MerchantCircle vs. GYM

Garrett French has an extensive post comparing MerchantCircle and Yahoo! Local Listings (the free website product). He questions why I didn't get into a comparison of the two. The honest answer is I simply wasn't thinking about it. A related reason is that the Yahoo! free website product has fallen off my radar. While Yahoo! won't share numbers, the product doesn't seem to have made a meaningful impact or hasn't had ongoing, sustained adoption (as far as I can tell).

All of the big search sites now have free webhosting:

The new AOL offering through AIM Pages is the equivalent of a free SME website in my view (with a tracking phone number). However the company is emphasizing the MySpace-like consumer side of the offering.

Again, I can't yet speak about the Windows Live product. But I would say that the Yahoo! free site offering (assuming it hasn't been significantly upgraded since I initially looked at it) is quite limited in most respects and the setup is not as easy as it could be. The Google product is more flexible and generally easier to use. It also offers a better URL in that the user has some control over the "domain" (e.g., "http://greg.sterling.googlepages.com/home")

Google, Yahoo! and MSFT are really not emphasizing these free products, to say nothing about exploiting them to their full potential. (For example, Google could push Page Creator and use it as a channel to "educate" and upsell local businesses into AdWords or simplified versions of AdWords that the company is no doubt contemplating.) But Google is focused on a million things and probably not going to execute here. Also, Google, unlike Yahoo!, has nothing to sell (beyond AdWords) to the local business after they set up that free site.

(Long, long ago I argued that Google ought to buy a web host as a revenue stream/sales channel into the SME market.)

Generally, the free site is really seen as a throwaway or as a "foot in the door" for an upsell to more customized sites that cost money. I understand this rationale in Yahoo!'s case, given that the company is one of the largest, if not the largest, small business web host. If they made too "robust" a free offering it might start to cannibalize their site hosting business.

MerchantCircle has put together a nice and interesting mix of features and capabilities, with some viral elements to speed adoption among small businesses in the absence of a costly local sales channel. We'll see if it works to deliver the volume of SMEs they think they can get. The weaknesses for MerchantCircle chiefly surround reliance upon Google SEO for traffic. Many of the local businesses featured on MerchantCircle have websites and are using MerchantCircle as a marketing vehicle and/or CRM tool and blogging platform. But the "structured landing page" dimension of the site, as a substitute for a website, is going to be appealing to some "late adopting" SMEs.

I agree with Garrett that the range of tools and capabilities that MerchantCircle has brought together is more impressive than Yahoo!'s free website product (as a stand alone). And there may even be an eventual advantage over Yahoo!'s Local Listings ad products if MerchantCircle gets really "good" at SEO. (Most people still go to the main domain to do local searches [e.g., Yahoo.com].) But I don't think that MerchantCircle will eventually dominate Yahoo! or the yellow pages. The market is too fragmented and there are too many aggressive competitors. And Yahoo! has some things up its sleeve that haven't yet been released.

Web hosting is a commodity business and every host must now offer marketing services to be competitive. We're going to see more consolidation in this industry in the near term. If MerchantCircle can get to some threshold (50K? 100K? businesses) it will get bought. CEO Ben Smith probably wouldn't have a problem with that.

To put things in perspective, there are between 10 and 17 million small businesses (depending on the definition) in the US and yellow pages has 3.2 million advertisers. Yet it's the largest single SME marketing vehicle.

Google, Yahoo! and MSFT have brand strength (and potentially trust) vs. startups like MerchantCircle. Yellow pages have "feet on the street" (but so do local newspapers). MerchantCircle has the advantage over the big players of being very focused and not being distracted by a million other projects and initiatives. The market is big enough to support multiple competitors, but probably not all the competitors moving into Local right now.

MerchantCircle's game plan, I'm sure, is to ramp as quickly as possible and be acquired. Local itself, however, is a complex, long-term play.

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6 Responses to “MerchantCircle vs. GYM”

  1. Greg Says:

    Greg, you mention MerchantCircle’s viral nature and certainly that’s where their best hope lies. I am amazed at many otherwise savvy SMEs don’t bother to do the free info. inputs and updates on their Yahoo Local and Google Local Business Center results. SMEs are so bogged down that many won’t bother to actively go and do this even though most all get, to varying degrees, the importance of local search. But if a fellow business owner, local chamber of commerce, etc. does the equivelent of tapping them on the shoulder and saying, ‘hey, check out MerchantCirle, it could help both of us,’ then they’re pretty likley to give it a go. BTW, good luck with the new gig.

  2. Greg Sterling Says:

    Agree. Viral is more powerful that advertising. But as a “small business owner” myself now, I understand how bogged down and overworked they are. :)

    Getting their attention is more than half the battle. They all know they need online marketing, but where to go for that . . . ?

  3. Ben Says:

    We have a long way to go to show our value and change the industry. To start with, we have a new release to get out tommorrow. ;) So we don’t spend time thinking about exits or whatever, we think about getting to cash flow positive so we can invest in more product…

    Our goal is simple, we want to bring every small merchant online. Every small merchant from Mom and Daughter carpet cleaners who can’t afford the Yellow Pages, to the corner Pizza joint who is wasting money on an ad in a book that in a couple of years no one is going to open. We want to do it because it creates an enormous opportunity for Local Merchants to use their one advantage that Starbucks and Wal Mart, they are Local and they understand and value the Local Community. We don’t think about exit strategy (ok so maybe late at night- say 3am when we are trying to get to sleep), we think about getting to every local merchant from Soldotna to Fairhope.

  4. John Triano Says:

    Greg,

    Quite a few players offer free hosting such as http://www.sambiz.com/business services for Sam’s Club business members.And you are right, hosting has become a commodity with paid hosting as low as $2.95 a month in some cases.The “barrier to entry” with regard to hosting technology is so low that anyone can enter the game.
    The real money is in the value added products centered around local advertising products and search.
    I have heard from some call center contacts that 50% of their customers that they dial already have a website. So the problem is not the website, but how do they stand out locally and find customers.
    That is the direction that Innuity has taken with our LeadConnect product. Presently the space is not crowded.The window of opportunity is about 12-18 months for someone to really provide a solution that is affordable to small businesses and delivers the value proposition that moves the small business owner to utilize any solution ” in mass”.

  5. William Howell Says:

    Thes people are not easy to contact, no phone numbers, when clicking on comments/complaints there is no actuation. My information they are advertising is incorrect and they have not responded to my reply several days old now! Any suggestions? Bill

  6. KevinL. Says:

    Hey William,
    You can call me at 650-352-1335 ext. 515.
    thanks,
    Kevin
    Community Relations

Comments are closed.


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