the nature of your business and its industry. The type of advertising that works well for a local restaurant is probably not the type of advertising that works well for a company that sells specialized products to another industry, for instance.

Time

[ubersoldat2k7]

I work creating new products to try to break this market and our biggest resistance is time. Most small business owners don't have the time to learn your tool, learn your business model or to care. They're not going into your HTML5 dashboard where you show them visits, spending rates, high traffic windows, etc. They're not going to download your app because they might not even have a smartphone and if they do, probably, don't know how to install apps.
They're not going to go through the process (as Foursquare is experiencing) of registering their business just to get some hate feedback and loose the little customers they have left.
Also, any normal small shop can have 2-3 visits a day from providers and commercials trying to sell them stuff. So you're simply another guy trying to reach into their rather limited margins and there's no MBA that can break that.

Re:Time

[Jah-Wren Ryel]

Also, any normal small shop can have 2-3 visits a day from providers and commercials trying to sell them stuff. So you're simply another guy trying to reach into their rather limited margins and there's no MBA that can break that.

Angie's List seems to have solved that problem - they charge people to look for reviewed service providers rather than charge the providers. Just a reversal of the typical "if you aren't paying for the product, you are the product" scenario.

Angie's List also sells "preferred placement" in searches and personally that's enough for me to distrust their whole operation. But I am a cynic.

Re:Time

[Anonymous Coward]

Doesn't sound like they've solved the problem if you don't trust them then. (I don't either)

Trust is a big deal, and most Internet companies have none. That matters little to Corporate America, which will do anything and use anything to make a buck, but it kind of does matter locally. There aren't any Internet companies I trust at all. They're always up to something other than just the service they provide, which usually involves data mining and reselling. Small businesses tend not to do that.

Re:Time

[Jah-Wren Ryel]

They could stop selling preferred placement and that would change my mind about their trustworthiness.

The problem isn't with their solution - selling access to data on merchants, their problem is trying to burn the candle at both ends by also selling a form of advertising.

Re:I think it is successful

[stox]

You are confusing Square with FourSquare. Two separate companies.

Re:I think it is successful

[syzler]

What people like about it is that they don't have to pay the credit card companies their 4% of the sales. Instead 4square is only about 2% so small business gets to keep more of their money.

I believe you are thinking of Square which performs credit card payments, however the article is about Four Square which is some social restaurant service I had not heard of until this article. I agree that Square is immensely popular, even here in Alaska.

small business hates silicon valley

[Anonymous Coward]

Mostly small business hates Silicon Valley and their Goldman Sachs "uber" mentality -- i.e. put ordinary Americans out of jobs through disruption, H1B visas, etc. There is no upside to small business to work with any Silicon Valley company. It doesn't mean Silicon Valley will stop trying to put mom and pop out of business.

Value proposition

[frisket]

Small business may not have all the smarts that big businesses can buy, but they're way too canny to splurge on advertising in an unproven medium which could sink without trace tomorrow. Businesses like 4[] who want their cash are going to have to offer a MUCH better deal to attract them.

Re:This is stupid.

[Anonymous Coward]

or the narcissistic indulgence of the web

Re:Following trends...

[Anonymous Coward]

individual thought, brought to you by anonymous cowards anonymous

Facebook, Twitter, Paypal: the small biz trifecta.

[conspirator23]

If I'm a small entrepeneur, these three give me platforms for advertising, promotion, and e-commerce with optional "social interaction" channels built in. I'm probably already an experienced user with all of these systems, and I can safely assume that the overwhelming majority of my current and future customers know these systems as well. How much time and money do I need to invest up front in order to exploit these tools? Zero. Zip. Nada.

Anybody who wants to deliberately insert a $$ product or service into this space is going to have to identify a gap in the current ecosystem that is painful enough that the entrepeneur will happilly throw the money at them. I don't see Foursquare doing anything right now that meets those crieria. They might have something interesting in mind but we'll just have to see.

Re:Word of Mouth

[TaoPhoenix]

I know I'm just one more armchair commenter, but there's clues here to work with.

