On the Leading (Bleeding?) Edge With Verticals

The first day of the Kelsey Drilling Down on Local conference included a somewhat unusual panel with four entrepreneurs in verticals. They talked about the nuts and bolts of building truly local verticals. These vertical pioneers shared their war stories and loads of practical advice. Some of the commonalities to their experiences:

• They worked hard to get advertisers — against heavy odds, in most cases.
• All are now in a heavy growth mode.
• Their expansion tends to be “node by node” (market by market).
• They each took great pains to understand the business models and requirements of the SMBs in their vertical. Most of them have had to adjust THEIR model, as they’ve learned more about the needs of their SMB advertiser clients.

Their stories reminded us that being an entrepreneur is rarely glitz and glory. Real entrepreneurs have calluses and dirt under their fingernails. You could feel their pain, when they told about pounding the pavement and dragging some of these SMBs, practically kicking and screaming, into online advertising. It’s a long, arduous, time-consuming process (which may be monetized someday in the form of a handsome multiple of revenues paid by an acquirer like, say, Yahoo! — or not).

Summaries of the four presentations:

Mark Britton, CEO, Avvo

Avvo is a legal vertical, used by consumers to find attorneys. (The litigious-minded among us probably already have it bookmarked.)

The legal industry is a $225 billion industry in the U.S. The industry spends about $4.5 B annually on marketing. (In print Yellow Pages alone, attorneys spend about $1.3 billion annually, making this the largest single revenue category in print Yellow Pages.)

Avvo provides profiles and ratings for every lawyer in practice (in the states in which they operate). It obtains basic content from its Web crawlers. It also permits individual attorneys to upload information to embellish what is obtained by crawling.

One of its more clever approaches to obtaining content is this: It poses a typical legal question in the “Avvo Answers” section of the site, and several attorneys will post their answers. Of course, this is a “win-win-win” for Avvo, the responding attorney, and the consumer. Avvo gets free (and quality) content, the attorney gets “free” exposure (quasi-advertising), and the consumer gets his or her question answered.

“We’re tearing a page from Expedia’s playbook,” Britten said.

This is also the same thing that Zillow is doing: Going into a highly inefficient market where there is an inherent “asymmetry” of data between the service provider and the consumer, and creating a more level playing field by providing abundant, empirical data to the consumer.

Steve Cissel, CEO, 10-20 Media

Cissel is the CEO and founder Lawn & Garden Search (LGYP.com), a vertical for everything about lawns, gardening, landscaping, etc. He said LGYP.com is the first effective vertical in this space.

He pointed out that the lawn and garden vertical (which includes 11 categories in print Yellow Pages) is a $200 billion industry (total annual sales of products and services). It’s the only major vertical that hasn’t yet been really “Webified.” A key reason for this is the fragmentation of the lawn and garden industry. (Arguably, this fragmentation is driven by the inherent localization of the “raw material” for this industry — flora.)

Seth Gardenswartz, VP, SpaBoom (of BoomTime)

The day spa industry has about $10 billion in revenues. About one-third of its revenues come from gift certificates. SpaBoom makes it easy for spa owners to offer their own “private-label gift certificates” that they sell from their own Web sites.

Spas, of course, are a luxury, high-end business, with a high level of personal service. Perhaps because of this, spas “don’t give a damn about online.”

Through sheer tenacity and shoe leather (at least major change in its business model) SpaBoom has achieved about 12 percent penetration of day spas in the U.S.

It plans to take its format (gift certificates) to additional verticals as well. Gardenswartz announced that the next vertical it will enter is the restaurant vertical. It will be focusing on higher-end restaurants, where gift certificates are likely to resonate with the clientele. It is partnering with Zagat (which was announced today, at this conference).

Robert Johnsen, Director of Sales and Marketing, Mywedding.com

The wedding industry is about $66 billion this year. Mywedding.com is the No. 3 online wedding site. The company is 6 years old, and now has a total of 54 local wedding guides. Revenues were up 43 percent over last year.

It serves a variety of local SMBs related to weddings (florists, photographers, bakers, wedding planners, etc.). It took Mywedding.com about 3 years to build its current base of advertisers. On average, its advertisers spend about $600 on the site annually.

For couples typing the knot (let’s hope it isn’t a Gordian one), Mywedding.com provides a free wedding Web site to handle those oh-so-important details of the modern wedding.