Making money locally
Sarah Lacy’s coverage of the pending Oodle launch brought up some interesting ideas about monetizing a locally focused website.
As good a job as Craigslist has done it only monetizes about 1% of its users, and that’s probably one reason it has spread as far and as fast as it has. But- by design- it’s not the next great billion dollar Web powerhouse.
Craigslist is an interesting service to analyze. Much of the sites value (to the consumer), is that the service is free. The ability to list an item for sale for no cost is part of what makes selling and buying on Craigslist so appealing.
Sure buying and selling on Craigslist has its share of problems; fraud and a lack of buyer and seller contracts among others, but it has prevailed nonetheless as an effective and popular classifieds service.
Could Craigslist make the process more formal and still maintain the visitor traffic it enjoys currently? Probably not. Craigslist for most is an alternative to paid listing services like Ebay. For one, Craigslist simply isn’t as comprehensive as Ebay. Search for anything on Ebay and you’ll likely find it (I’m still trying to find that Bermanator poster). Second, Craigslist isn’t a competitive market place. Ebay has many sellers with the same product competing for the best price, best reputation, and the most sales. On Craigslist however, the items are essentially random. If you are looking for speakers you will be able to find them. But if you are looking for a Klipsch RF-63 Home Theater system you’ll likely only find one set listed if any are listed at all. The most important reason, Ebay can make millions of dollars, and Craigslist can’t is that Ebay provides basic order fulfillment services. The inconvenience of Craigslist (phone calls, arranging meetings, negotiating prices) is simply just too much work to charge for a listing.
But how does this relate to making money with a local web service? Most web services that succeed in generating revenue are well suited for the national or even world scale. Sure you could make a site for dinner reservations in Boston, but if it works there why not take it global (see OpenTable)? If your aim is local the value you provide to your consumers must truly be unique and useful only to customers in that area. This is not to stay starting small isn’t beneficial to refining the operations and business plan of your enterprise. However, having a strategy that aims to be local won’t lead you to the next billion dollar web business.
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