Building a successful local website is hard and there are tough problems to overcome on the business and consumer fronts. I’ll focus on the consumer side in this post. If you’re interested in some of the local business related challenges, Dave Naffziger has a great post on the challenges of breaking even in the local space, that you should definitely check out.

As if there weren’t enough problems on the business side of the equation, the consumer side of building a local website is no cakewalk either. Some of the thornier issues center around content fragmentation and achieving critical mass. How do you make sure you have content and an audience in the geographies you care about?

Content Fragmentation

The range at which data and content are relevant is extremely variable. For someone in Manhattan, relevant may be 20 blocks whereas for someone in Anchorage, relevant may be 150 miles. Ensuring that you have fresh content in a given relevance radius is very hard. The empty database problem (no initial content in your whiz bang user generated local directory of self-cleaning public toilets) exists wherever you’re attempting to have a presence. Your choices are simple - you can aggregate content from multiple sources or you narrow your focus so you need fewer people in order to matter.

Content aggregation in local is complex because the sources are so fragmented. You have hundreds of local and regional websites, each with their own formats and data slices. It’s doable, but hard. Another problem arises here - that of business matching. If two websites are talking about a Starbuck’s in Seattle, are they really talking about the same business? This is not an intractable problem, but it’s not an easy one to get right. Too many duplicates, and you destroy the user experience that got you down this path in the first place. A related problem here is surfacing quality content. Given twenty pieces of information about one business, how do you choose which content to display above the fold?  

Achieving Critical Mass

If you’re building a local resource for people living anywhere in the USA, then you have to collect enough content and market to people in all 50 states, all at once. Again, this is doable, but it’s hard. It takes a lot of time and a lot of money - two resources which are typically constrained in most startups.

Based on our experience with Judy’s Book and looking at other companies in the local sector, I’ve come to believe that the best way to build critical mass (a high enough concentration of users in a given area to become ubiquitious) requires scaling city by city and engaging heavily in grass roots marketing. This is the model that Craigslist followed and that Yelp is following. It still takes time and money, but it’s easier to go national in stages rather than trying to do it all in one go. It’s far better to have 1000 active users in Boston, than it is to have 100 active users in the top 10 cities around the country.

Another approach is to use the portfolio strategy and acquire a variety of regional web properties. Local.com has gone down this path, as have most of the offline newspaper holding companies. Regional newspapers tend to have localized news gathering and distribution and are owned by central holding companies. It’s hard to build a national paper for the same reason that it’s hard to build a national web property that delivers local relevance. There are some great comments on this and related issues at Local Onliner, a great blog about local/online issues.

Local Still Matters a Lot (And always will)

It’s not all doom and gloom. Local matters a lot and although the problems outlined above are hard, they are solvable. In addition, consumers clearly care a great deal about where they live and there is a strong need to deliver accurate local information to online users. The key for a startup attacking the space is to narrow your focus, ideally to a city-category pair, that you can dominate. Once that’s done, moving to adjacent sectors and geographies becomes easier. This strategy is a slow and steady execution approach and may not work for venture backed companies that have a mandate to get big quickly.

There’s no free lunch but companies that can make headway will be highly rewarded.