First of all, I think anyone wanting to start a business needs to go into it with a solid chunk of funding knowing full well that they'll burn money for a couple of years. So then while your point had rhetorical value, "$50 at a time" is a little low. I'd prefer to think of it more like "plan an ad campaign that seems to get the most bang for the buck". Personally I think company vehicles are severely under-rated. I've noted a few businesses from that avenue because they were "just doing their thing" so it felt different than regular ads.

Re: Yelp, I've come across gaps aka "be the first to rate this". To me that screams to just find someone (reputable! more later there!) to rate it. "Reputable" could mean a system of "Super-Reviewers" who have the freedom to be autonomous enough so that if they have a bad experience, they can say so. (I know, lots of problems, but the problem for this post today is avoiding astro-turfing per se.)

There's other things that might be doable, but I'll go all Fermat and say they won't fit in this post. Teaser: Some feeling tells me Google Glass and tech-friends are going to be a game-changer for this topic.

Give me stuff on Sunday!

[kuhnto]

The problem as I see it from a weekend warrior, tinkerer, technical point of view is as follows: 1. The majority of SB is not open afer the standard set of work hours (m-f, 8-5)to allow for other run of the mill people to purchase goods 2. The SB is engaged in a trade based (can not remember the exact name for this) buisnesss such as window tinting, hardware supply, or other wholesale or redistributor only market that will not sell to the "common folk" 3. If the SB will sell to regular person, their inventory is not easily accessed. There are other thingsto list, but n essence a big company needs to ge tthe common person unlimited access to the tail of the dragon type of goods. An example would be if i need a hydrolic actuator at 3:30pm on a sunday afternoon,but i am a software engineer and can not call up local plumbers union to get one.

and foursquare will fail again

[Anonymous Coward]

rip foursquare

Yelp?

[CohibaVancouver]

If I was a small business owner, the issue I'd have with advertising on Yelp! is the fact that I'm giving money to an organization that might post bad reviews of my establishment tomorrow.

[Insert frothing-at-the-mouth posts about Yelp! being corrupt and taking down bad reviews for customers who pay. All done? Good.]

Couple cases in point:

There's a little Thai joint in my 'hood that I quite like. There are negative reviews (along with my positive reviews). Why would he advertise on Yelp!?

I'm involved in the management of a little rustic resort - It has one review on Tripadvisor posted by a couple of wingnuts who smashed up and almost burned down a cottage. Why would I buy an ad on Tripadvistor?

Re:Yelp?

[Anonymous Coward]

Your point is well taken, also, I think Yelp & Tripadvisor are liable for defamation. Neither the Resort nor Restaurant asked to be reviewed, why are reviews being solicited by a third party?

Re:Yelp?

[Anonymous Coward]

Your point is well taken, also, I think Yelp & Tripadvisor are liable for defamation. Neither the Resort nor Restaurant asked to be reviewed, why are reviews being solicited by a third party?

Because they felt like soliciting reviews? Does it matter why? And defamation is a high bar (assuming publishers are even liable), and likely inapplicable, since reviews are often just the opinion of the reviewer. Or if they're true, then there's no defamation.

Re:Yelp?

[Anonymous Coward]

Is this a joke or what?

The WHOLE point of reviews is that they are unsolicited and done by third parties who might just say that the business sucks ass.

Otherwise it's called a "paid review", which is a kind of fraud.

Re:Yelp?

[dfghjk]

"There's a little Thai joint in my 'hood that I quite like. There are negative reviews (along with my positive reviews). Why would he advertise on Yelp!? "

For the same reasons that anyone would advertise anywhere.

Bad reviews are not evidence that the service intends to oppose a business. Don't reject it because it does its job well and you don't. User-driven feedback sites are services that support users; companies that want to treat customers well should be fine with that. You should only fear what customers have to say when you treat customers badly.

"If I was a small business owner, the issue I'd have with advertising on Yelp! is the fact that I'm giving money to an organization that might post bad reviews of my establishment tomorrow."

Only if someone creates them. Why would that happen and what role would "your establishment" play in that? Why should anyone respect the opinion of someone who fears honesty?

