Your Suspect

A few months back at the Somerville Local First launch party I met a fella named Steve D’Agostino. We talked briefly about what CitySquares was doing, and he spoke passionately about what he’s doing in Worcester for Worcester Local First. We hit it off pretty quickly, and realized how well aligned our missions are. I later found out that Steve also hosts his own talk radio program. Well, today I had the pleasure of being interviewed by Steve on WICN 90.5 FM‘s Business Beat program. It was a 30 minute interview almost entirely about local businesses, their impact on local economics, and of course CitySquares too.

I’ve uploaded the audio file here but you can also find it up on WICN’s website.

Locally owned businesses, aka independant businesses, aka Mom and Pops, are superior to big box retailers in so many ways. Even though I believe this with every nerve in my body sometimes I forget the nuances and subtle qualities that really drive this point home. I’m guilty of shopping at chains and non-locally owned businesses like 99% of America but I truly and wholeheartedly try to shop locally whenever reasonably possible. I go to Porter Square Books to get all my books and if they don’t have it, I order it. I go to Diesel Cafe for my coffee. And when I shop at Trader Joes’s (yes, I know they’re not “local”) I buy organic foods and coffee beans etc, all in an effort to support whatever and whoever I’m told I’m supporting! Unfortunately I don’t have any locally owned pharmacies near me, so I go to CVS. On rare occasions I may go to Starbucks and I’ve been guilty of shopping at others, like Target, Home Depot, whatever. But I really try to avoid it. This past holiday season Ali and I did 90% of our gift shopping at local businesses. Some stuff we just had to buy otherwise, like a specific Brookstone gift. Unfortunately the days of local grocers are mostly gone, but we do try to shop at local butcher shops and farm stands and such. I do not like Home Depot and I try very hard to go to locally owned and operated hardware supply stores. I’ve learned a lot about Ace and True Value as a result of this and make no mistake about it – Ace and True Value stores are still very much locally owned and operated retail stores.

I think most of the population probably doesn’t concern themselves with this too much. They don’t intentionally go out of their way to Buy Local. When they need a new rake for their lawn, they go to Home Depot or Lowe’s. When they need a coffee they go to Dunkin Donuts or Starbucks. When they need some food they go to Stop and Shop. And the national brands like those I just named have such deep pockets, they can outspend and out-advertise any local guy. They can cast so broad a net that we’re just all victims of their marketing and branding and it becomes almost instinct. You think soda – you think Coke. You think car, you think Ford. You think clothing, you think Filene’s. Ever since I was a little boy sitting in front of the TV eating cereal I’ve been bombarded with these ads. Sears, Home Depot, Circuit City, Macy’s, whatever – I’ve been groomed into this zombie consumer. MUST SHOP HERE. MUST GO THERE. NO OPTIONS.

When I was a kid I went to the same local barber with my dad every 2 weeks, I went to the same hardware store, more often than I liked. Most everything we bought was bought locally. My father is a republican, mind you (or was). He loves Nixon, loves Reagan – so this had nothing to do with politics or policy. It was how he was raised too, in NYC. Neighborhood stores in Brooklyn, the Bronx. So for me, the occasional trip to say, Child World, or Montgomery Ward was, again, occasional. It wasn’t the only choice. Heck, I don’t even remember Wal-Mart as a kid. It seemed to spring up when I was a teenager out of nowhere, but that’s here in the northeast. Anyway, I digress. Point is, I have fond memories of local stores and service providers. I don’t have memories of long and towering aisles at Sam’s Club, or grumpy people standing in lines at Wal-Mart.

