Unlike most startups, Yext makes money. After launching in 2009, the New York-based company soon sacked an already lucrative pay-per-call and pay-per-action business to build its Power Listings product, which allows businesses to update and alter listings across multiple sites – among others, Super Pages, Yelp, City Search, Map Quest, and Yahoo Local — through a single portal. In July, Yext raised $10 Million in series D funding to power the new venture and has since amassed a massive customer base, onboarding over 40,000 paying subscribers in a little over a year after the launch. In December, the company updated its listings sync tool with new multi-media capabilities as well as new partnerships with a handful of hyperlocal publishers, including foursquare, EZLocal, and AOL’s Patch.
Street Fight caught up with the company’s CEO, Howard Lerman, to take a deep dive into the business of local information and to talk about which hyperlocal companies he sees coming out on top.
What has been the biggest story in the listings, and broader local information space since we last spoke in August?
One thing that we’ve seen is continued fragmentation. What I mean is that there is a movement by consumers to approach local discovery through a range of different kinds of apps and devices. Needless to say, mobile is constantly reinventing the local information space. In 2011, I believe, we’ve seen 30 percent year-over-year growth in mobile traffic, with even higher growth in certain verticals.
The debut of foursquare’s Explore feature for the web marked a big shift in the balance of power for local search. As companies increasingly hoard datasets, how do you see the basic name-address-phone number data fitting in to the mix?
I think there are two kinds of local content. What we deal with at Yext is the objective local content — namely, name, address, phone number, categories, and business hours. Users shouldn’t be able to vote on businesses contact information or rate businesses hours of operations. This is information for which the businesses themselves will be the authoritative voice. Objective information should be widely available to every search source and businesses should be in control of their own information. That’s our whole vision for the local information ecosystem.
The second type of local data is subjective stuff — ratings, reviews, and obviously users should be the ones generating that — and this is where most sites generate their unique angles.
For the more subjective local data, which companies do you see coming out on top?
What differentiate hyperlocal publishers like Yelp and foursquare are the communities developed around generating information and the user activity surrounding these features. As far as the next 6-8 months are concerned, Yelp and foursquare are in the best position to succeed because they have a unique angle and a real community.
There is so much crap out there that’s being sold, and it’s complicating the ecosystem. It’s extremely confusing for small businesses to differentiate what works and what’s not a good investment.
Many pundits have credited Groupon with bringing a vast amount of small and medium-size businesses (SMB) online. Have you seen a change in the attitude towards online marketing from the broader SMB population?
We’re actually seeing growing skepticism from SMB’s — maybe, more so then when we launched our business a few years ago. There is so much crap out there that’s being sold, and it’s complicating the ecosystem. It’s extremely confusing for small businesses to differentiate what works and what’s not a good investment. There are a lot of clueless middlemen and bad products out there, which are muddling the proposition and mystifying the experience for local merchants.
In building Power Listings, what pain points did you work around to ensure scalable SMB adoption?
With Power Listings, we focused on building a product that was sold self-serve, so a giant in-house sales force was not necessary. I believe Power Listings might be the only local marketing product that is sold completely self-serve. I think it’s a case of the simplicity of the product. For some of the more complicated local marketing tools, it would be much too difficult to sell online without a fairly large support staff. In understanding that we wanted a self-serve product, we intentionally built a product that could be sold with little to no explanation.
Last month, AT&T Interactive began selling its local ad space through Super Media, a fairly well established sales organization. Do you see the space segmenting in a similar manner as the credit card industry, with providers selling products through independent sales organizations (ISO)?
I think the ISOs have no chance. You need your own sales forces — it’s a huge strategic asset. Take a look at the companies that have been successful: they all have built and maintained an in-house sales force. And since many of the products are so similar, there is no real incentive for an ISO to push your product instead of someone else’s. Sure, it’s possible to build a successful business based off of an ISO but if we’re looking at a company with the scale of a Groupon, there’s no chance you get there without your own force. I guess it’s about your definition of success but I’m confident that we’re not going to see any companies IPO on the back of an ISO.
What will be the biggest story in the local marketing space over the next 6-8 months?
I think we’re going to see fairly intense consolidation. As the products become more complex, companies will need an in-house sales force to gain traction, which will make it increasingly difficult for new entrants to pop up. Working off that, we’re going to see even more deal sites close, and a couple of leaders emerge from the pact – we’ve obviously seen that start to happen. In addition to the deals space, consolidation will also start occurring around local marketing agency companies as well. The successful companies will be the ones that choose to focus on one thing, rather than the all-in-one approach.
The deals space is already experiencing pretty intense consolidation. Some believe that daily deals are going to be absorbed into the larger local advertising ecosystem, with a few big companies surviving as pure play providers. What’s your take on the future of the deals space?
The first thing you have to remember is that daily deals are a consumer product. Groupon and Living Social are consumer brands. It’s not an advertising product. It’s a consumer media property — more along the lines of a publishing effort than anything else. Fundamentally, it’s a product for consumers rather than an ad product sold to businesses.
Steven Jacobs is an associate editor at Street Fight