Sure, user reviews are a mixed bag vulnerable to politics but any company engaging in advertising has no room to complain. They are, after all, engaging in lying for hire. Outliers aren't interesting on review sites, trends are. Just like word of mouth has always been.

I don't respect the views of someone whose looking to buy their way to success rather than work for it. Businesses that work to please customers don't need to fear sites like Yelp.

Re:Yelp?

[dfghjk]

Wow, what horseshit. AC was a good choice for this one.

Re:Yelp?

[Anonymous Coward]

No joke. What Yelp and TripAdvisor are doing is setting up a soapbox in the front of the businesses driveway with an umbrella, free lemonade and a megaphone to allow stupid, miserable people to sound off with!

Look, here is a story of how TripAdvisor is just plain annoying and stupid 'for the business owner' (since this whole article is about business owners and online marketing):

I work at a Resort where the owner has spent $10 million dollars building an elegant clubhouse with luxurious hotel villa suites. They are by FAR and above nicer than anything else you could possibly stay at in the area. The price for a room night is perhaps 15% then your standard Holiday Inn box room. Its a great value, hands down.

The hotel was ranked #5 in the area on TripAdvisor. Why? Because it 'sucks ass'? No, because the Resort did not care to play the game of actively soliciting honest, positive reviews from guests once they had stayed there. So the hotel had a few good reviews, and quite honestly, had a couple of bad ones. Because there were so few reviews, it ranked poorly, with a couple of bad reviews dropping the average.

So the resort went on an active campaign to manage its online TripAdvisor account. The resort put the stupid green owl sticker (or whatever the logo is) on the front door of the $10 million dollar resort center. The front desk staff were trained to hand out TripAdvisor review invitation cards to happy guests upon check out. The follow up departure email to the guest now contains a link to review the property on TripAdvisor.

Guess what? The resort is now the #1 hotel on TripAdvisor in the area. We did all the hard work to PROMOTE TRIPADVISOR! NOW YOU WANT US TO BUY A BUSINESS ACCOUNT FOR $1200 A YEAR?!

Horseshit indeed.

Re:Yelp?

[Anonymous Coward]

See my AC response (The story of the hotel on TripAdvisor) above to other AC for the point of view of the business owner who was not asked to be reviewed publicly in the first place. You are missing the whole point of the article. The local business does not necessarily have the time or expertise to manage their online profile (not created by them or with their permission). They might not even know about it, or really even care...

Re:I think it is successful

[Sri Ramkrishna]

That's what I get for writing wtihout reading the link. I thought it was the same thing.. such as it is. :-)

Here's how to get small biz to like you:

[Anonymous Coward]

Stop frickin' calling me while I'm working. My phone is not here for you to tell me how sweet your search engine optimization service is, or how I can attract lots more customers if I give away my product for a quarter of its value. My phone is to service my customer. If I need your help, I'll find you. Leave me the hell alone and let me work and take care of my customers.

And stay off my lawn.

Re:My company did it...

[Anonymous Coward]

Perhaps you missed the "profitable" and "$100m/yr subscription run rate?"

I don't even get the point of Foursquare

[ArchieBunker]

Seriously what does it even do? I see a facebook post saying someone has checked into Burger King via foursquare and think oh good for them. What does that do for me?

Google's 'local' -- 'feeling lucky' restaurants

[ankhank]

checked Google's 'feeling lucky' lately?

The result used to be all interesting stuff, even after
the randomized topic thing started to intervene.

But as of now about one in five times "lucky?" opens up to "feeling hungry" with a clickmap to local restaurants.

I'm feeling steered.

Pay day

[Anonymous Coward]

Forget trying to start-up a business, just raise money, say you tried, give everyone back their money minus your paycheck of $10mm, and close up shop. Oh wait.. that's fraud right?

Slashdot practically unanimous on a subject

[Attila Dimedici]

I read through the majority of the comments and they almost completely agree. There are several different points made, but they are variations on the same theme. That theme is that big, national advertizing campaigns really do not offer anything of value to small, local companies. To put it another way, what small, local companies need in an advertizing company is one that understands the small, local market they are in (in other words a small, local advertizing company).