So when I started CitySquares back in 2005 it was as much about local businesses, neighborhood businesses as it was about anything else. Our message is clear – BUY LOCAL. But we’re not obnoxious about, we’re not pious about it – we can’t be. And also, we ultimately respect people’s own individual rights to shop wherever they want to shop. At the end of the day, a larger portion of society does shop with their wallets. It’s nothing against local businesses, and they may even understand the value of shopping locally, but for them, it’s a matter of dollars and cents. If they can buy a box of crayons at Wal-Mart for 69 cents less than they can at a local toy store, then there are likely other savings for them and that’s ultimately what drives them. They may care deeply about the economic benefits of shopping locally – and there are many - but they have a family of four and the budget is very tight. So as far as they’re concerned, “thanks for the enlightenment buddy but I’ve got 3 kids to feed and a mortgage to pay!” And we respect that. That’s also why we continue to list non-locally owned businesses. We don’t ask them for their advertising dollars but we still put them on the website. That’s for us to be meaningful and credible.

Anyway, as you see, I’m passionate about this stuff. It’s not just a drum I’m beating either – I believe in it greatly and I believe in the importance of shopping locally as much as the next guy.

To wrap things up, I’m writing this because many people have heard me talk about it before, some people have heard me talk about it so much that it’s making them crazy (but they get it!) and I finally realized that I haven’t really blogged about it at any length. I got inspired this weekend when Ali and I had some very inspiring local shopping experiences. But I won’t get into that right now, I’m only on one cup of coffee and I feel like I could talk about this forever. But I will be talking about this more, you can bet on that.

On Monday Google announced their Google Local Business Referrals (LBR) program in which “local representatives” (essentially 1099 contractors) are paid to a) collect local business information, b) submit that information to Google’s map/listings services, and c) spread the word about AdSense. Google will pay it’s local reps $10 for each business submitted, but not so fast. Here’s what Google says:

You’ll visit local businesses to collect information (such as hours of operation, types of payment accepted, etc.) for Google Maps, and tell them about Google Maps and Google AdWords. You’ll also take a few digital photos. After the visit, you submit the business’ info and photo(s) to Google.

You can earn up to $10 for each approved, verified referral you submit. This includes $2 when a business referral is approved by Google; and $8 when an approved business verifies that the information you submitted is accurate. Referrals are approved by Google based on the completeness and quality of data supplied by representatives. Businesses verify their information either by sending us a response postcard or verifying their information online. As long as your earnings total at least $25 a month, you’ll receive a monthly check.

Well woopie-doo! Donna Bogatin articulates quite well what I think of all this:

Google has announced various partnering schemes with the goal of piggybacking on small business sales force and distribution assets of other companies, such as 1) a Verizon SuperPages.com partnership to “marry its “sales channel opportunities with Google’s vast advertising network” and 2) a Intuit QuickBooks referral button deal to “help small businesses to attract new customers.”

Despite Google’s efforts to leverage the sales efforts of third-party companies, however, the local ad market remains elusive. Not surprisingly, Google can’t even garner sufficient “freebie” Google Maps listings it offers local merchants.

Google is undeterred. Sheryl Sandberg, VP Global Online Sales & Operations, said of the local opportunity last year:

As people do more local search on Google, we provide greater opportunity for local advertisers. In that area we think the market is widely under penetrated, it sounds surprising to a lot of us, but even in the United States, arguably the most developed market in the world for ecommerce less than 50% of businesses even have a Web site, or let alone advertisers, so we think there is tremendous opportunity to bring those people online and bring them into our advertising product.

Is Google biting the “feet on the street” sales force bullet, then? NO! As usual, Google believes it can get away with playing by its own business rules.

I think Google is way out of it’s league here. I’ve often believed that Adwords doesn’t really even make sense for much of the local merchant market, unless they’ve got an active eCommerce function.

Donna goes on:

The Googley local ad sales solution is to offer slave wages to U.S. residents: $2-$10 for hours of labor intensive one-on-one cold-calling, prospecting, ad creative development and sales closing.

What is the going local ad sales market rate? Erron Silverstien, former Citysearch exec and founder of local search play YellowBot recently told me a successful close of a local merchant entails, on average, a $500 investment.

Does Google know better? NO! Google believes it can get away with solicting U.S. adults with a pennies on the dollar pitch: That is the Google Local Search $10 pipe dream!

Greg Sterling takes a practical approach:

Yet unless there’s radical simplification (”just tell us how much you want to spend monthly and we’ll do the rest”) there’s still the issue of the learning curve and complexity of self provisioning for local businesses.

