Startup RedBeacon, a self-described “Open Table for service businesses,” has won TechCrunch 50′s top prize and $50,000. I wasn’t at TC50 but I watched the demo pitch on video. RedBeacon is the just the latest startup to take aim at the massive local services segment. The demo was elegant and the theory behind the site makes lots of sense.
There’s just one fairly major problem: execution in the real world.
One can imagine the VC meetings and the pitch: “No one has yet to create an Open Table for the millions of local service businesses in the $14 billion yellow pages industry.” In fact there are a number of startups that have come before and have tried or are still trying to do some version of that very thing. They include (but aren’t limited to): BookingAngel, Bookfresh, Genbook, Libersy and a few others.
If we open the aperture a bit wider there are many lead generation sites and tools for local service businesses, ServiceMagic most visibly among them.
I’ve got nothing against RedBeacon and wish them well. But they will find, like many others before them, that the local space is much much harder to crack than it appears from a distance. There are many failed startups in local. In most cases they failed because they didn’t realize how tough it would be to get businesses to advertise or sign up.
There are also those who strongly believe that the telephone is a critical part of any advertising platform for local business, since so much business is connected via the phone on the local level. There is no phone component here. In fact RedBeacon is explicitly avoiding the telephone — “all without making a call” was the phrase mentioned during the pitch.
As a general matter local businesses are time starved, confused about online advertising and generally overwhelmed by pitches for their marketing dollars. Getting them to show up and participate at RedBeacon is going to be an enormous challenge. Let me repeat that: an enormous challenge.
If the founders have a five to seven year time horizon they might be prepared for the very long, slow climb up the mountain that is local. Alternatively they might be secretly thinking they’re a useful platform and will be acquired by a yellow pages publisher or other traditional media company if they can prove value and gain some momentum. Perhaps; it’s more likely than succeeding as a stand alone company.
Somewhat less challenging than getting local businesses to self-serve and participate in RedBeacon is building consumer awareness. Yet that too will be tough, with search engines and so many other sources of local business information online. The booking part is novel and differentiates RedBeacon from many local destination sites. But the third party appointment vendors (e.g., Bookfresh) will enable sites like Yelp to add booking and appointments quite easily. Yelp has 25 million uniques and a consumer brand. Tough to match.
Yet without brand awareness and usage among consumers, those local businesses that are more savvy and motivated will not show up because they’re not likely to get much response. And without a critical mass of local business participation the value won’t be there for consumers either. It’s a classic chicken and egg problem. The fact that RedBeacon won — again, I have nothing against the site or its founders — also reflects to me the disconnect between the bubble world of startups and their funders and the real world.
Good luck to RedBeacon and congratulations. I hope that they prove my skepticism wrong.