Different Models

[bill_mcgonigle]

Startups usually start with a small application and small infrastructure. To "do local" would require massive infrastructure and fairly sophisticated applications that can cater to the differences among the millions of local businesses. If somebody can "do local" it'll probably be Amazon. I've thought of more than a few ways they could work symbiotically with local businesses in partnerships which would own the Anti-Walmart crowd (and the ambivalent in many cases).

Cracking that Nut is Easy

[EmagGeek]

I honestly can't believe they haven't figured it out yet.

Google knows practically everything about you. So does Facebook. The local advertising nut is cracked when they figure out how to get your attention when you are in proximity to a local advertiser that you have affinity for - and they are right about it.

No, it is not sufficient to just scan your email for keywords and then try to refer you to advertisers with those same keywords. They have to figure out the purpose of your trip accurately as well. Say you pull into the parking lot at the grocery store. They can push coupons and offers to your phone that are TIMELY and RELEVANT - or even offers from competing stores that, say, offer you $5 to drive a mile down the road to try their store.

That kind of stuff would work, because if they could do it accurately, would offer consumers timely and relevant opportunities.

Timeliness and relevance are the most important thing.

HInt: stop trying to be something you're not?

[Anonymous Coward]

If I do want to know local stuff I'll go to a real community website, not a ridiculous web 2.0 circus like groupon or Foursquare

It just doesn't make sense. If I look for local places, I want to know two things:

1) Facts: address, location, ownership, scheduled, hours, phone numbers, events etc or even inventory prices etc if that makes sense fo the venue
2) opinions and impressions : reviews, editorials, photographic expose's etc

That's it. Nothing else. I don't want little dangling carrots like groupon or social voyeurism like Foursquare.
Simple community websites can get me what I want
Regional Newspapers can get me what I want
Review sites like urban spoon,Trip Advisor, etc can get me what I want. ( though I favor moderated sites )
I don't want all the web 2.0 ooey-gooey crap. And I think these statistics show that vmost people agree.

/ and heck I think groupon and foursquare could do just fine if they stopped trying to be so agressive and went for a model of stability instead of a model of maximum proft

Re:First post

[gagol]

Maybe local business needs local advertising, not global worldwide adverts... just maybe.

Re:Word of Mouth

[Jane Q. Public]

"First of all, I think anyone wanting to start a business needs to go into it with a solid chunk of funding knowing full well that they'll burn money for a couple of years."

In most cases I would agree with that only if it is YOUR OWN funding, not borrowed money. DHH (if you know who he is) watches the tech industry closely and he has said it many times: the FIRST and often fatal big mistake many small companies make is going straight into heavy debt to finance their startup.

Internet Graveyard is littered with ...

[Taco Cowboy]

It's one of the biggest, scariest graveyards for Internet entrepreneurs: Small, local business

Not true

Internet graveyard is littered with businesses that does *NOT* make any sense

Most people have a misconception of how to do business online --- they often thought that Internet is a world of its own, that it has rules so special that online business must act differently than their brick-and-mortar counterparts

I'm talking from my own experience --- I had been in the Silicon Valley since the late 1970's and I had involved myself with several very very successful startups

Although my portfolio did include several failed projects, the majority of the projects that I involved with were successful --- simply because of common sense ---

Any business, no matter if they are online or in the brick and mortar form, must have at least one product that others need

And if the demand is great enough, others will actually PAY YOU to get that product --- and that's where you get your profit

No matter if it's google or youtube or facebook or foursquare or groupon --- as an investor (and an entrepreneur) you need to look at the project as a customer ... and ask yourself "Is there anything that I desperately need from them?"

If the answer is "Yes", I will pour my money in

If the answer is negative, or maybe, or not sure, or whatever, I won't waste my time with it no more

I can use my time better by looking around for other startup ideas --- and there _are_ a lot to choose from

Re:Internet Graveyard is littered with ...

