Backfence and Locals Hitting a Wall

During the few days that I was off, I (among others) received a note from Susan DeFife, now former CEO of Backfence:

I wanted to let you know that the management team (Amanda Graham, Bob Kelly) and I have left Backfence. We gained unique and valuable experience, evident in the success of Backfence sites. Ultimately, we did not share the same strategic vision for the company as the Board of Directors.

Several months ago Mark Potts, co-founder of Backfence left, with a similar sounding explanation.

Susan’s note cited a number of accomplishments of the management team:

During our time, the Backfence team:

· built 13 sites in three metropolitan areas

· engaged more than 10% of the people living in those communities on a monthly basis

· acquired registered users topping 2% of the total population in our mature communities,

· successfully proved the model of selling high CPM advertising by selling over 550 ads to local merchants and businesses since April of this year.

The departure, now, of both co-founders and the management team does not bode well for the future of Backfence in my view. I have no real insight here but I’m guessing that monetization might not have been ramping at the level the board might’ve liked and the site was at something of a crossroads around that issue.

A similar thing happened to InsiderPages, around which numerous rumors are now circulating. (Most of you have probably heard those rumors.) Here too there was a board-founder conflict that resulted in the departure of CEO Stu MacFarlane (mutual by both accounts).

And Judy’s Book is a related case. CEO Andy Sack (who’s still there) and his team themselves decided that it was too challenging to continue to try and sell ads to local businesses. Judy’s Book still has local content but monetization is now built around deals and coupons.

I told a reporter on Thursday that winning in local “is like climbing Mt. Everest.” We’re now seeing attrition (or something like it) in local because it’s much harder to monetize local consumer destinations with direct sales than people think when they start out. That’s not to say building a great consumer destination is easy, but in many respects that’s the easier part.

Local is such a tantalizing market because consumer demand is solid, most small businesses fulfill locally and nobody has truly nailed it (although the major sites are getting better). But success is elusive; it’s an enormously challenging and complex market.

Let’s be clear: all these sites that I mention above are still operating. But each, in its own way, hit something of “a wall” around the question of monetization (I’m entirely speculating in the case of Backfence). All this raises the question of whether independent players can succeed in local (short of something like Wikipedia or Craiglist). Of course Angie’s List and Yelp are still going strong and trying to expand into new markets and grow ad sales in house. And there are numerous local sites that are vertically focused (e.g., Zillow) that appear to be doing well.

Local is really about getting good data (including from users) and getting to scale in a cost effective way, recognizing that building a successful brand in local and the usage and monetization that implies takes not only the right vision, but tremendous persistence and lots of patience.

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Subsequent to writing this I saw that PaidContent is reporting (based on a Local Onliner post) Mark Potts has returned to Backfence as interim CEO and there have been layoffs (“12 of its 18 employees have been let go”).

Update: Susan DeFife in an email corrected my speculation. She said that differences over monetization were not the issue between her team and the board.

5 Responses to “Backfence and Locals Hitting a Wall”

  1. howardowens.com: media blog » Blog Archive » Shake up at Backfence and what it means for hyperlocal citJ Says:

    […] More from Greg Sterling. Local is really about getting good data (including from users) and getting to scale in a cost […]

  2. A back fence around a ghost town » Mathew Ingram: mathewingram.com/work Says:

    […] written about the recent news, as have the gang over at PaidContent. Greg Sterling at Screenwerk says that winning with a locally-focused website is “like climbing Mount Everest.” Technorati […]

  3. earlpearl Says:

    As a DC area business we looked at advertising at backfence and thought the rate quotes were way high. Franly, it wasn’t the prime local venue for us…which made the rate quotes even higher. While placing 550 ads–how many advertisers did they approach and what were the results. If they approached 700 advertisers that is fantastic. If they approached 30,000 advertisers that is dismal. But alas…that is internal information that we won’t see.

    Dave

  4. Backfence and Setting the Record Straight « Screenwerk Says:

    […] Potts and DeFife previously told me via email that my speculation about the site and its challenges was […]

  5. Local Search Sites and the Constant Whining - Tech Soapbox Says:

    […] and Judy’s Book) have gotten a lot of attention. With them (and ultra-niche sites like BackFence) laying off people left and right, the trumpet has started to sound. Local search does not […]

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