The Siren Song of Local Reviews

I just got off the phone with another young entrepreneur who’s in the process of starting a new “social reviews” site for local restaurants. I tried hard not to be a complete wet blanket, but I have so many knives in my back from my Judy’s Book experience it was hard not to pull a few out and do a little show and tell.

I completely understand the emotional appeal of local. Starting a local reviews site is the online entrepreneur’s equivalent to the fiction writer’s maxim of “write what you know.” The internal monologue goes something like this: “I love to eat at great new restaurants with my foodie friends. Existing review sites are mass market mediocrities that sing the praises of T.G.I. Fridays. If only there were a site that spoke to my personal tastes and values. If I build it others will come.”

The list of reasons why a new local site (especially one focused on the super-saturated restaurant category) is extremely unlikely to ever make money is too long to enumerate here, but if you want me to bore you with the details (like I did the poor guy I spoke with a minute ago) I’m happy to share. But if you just want the short version, here it is:

If you’re looking for a labor of love that will take years to mature and, with good luck and patience, might become a breakeven business someday, by all means start a local reviews site. If you want to make money in local, forget reviews, forget content, forget innovation. Just pick one, narrowly-defined, high-ticket services vertical where local merchants understand the value of a new customer (and where there aren’t already a dozen other competitors). Figure out how to connect online searchers with qualified local providers for less than the provider is willing to pay you for the referral. Listen to your customers, focus on the numbers and look for small ways to improve your service every day. Scale to profitability. Select another vertical. Repeat.

I’m the kind of person who has to learn things the hard way, so it took me three years to learn this lesson. I hope this post saves somebody out there from making the same mistake twice. (P.S., if you’d like to see this playbook in action, take a look at Cooler Planet, they’re nailing it).