[PoolOfThought]

That's crazy talk! Capitalist bastard! You and your business should be able to survive off good feelings about what you value you think you bring and just "knowing" you're doing something worth while... even if no one else is willing to actually affirm your choices by, you know, giving you money for doing so.

Thank goodness someone gets it. I've recently begun worrying about the state of things, but your post will help me sleep better this weekend knowing that someone gets this. Bravo.

Capitalist bastard ??

[Taco Cowboy]

You Sir, will not be able to do what you do (online or not) if not for the hard work and risk taking of the so-called "capitalist bastards"

Where do you think the bread that you ate this morning came from ?

From the capitalist bastards who own the bakeries, which baked the bread

Who do you think produce the wheat flour that the bakers used to make the bread ?

From the capitalist bastards who own the flour mills, which grind up the wheat grains into flour

Who do you think produce the wheat in the first place ?

From the capitalist bastards, the farmers, who took great risk to plant the wheat last fall and later harvest them to feed your kind, the freeloaders

Re:Capitalist bastard ??

[PoolOfThought]

Wow. I think you missed my point - or probably more accurately - i did a bad job of showing sarcasm in the first paragraph and true appreciation in the second. It rare on slashdot that anyone actually has a mindset such as ours (shared at least on this particular topic) and actually speaks up in the discussion, and I was taken aback that you were so brazenly doing so. I was merely mentally preparing you for the lashing coming you way (by those that think everyone gets a trophy and that those trophies should be paid for with other people's money) by giving you a little ribbing first. You completely misunderstood... classically almost.

Trust me. I meant the "bravo" and that I really did feel better getting to hear someone else tell it like it is.

PS. If there were any doubts at all about what I was saying you could have looked at my profile and my comments. I'm pretty sure if you did so you'd see we're coming from the same place. In any case, thanks again for your original comment.

Re:Capitalist bastard ??

[benthurston27]

If there's not already a named law for it I submit that "There is no level of sarcasm that won't be interpreted literally by someone." Maybe called The Whoosh lLaw.

Re:Capitalist bastard ??

[Intrepid imaginaut]

Nice, the Whoosh Law: "You can't be so sarcastic that someone won't think you're being serious".

Re:Capitalist bastard ??

[kermidge]

and @benthurston27 - either phrasing of law seems about right.

Nice. Saves me doing a "whooosh" on Taco Cowboy, also.

you're overthinking this

[Anonymous Coward]

haven't you dorks figured out that these jerkoffs don't HAVE a product, and that they are just doing a pump and dump scams after pump and dump scams? Web 2.0, social media, etc are all just BS excuses for monied interests to pump and dump, you idiots DURRRRRRRRRRRRRRRRRRRR

RE: "I work ... to try to break this market"

[Anonymous Coward]

RE: "I work creating new products to try to break this market."

I'm sure you, and many others like you, work hard to try to break the small business market.

That is why Capitalism, especially American Oligarchical Capitalism, will be the death of us all.

Carry on.

Small businesses are often small for a reason

[CuteSteveJobs]

A rule of business is sell to customers who have money. Small businesses are notoriously poor. They don't have much cash don't pay their bills on time, if they pay them at all. They are often poorly run. Even though you may stumble across the odd 2-man Apple-in-a-garage operation, even they were cheap and nasty when they started. It's a really bad market to chase. They won't pay much, and you won't get repeat business because most fail in 12 months anyway.

Re:Small businesses are often small for a reason

[CuteSteveJobs]

LOL! WOT!? Someone modded me down. I've worked with small biz. It's the reality. You spend most of your time chasing debts.

If whoever modded me down didn't like what I said because they are chasing small biz then they are in for a rude shock.

Re:First post

[jonbryce]

There is one company that makes huge amounts of money from small businesses. It is called e-bay, and it is successful because it gives these small comapnies access to a global marketplace. It works for manufacturing and retail where the companies send stuff in the post in exchange for money, but not so much for service businesses.

Newsflash:

[VortexCortex]

They fail because they're not fucking useful enough.

Instead of spending piles of money on marketing,

[Anonymous Coward]

how about JOINING the local community instead?