My hat’s off to MerchantCircle. I’ve just read a Business Week article that explains how the company is serving local businesses with a network that borrows a few ideas from MySpace. It sounds like they’ve hit on a winner!
Using data obtained from public records and a proprietary Web crawler developed by cofounder Yamamoto, the eight-employee MerchantCircle builds the listings, then relies on merchants finding listings through word-of-mouth and search engines. MerchantCircle optimizes each entry in the directory, so that it gets good placement when it is picked up by major search engines such as Google. “We make it easy for people to link to your site, make it easy for merchants to create new content, and tag it in a way the Web loves. Google wants people to be able to find stuff that they’re interested in. For a small-business man to do that himself would be impossible, but we’re applying that [technology] across lots and lots of merchants’ pages,” says Yamamoto.
Smart guy! If you build it they will come. Instead of going out and trying to convince local businesses to let MerchantCircle build them an online profile, the network is simply going ahead and building it anyway. They then optimize it so that the profile shows up well in Google – which business owner wouldn’t want to claim that for free??
Of course, the hard part is actually getting the local business owner to pay for premium services. So far, MerchantCircle has 85,000 “claimed” profiles, which can be done for free. They’re hoping they can build such a vast and useful network, that local companies will upgrade to either the $30 or $100 a month level.
But selling the premium packages remains an afterthought for the cofounders, at least until they build their base of business owners who use the free services. “Our view was and still isâ€”let’s grow the largest number of users. It doesn’t cost us a lot to help them do it. Once we’ve done it for one, [doing it] for 14 million doesn’t cost much more,” says Smith.
If I were to build a local network – and I know a few people considering it – this would be a good model to mimic. While it might be better to look at a per-click or per-lead model for revenue – as opposed to a monthly fee – I love that they’re building the profiles and optimizing them first. They’re creating value for local businesses and local residents.