Wednesday, June 11, 2008

Hyperlocal: The ad side of the equation

I recently read a post on Peter Krasilovsky's blog, The Local Onliner, about Citysquares and the progress they have made. Here are some of the numbers Peter mentions...

Boston-based CitySquares, which just celebrated its second anniversary, is getting about 70,000 unique visitors per month and now has a base of 700 advertisers, averaging $1,200 per year, reports CEO Ben Saren. He believes they have even more potential via upsells such as video, sponsored/display ads, etc.

Those are some impressive numbers for the team over at Citysquares. I have met Ben and Bob, the founders, many times at local conferences and other tech related events. They are great guys who are passionate about building a fantastic product. These guys really get how to connect and work with local businesses and I think the results to date speak for themselves.

Citysquares is becoming another example of how hyperlocal can work by focusing on one area and becoming the experts there. But most site want to grow, expand and become national players. Thus Citysquares is now expanding outside of the Boston area into other Northeast cities. So the question becomes, how do you scale this advertising model to each region?

Is it simply a matter of throwing more sales people into the pot? More sales people is a solution, but does not make for a very scalable proposition. And this is the issue that most local sites face when trying to expand. There is very little, if any, overlap in your customer base and relationships must be build again from the ground up.

(While some of you might think this is a perfectly fine sales model, it should be understood that on the web it is expected that you have an self serving algorithmic based sales robot that requires no salary and can handle an infinite amount of customers while still converting an infinite amount of new customers. This way your revenues achieve hockey stick like growth while your costs remain flat.)

So while the promise of hyperlocal tantalizes, the economics of it seem to lag. But having attended many local conferences this past year, I can tell you that there are many smart people and companies working on new solutions. And having chatted with them in the past, I know Ben and Bob have some innovative and interesting ideas on hyperlocal and how to make it work.

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