You Have How Much Traffic? BS!

OK. Here is the truth. As an analyst, you become quite the connoisseur of hockey stick graphs. “I do like the way the chartreuse in the bar chart plays off the light and complements your logo.” I heard that in a meeting once, seriously. Anyway, the sad fact is that the vast majority of these exponential growth graphs usually end up charting expenses not revenues or traffic. “Yes, I know. You’ll make it up in volume (because your volume goes to 11).” Not to be flippant, but you become accustomed to hearing outlandish claims, which is part of the fun, really. This is why when you come across something that ends up being true it is all the more worthwhile.

Last month (June), YellowBot.com, a Los Angeles based local directory start-up with four full-time FTEs, told me it had hit the million unique user mark. The claim is that it hit this without any advertising after about four months in operation. It’s worth repeating: One million users, all organic, in four months. Company reps showed me the Google Analytics report. Not to be outdone by this reporting ruse, I called comScore to see if it was tracking similar numbers.

“Zero in March, 325K in April, and 492K in May,” was comScore’s answer. June was the month YellowBot reported hitting the million user mark and those numbers had not come in yet. Internal logs and external third-party reporting never exactly match but these numbers are in what I would consider a reasonable margin of error – on a month-by-month comparison – trending similarly to YellowBot’s internal reports.

So, we’ll see this month but it looks like on the surface that this is real. Even from zero to half-a-million is pretty astounding without advertising. So what is happening here?

According to YellowBot, consumer retention went from 6 percent in April to 13 percent in June. The engineers focused on consumer product development. After building the tools for users to tag, rate, review and upload photographs of local businesses, YellowBot integrated more than 500K crawled reviews and other content in that same time period. YellowBot graphed the time series of ratings for each location and built a clever meter (in beta) that charts ratings over time so you can see whether an establishment is getting better, worse or staying the same – an interesting product feature.

All this begs the question, if a couple of albeit talented engineers can build a local search site, with reportedly low overhead and little capital, and in four months reach the million user threshold, what does that mean for all the rest of the local sites that employ a lot more people and have much higher cost structures? I certainly have my own thoughts, but to quote a YellowBot engineer: “The bar is being raised. Just being a simple local directory site is just not good enough anymore. It’s too easy and too cheap to replicate. Products are going to have to become a lot more robust to defend against new market entrants.”

This is the part of the story where the start-up usually veers into how it is going to put the Yellow Pages out of business. “Are you crazy?” The engineer asked. “Who is going to sell the advertisers?”