They may be a little less well-known than some of their Silicon Valley counterparts, but a number of location-based services and hyperlocal content sites of various stripes have popped up in the past few years across Europe. With venture capital purse strings a little tighter on the continent, startups there often have less of a runway than their U.S. counterparts, but more than a few in the LBS space are gaining traction.
Austria-based Tupalo — a locally focused user-generated reviews site — is now in eight European countries, and continues to expand. The service’s strategy has been to partner with legacy yellow pages providers and use their existing merchant relationships and infrastructure to introduce their product.
Street Fight caught up recently with Mike Borras, the company’s co-founder, who told us about what sets Tupalo’s model apart, and about some of the challenges that location-based startups face in establishing relationships with local merchants.
Tell me a little about where Tupalo came from.
We got started at the end of 2006, focusing on the Vienna metro area, which has around 1.8 million people living in the city. Vienna is a very vibrant, very young, city. However, it’s very remote from the rest of Europe — it’s not necessarily a part of larger Germany; it’s not a city that people are interested in, like London. We started to pay attention and noticed a heavy monopoly of the restaurant reviews here on the editorial side, and we wanted to democratize that.
We wanted to build a user-generated city guide, creating content purely around the local businesses and local commerce around the city. And after we received a little bit of support from the city of Vienna through a technological grant, we began solely focusing on ratings, reviews, and photos of local businesses. The goal was to bring passionate consumers a little bit closer to the local businesses that they’re extremely passionate about.
Is Tupalo similar to user-generated review apps like Yelp or Oink?
We very much view our product as being in the same space as Yelp. We focus extremely heavily on the consumer side around user-generated content about local businesses. That’s very similar to what Yelp is doing on the web as well as on mobile applications. We have a main differentiation on the back-end, on the business model side. We approach that from a very different direction than a traditional U.S. start-up.
In 2007, we were very focused on 100% consumer service. We were an online startup, so our plan was to try to compete with — and eventually overtake — the traditional Yellow Pages directory. But then we realized that we were a very small company, we were angel-funded, and developing a sales infrastructure and creating channels to business owners is an extremely difficult aspect of local.
Around 2007-2008, we started to get a lot of attention from European Yellow Pages publishers. It was a little bit of a surprise to us, but it seemed that certain, very large Yellow Pages publishers in Europe were starting to recognize that they needed to transform; they weren’t agile enough, they were not able to evolve as quickly as they would like. A lot of interest started coming our way in terms of taking the existing content from the local Europe Yellow Pages directories.
In 2009, we took a very small round of investment from a company specializing in European directories. They are based in London, and have eight market-leading positions in the Yellow Pages directories based around Europe — primarily in the tier-two countries like Austria, the Netherlands, Finland, Denmark, Sweden, Poland, Czech Republic, and Slovakia. Around the whole group, there’s around 750,000 customers existing in the sales portfolio. They have a sales team of about 3,500 people.
So, we started as a development-driven startup, but we looked at how difficult building those relationships are between a consumer-based service like ours and merchants. It’s extremely difficult for a small company like that to generate those relationships. What we did, basically, we worked out this partnership.
Are all the reviews user-generated or is some of it curated as well?
It’s all user-generated. We toyed in the past with working together with editorial sources and having expert reviews, which is something quite common on TripAdvisor and other types of services. But, up until today, it’s been purely user-generated.
For example, in Austria, where we reach about one million unique visits per month, we’ve built up the brand over the years, so many of the local businesses are now quite aware of it and are quite aware that discussions have started happening on the ground and on our service, but naturally they want to inject themselves into the conversation.
Through our Yellow Pages partner here in Austria, where they have in the area of 80 to 90 thousand customers around the whole country, and 300 sales staff, we’re able to then bundle our products into their sales portfolio. When a salesperson is going to one of their customers, they are able to offer Tupalo products as an additional products, whether it’s an upsale or whether it’s a pure Tupalo-focused sale, we’re able, through them, to reach out to the local business owners. I think they have a 92-94% market share here in Austria, which is quite massive for a Yellow Pages directory.
We were blown away at how slow many local businesses were at adopting newer technology.
What are some of the challenges that location-based services face in selling to local merchants?
I think what you have is a lot of extremely interesting new services coming out and focusing purely on the consumer side — but the market is a little more difficult than they expect.
We didn’t even visit our first customer until two and a half years after we started the company. And boy, when we visited our first customer, the amount of feedback and the information we got from them, we were really blown away because we were approaching things completely wrong. This was around 2009, and we were sitting in this gentleman’s salon and we were saying “these are our thoughts around what you need,” and it turned out we were completely wrong on every regard. The salon owner came back and started spouting off four or five different problems that he had which we didn’t even think of.
What are some of the trends that you’re finding among local merchants?
A few years ago, were very stark breakdowns between the different verticals, if you will. Coffee shops and certain types of restaurants were very focused on social media. We know Twitter and we know Facebook, but we would go to beauty salons and we would go and speak to plumbers and they were still wondering why they would need a website.
That sort of blew us away because everybody needed a website back in 1999, at least. We were blown away at how slow many local businesses were at adopting newer technology. Naturally, you have a much larger dataset in the U.S. — you have 17 million local businesses in the U.S., so there are a much larger percentage of them that are aware of services like Foursquare, Oink, and Yelp. Whereas, if you’re in Europe, in many of the markets there is probably… for every one business that is on Twitter, we have ten who didn’t have their own website yet.
This interview has been edited for length and clarity.