But this is one more piece in a diversified Google strategy to reach the local market.

Matt McGee has quite a bit to say about this matter, and in summary he also believes it will be a failure. Matt says:

I think it’s naive to think that people are going to jump at the chance to knock on the doors of local businesses, take photos inside, promote Google Maps and Google AdWords, fill out paperwork, submit it all online when they’re done, etc., out of the goodness of their heart. You have to provide a better benefit than “you’ll be helping your community find local businesses.”

I just don’t see Google coming into this space, sprinkling it’s Google fairy dust on the marketplace and voila – cracking the code. OK, so maybe Google’s isn’t trying to crack the code, but just penetrate the market a bit more than they’re able. Google should want to penetrate this space, of course they should, but doing it themselves? Gimme a break! And this approach is just silly. I kind of get the sense that this is a desperate move by an increasingly clumsy and goofy corporation that will yield very little. Next step for Google? Snatching up local search players.

Success in the local search market will not come from a giant like Google or Yahoo or Microsoft. It will come from the small startups like, well, like CitySquares.

Ali made a delicious dinner the other night; lobster ravioli with her own sherry sauce. It was absolutely delicious. I guessed that she handmade the raviolis all by herself, kidding of course (right?). She bought them at Dave’s Fresh Pasta, down the street. At Dave’s you’ll find homemade and handmade pastas – very high quality, gourmet style pastas, sauces, and a lot more. It’s a real gem in the Davis Square neighborhood. Anyway, Ali mentioned how nice the person was, who waited on her. She asked for a loaf of bread, but they were out. He then told her that next time she can call ahead and tell them what she wanted, and they’d have it all ready for her. Well… now…. that, folks, that is good service. And that, you only get from your local merchant.

The kind of service you get at Dave’s Fresh Pasta, the kind of care and treatment you get at Massage Therapy Works, at State Street Barbers, at Porter Square Books, is only the kind of service you find where the ownership is local. You just don’t get that anywhere else.

When I see reviews on Citysquares.com from members of the community, of local businesses,and when I hear stories like Ali’s, or from anyone, I can’t help but feel a strong sense of pride and honor. I’m really quite proud to be doing what we’re doing, for the community, for local commerce, from the members of the community across all areas. I couldn’t imagine doing anything else and feeling so good about it.

I’ve learned so much from Citysquares already. No matter where my career takes me in the short term or long term, I will always make sure that I’m involved in a socially responsible business.

I’m going way out on a limb here, and surely many of you may disagree with me, but I feel pretty strongly about this, as a serious consumer and as a serious business person running a startup that connects consumers with local merchants.

Greg Sterling posted an interesting piece on his blog today titled “Opportunity: Online Reputation Management.” I can’t debate the logic here and the basic point that it makes, but I think that the reality of user reviews and how they may or may not influence consumerism is much deeper than indicated. I also think that the user-review value proposition for small, local merchants is not a strong one.

Citysquares.com offers users with the ability to write reviews for local merchants. An interesting example of this is for a new coffee house in Central Square Cambridge, called Andala. It’s probably the best example you’ll get in any urbanized area of the typical small business just getting off the ground. They’re not a Citysquares.com customer (yet). I’ve been there, with my wife, and Chris has been there a few times. I really enjoyed my experience there, and I posted a review. Why? For two reasons: 1, because I truly enjoyed my experience so much, I found the atmosphere, the coffee (I’m a coffee fanatic), and the pastries and so forth very good and it reminded me of my visit to Beirut Lebanon a couple years ago. My wife also really enjoyed it. That experience was, on a scale of 1 to 10, a 9. That’s how strongly I felt about Andala so I posted a review, once I returned home. The second reason is because I want their business and I genuinely want to help them succeed.

Here’s the problem. I am founder and CEO of Citysquares.com, and for better or worse, I only post reviews for local businesses when I feel strongly compelled. I think I’m a typical consumer too – discerning, choosey, but reasonable. I believe that I am like the vast majority of consumers, of all ages.

