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Jul. 16, 2007 at 9:18am Eastern by Greg Sterling

Local Is Social By Definition

Several years ago I was having lunch in a restaurant in New York with a couple of Yahoo executives, discussing the challenge of motivating people to rate local businesses. Yahoo was way ahead of the online curve back then, although now ratings and reviews of local businesses are seemingly everywhere online. Indeed, that conversation seems somewhat quaint in retrospect given all that has transpired in the realm of "social media" since that lunch.

While those creating content and interacting with social media sites still represent a vocal minority of the online population, social media in its many and varied forms is clearly one of the most important trends to emerge in the last couple of years. Although one might argue that the general antecedents of today's social media have been around since the very beginning of the Internet, a number of factors have made community and user-generated content very widespread, to the point of near ubiquity, today.

Social media has become so mainstream in fact – especially after the $580 million acquisition of MySpace by News Corp. – that there's almost a perfunctory feeling about it on many sites. It's now simply an expected layer to boost the "virality" of the site. Community feels "forced" in such situations.

By contrast, there's an organic relationship between social media and local content. It may not seem immediately so given the historical resistance of many yellow pages publishers' sites to consumer ratings and reviews. But that resistance has totally fallen away in the past year or so under the weight of user demand and the success of what I've called "social directories" – sites that marry reviews with yellow pages databases and business models. IAC's Citysearch and Angie's List are the grandparents of the genre and Yelp is now the poster child.

The principal way in which most truly local businesses gain new customers is through word of mouth. There's considerable anecdotal and empirical data to support this. And we all know this from personal experience: we consult friends, colleagues and family about recommendations for preschools, painters, lawyers, landscapers, tax preparers and so on.

The self-evident reason is trust. We trust our friends and colleagues to make good recommendations. A secondary but almost as important reason is efficiency; our friends and associates have hopefully done the work of screening these businesses for us. It's much easier, for example, to get a recommendation for a painter and run with that – given all the time pressure today – than to make three blind calls yourself, get bids, etc. Although you'd be inclined to do more due diligence regarding a preschool for your child.

It's nothing new to say that these word of mouth dynamics, which are pervasive offline, have moved online in a big way. That's why almost every directory or local search site you can name today is going social. Here's a very incomplete list of locally oriented sites where community or ratings and reviews are an integral element or the central value proposition:

Angieslist
AskCity
Avvo
Backfence (now suspending operations)
Boorah
Citysearch
Craigslist (community is in the background)
Fatdoor
GoCityKids/Parents Connect
Google Maps
Insiderpages (acquired by IAC/Citysearch)
Judy's Book
Kudzu
Live Local/Maps (Microsoft)
Local.com
LocalGuides.com
MojoPages
N49 (Canada)
OpenList
Outside.in
ServiceMagic
SmallTown
SuperPages.com
TripAdvisor
TrustedPlaces (UK)
welovelocal.com (UK)
Yahoo Local
Yellowbot
YellowPages.com
Yelp
Zagat
Zillow
Zipingo

Even Facebook and MySpace have strong local dimensions. Indeed, if I were seeking to be exhaustive this would be a much longer list. The point is that the combination of local listings and community content is natural and fundamental because of the way in which people use word of mouth in the real world. The Internet is merely reflecting that online. But as the local-social connection gains momentum there are challenges and paradoxes too.

The rapid proliferation of online word of mouth creates a profound challenge for local businesses, which can't possibility monitor and manage all the online ratings and reviews about them. (It might even make sense for small businesses to stop spending money on marketing in favor of monitoring, managing and responding to all the reviews out there.)

As valuable as they are, the explosion of reviews also has something of a dilutive effect for consumers. When everyone has local ratings and reviews (and community), those elements alone cease to be differentiators for publishers and have a diminished impact on consumers. In response to that assertion one might argue that volume of reviews content on any given site remains a differentiator. But that creates its own problems, ironically.

While it remains challenging to engage users and get them to participate, if you're successful doing that, as TripAdvisor and Yelp have been for example, then you have to find a way to manage all that content, summarize it and make it accessible to users. Too many reviews creates its own problem. It's just like the problem of too many search results; users will only look at the first page. Local content aggregator OpenList has sought to address this challenge with a Zagat-like reviews summary it calls "Open View."

Stepping back, here are some observations and conclusions:

• The natural connection between local and word of mouth/community means these categories will be increasingly linked going forward
  
• The increasing volume, fragmentation and proliferation of user-generated content creates a problem for local businesses (and a business opportunity)
  
• Reviews and recommendations content on local sites over time loses its novelty because everyone's doing it
  
• Local sites that ultimately succeed must have this content, but it becomes just a feature of a larger, holistic publisher value proposition
  
• That larger proposition, an expression of the full local search user experience, must embody the historical value of traditional, offline word of mouth: trust and efficiency

There's more to say, certainly, about the joint evolution of the Local Internet and social media but I'll leave it for a future column. (If you haven't yet registered for SMX Local & Mobile, do so today.)

Greg Sterling is the founding principal of Sterling Market Intelligence and a senior analyst at Opus Research's Local Mobile Search program. He publishes Screenwerk, a blog focusing on the relationship between the Internet and traditional media, with an emphasis on the local search marketplace. The Locals Only column appears on Mondays at Search Engine Land.

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