The Local Opportunity at Hand

This following column was provided by Matt Ackerson. Matt is the author of Venture Kid, a blog about entrepreneurs and start-up advice. He currently works at Scrimple, Inc, a firm that creates products and services for the benefit of the local economy.

The future of the internet will become more locally focused. There are four major reasons why this will is the case.

1. Everyone in the U.S. is aware of the internet and computers are becoming ubiquitous. Local business owners, even those who are older, are becoming more familiar and sophisticated in terms of internet technology and how to employ it to their advantage. According to Opus research, over 40% of small-to-medium-sized businesses (SMB’s) are advertising online. In the same survey, taken in October, 2008, slightly over 30% said they would be shifting more of their marketing budget online.
2. Companies have gradually adapted to the market and are successfully producing web-based services molded to the needs and desires of local businesses. Reach Local is an example of this.
3. The volume of users performing local searches on the web is growing significantly. While search query volume grew 20% between February 2007 and February 2008, search queries with local intent grew 76% in the same period of time. Overall, Kelsey Group estimates that 20% of all searches performed online have local intent. These are important numbers for the local economy because it shows that more consumers are shopping or pre-shopping online while usage of traditional media is declining.
4. The proliferation of smart phones with embedded GPS technology.

Two subtle factors worth mentioning that are likely to contribute to the growth of this trend are the recession and a growing movement for a sustainable economy (e.g. living and relying on resources closer to home).

These facts demonstrate great opportunity for start-ups and established players to profit, as well as innovate. Plenty are already profiting, fewer are doing much that is truly innovative.

Internet Yellow Pages (IYP’s) are a perfect example of this. Take a large database of contact information, skin it with a slick design, do a bit of SEO and online marketing, and then, presto. It is a common play nowadays, common because it can work reasonably well.

Reach Local (mentioned above), Web Visible, and Yodle take the middle ground on this issue by bringing to market products that show incremental innovation: take the search marketing API’s that are out there, plug them into your site, build some landing page templates, use Adwords and lots of phone calls to get distribution, and presto (Clearly I am over-simplifying).

The same goes for online delivery websites: take orders from customers online and send them through to the business via a fax line. Both online ordering and search engine marketing resale programs are already crowded with competition, but the leaders of the pack are making some nice bank (supposedly Yodle pulled in $30 million in revenue for 2008).

The question remains whether there is the possibility for disruptive innovation in this space. Is a company like Reach Local or Delivery.com the epitome of profitable innovation on a large scale? Are they the "Google" of the local markets? Is it possible to create more innovative, valuable products and services for a market that has been quite slow to adopt internet technology in the first place?

The answer is a yes–we will see more innovation in this space in the future. Why? It is only a guess, but it a guess based on research, personal interactions, and time spent talking with numerous local business owners. In addition, recall the four points above: the progressive and continued blend of the internet and offline commerce is a logical prediction.

Gazing into the future we should remember that web technology’s major benefits will be is the automation or assistance of lab and the potential for cheap and wide distribution (the long tail).

New solutions may disrupt the market by turning online ordering sites or local SEM brands into commodities or make them irrelevant all together. How? Pricing models may be changed (perhaps making such services free somehow), operating costs may drop yielding cheaper and easier integration of SEM / Fax technologies. New competition to the space may address other problems that affect local brick-and-mortar businesses such as weather or seasonal changes. Others may change jobs that humans once had to do in person, such as answering the phone to take orders, and distributing them via a virtual call center.

The possibilities are nearly limitless for the local internet and we have only scratched the surface thus far. The hope is that whatever new web technologies come about in the next few decades, those that target the local economy should do so with more than profit in mind. They should consider the impact their products / services will have on jobs and on the overall quality of life in the local economy.