Ask your friends, ask your family – how many of them add reviews for local businesses? How many of them make a choice to shop at local merchant A vs. local merchant B because of some stranger’s review? I think you’ll find the answer, as we have found, to be not too surprising – that it plays a very insignificant role in local consumerism. But let me stipulate one very significant factors: I’m speaking about local merchants – not products! I’ll get back to that in a moment.

Here’s what I’ve concluded about reviews for local merchants: For the most part, their nice to have, their moderately helpful for a small slice of the consumer market, but by and large, most consumers don’t find reviews of local businesses really all that relevant or meaningful. However, that whole reality gets flipped over on it’s head with one simple difference, and that difference is the almighty dollar. How much cheddar do I plan on spending? That’s the critical factor here.

Whether it’s for a local shoe store, pizza pie, a bar, or for the closest Bank of America, user reviews just don’t carry much weight with the typical, and more importantly, LOCAL consumer.

Now, let’s say I was going to take Ali out for a nice dinner, perhaps within a 30 minute radius of home, somewhere we’ve never been? I plan on dropping a little more loot, having a bottle of wine, in a quiet, romantic atmosphere. Suddenly what other people have to say means more to me. Even still, for me, unless the reviews are dramatically, and powerfully positive or negative, they don’t really impact my decision that much. I can’t think of any situation that user reviews would have a really big impact on my local shopping behavior. Ultimately, I’m looking for X, and I’m looking for it here.

Additionally, part of the fun I have shopping locally is having my own experience – not basing my decision on a stranger’s opinion. Ah, now that opens up a whole new topic doesn’t it – Trust. That’s where this is going? Well, not today.

Back to products. This is interesting because here’s where user reviews take front row – here’s where they take center stage. Product reviews!

Just this weekend I had to find a new boom microphone for my digital camcorder. I didn’t want the stock Canon boom mic, I wanted something else. But I read some reviews on CNET, and sure enough, I made my buying decision.

Take my BlackBerry Pearl for example – a huge jump for me. I went from being a long time and loyal Windows Mobile user to BlackBerry. Before I spent the moolah and made the jump, I wanted to know what others had to say – many many others. I wanted a big sampling of user reviews.

Take my Creative Zen, a new refigerator, humidifier, bicycle, pair of skis, golf club – you name it. I want to know what others have to say – really badly. I bought some new golf clubs this past summer – let me tell you – I probably spent 15 hours or so reading what others had to say about a wide variety of drivers and irons. I’m not exaggerating – just ask Ali, and my brother and father.

Ok, what’s the point here? The point is this: I think user reviews are important for every form of consumerism, whether products, services, local retail, you name it. But ultimately it’s all about the mighty dollar and the impact on me or others around me. How much money I’m going to spend, and how much that decision has an impact on me or others around me. High spend? High impact? Reviews matter. Low spend, low impact, reviews don’t matter.

So if I had a formula it would be:

Total Spend $
—————— = Relevance of user reviews
Total Impact
(distance, pleasure/pain)

That looks more impressive than it really is.

Amendment: Greg and I exchanged emails after he read this blog post and he reminded me of an interesting point that I forgot to address, and that is as follows: In our many many conversations with local merchants, be them in sales calls or for other reasons, local merchants are not terribly big fans of user reviews. They don’t want bad reviews written about them. Surely, they also need to understand that they have a job to do – and that’s to please every customer. Yet some customers simply can’t be pleased, and some use the Internet or a user review platform as a sort of anonymous soap box. Ultimately, user reviews will be a big part of local search and online advertising for the foreseeable future, and certainly that is true for Citysquares.com. But we respect the needs of the local merchants, and while we allow user reviews, we do need to take an editorial approach to them sometimes. Take Andala for example. The user jlobel actually used a word that we could not approve. We did not bar his review, we merely edited the word. If a local merchant believes we’re on their side, and trust us to take user reviews and that sort of content seriously, especially if they’re a paid advertiser, than everyone is happy.

Lastly, on Greg’s point about there being an opportunity for online reputation management for local merchant reviews, I totally agree. Whoever figures that out is one clever person!