There’s a New ‘Local’ Industry in the Making

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jjjWith 2013 nearly in the bag, I wanted to take a moment to look back at some of the big ideas that shaped the local technology market this year. The industry continued to outgrow its legacy media foundation as new technologies forced innovators and incumbents alike to think critically about the services they provide and the means through which they make money.

Call it local media, marketing, or commerce — but the existing terminology and classifications used to describe the “local” industry simply do not fit anymore. It’s square pegs in round holes. It’s taxi apps and targeted ads, local search and point-of-sale, media and software — all working together within the same fold.

The making of a marketplace
What emerged in 2013 is a community of technology companies organized around the idea of creating a better, more connected, local marketplace. These companies are bringing the efficiencies and intelligence enabled by the web to real-world markets — everything from the shopping centers and strip malls to the farm stands and food trucks where consumers in the U.S. spend 90 percent of their income. The firms that will succeed will position their businesses amid a much broader back-and-forth between supply and demand, with an explicit focus on helping businesses and consumers exchange goods and services more efficiently in the real world.

Consider Uber, the taxi-hailing app that catapulted from a darling of the tech industry to a mainstream sensation in 2013. Via a mobile app, the company has vastly improved the way taxi riders and taxi drivers — two very local constituencies — buy and sell personal transportation services, and in doing so, has undercut a dysfunctional and largely parochial cab industry built largely around the telephone.

The big question for 2014 is which industry will technology “Uber-ized” next. Uber CEO Travis Kalanick hinted repeatedly throughout the fall that the company may move into other verticals, and that should be a big story in 2014. But we’ve already seen a rush of new companies sprout up with the intention of building marketplaces for local services — some of which grew, while others, like ReachLocal’s ClubLocal product, petered out in 2013. Keep a close eye on Homejoy, the service marketplace startup that raised a big $38 million round in the fall.

Soup and nuts served separately 
But the soup-to-nuts marketplaces like Uber will likely become more of the exception than the rule. The model should work in a handful of industries — namely, those that fit a certain combination of criteria — but it’s going to be tough for one company to own the entire shopping experience in more complex industries like retail. Instead, what’s started to emerge is a stack of interdependent services, each of which manages one element, or layer, in local shopping experience.

One by one, technology firms have recreated or reinvented various layers of the local shopping experience, disrupting industries and opening doors for new ones to emerge. The transformation began in search, but over the past year (and earlier) startups have started to rethink the way we buy and retrieve these goods and services as well as the way businesses reward, and retain, past customers.

The lesson here is that building an effective local shopping experience will be an exercise in coordination. In July, Yelp took an extremely important step forward, rolling out the a handful of integrations with delivery companies as part of Yelp Platform. The new business development initiative keeps the reviews firm squarely in the discovery layer, while opening the door for the company to work with a deluge of other firms that offer commerce functionality for local businesses.

Software eats the back-office. Marketing is next.
If there’s a lasting legacy of 2013, it’s that small and medium-sized businesses have become viable consumers of enterprise (by enterprise, I mean business operations as a whole) software. The emergence of reliable cloud computing infrastructures and increasingly affordable mobile hardware, has not only allowed companies like Square to bring software to previously unserved segments (mobile services, very small businesses, et cetera), but also has opened up the mid-level markets where legacy firms have dominated for decades to disruption.

The upheaval is ushering in a new dynamic, not only in operations but in local marketing as well, opening the door for a software-centric approach to local marketing. By bringing together these emerging operations technologies and existing consumer software (e.g. local search and discovery), marketers will be able to automate the way in which businesses and consumers interact, driving down costs and expanding capabilities.

There’s a massive opportunity in automating planning and creative decisions based on real-time business data, creating new ways for businesses to leverage the existing technology at a fraction of the cost. Vendors can simply plug into an existing data stream generated by the operations software and use algorithms to programmatically produce creative and execute campaigns.

Over the past decade, we’ve watched as the local marketing and media industry has been reshaped by the web. But this disruption is a leading indicator – a tremor – of a much more profound transformation in the way real-world markets operate.  The industry as a whole needs to think less about “Marketing” and more about market-ing — the art and science of facilitating commerce.

Steven Jacobs is Street Fight’s deputy editor.