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Local Search Is Getting Interesting

We are seeing a great many “local search” companies seeking investment these past few weeks.  “Local search” in this context means companies that are using location-aware devices to find stuff – an appartment for rent, a person you know or would like to know, a deal on a cup of coffee or a slice of pizza, a decent doctor, etc.  As location-aware smart phones reach critical mass, all of the concepts we have been reading about for a decade regarding location-based services (LBS) are being tested for real, and the early results are quite promising.  Here are a few of the themes we are seeing:

1. Engagement is off-the-charts great.  Once a mobile app gets adopted and tested, users seem to be returning weekly at very high rates.
2. The fast growing ones are viral.  Yes, obvious.  But attracting new users is extremely hard – the search experience for mobile apps is completely broken.  When there is some social component to the experience, it goes viral, and that seems to be key to customer acquisition.
3. Monetization is still more theory than practice.  No company has sufficient critical mass to approach local advertisers – yet.  Local advertising revenue will come in a few years, but for now the game is about building a user base and using Freemium and Admob.
4. The companies are often growing one city/university/other locality at a time.  Get established in the home market, then branch out.
   

My POV, which is pure gut conjecture, is that we are about three years away from local advertising dollars finding their way to the important companies that have figured out how to scale, and that the bulk of the consolidation will be taking place in 2012-2015.