Can Social Networks Address Local Business Owners' Needs?
If you're a small business owner with a limited marketing budget how do you compete online with no Internet presence. Even in the year 2010, there are still some local business operators that either for lack of funds, time or expertise who do not have a Web site. Can free social networking be the answer for these type of merchants?
LinkedIn has over 50 million members worldwide (at last count) and is one of the few social networks that addresses the issues of business people. However, its often used more as a resume-building platform for job-seekers than as a resource for small businesses. A small business operator might be able to find a few group forums to join on LinkedIn, but chances are there would be limited interaction from members in addressing specific business needs.
While Ning is an off-the-shelf-build-your-own social network, there would be an opportunity for niche small businesses to band together based on common products or services - for example, "plumbers," "carpet cleaners," "maid service," etc. However, even after Ning reached the one-million total network milestone just recently, the company recently lost Gina Bianchini, one of its co-founders and cut-back its staff by 40% due to lack of Google Adword sales off its 'freemium' sites.
"We are going to change our strategy to devote 100 percent of our resources to building the winning product to capture this big opportunity," Jason Rosenthal, COO stated in a memo. "We will phase out our free service. Existing free networks will have the opportunity to either convert to paying for premium services, or transition off of Ning."
In early April, the Insurance Newtworking News reported on a study that estimated that only 16% of small businesses in the US actually use social media sites to promote themselves. MerchantCircle, the nation's largest social network of local business owners thinks they can make that percentage grow significantly.
In interviewing Darren Waddell, vice president of marketing at MerchantCircle, he feels that small local firms without a Web site presence need a social network that "remove all the barriers that keeps merchants from promoting their businesses online." Since the majority of MerchantCircle's services are free and include email, online coupon creation and distribution and featured listings, local merchants with limited budgets don't need to invest money. "We've made publishing simple, too," notes Waddell, where local business owners can post blogs, articles, comments and forum questions on their social network.
In turn, consumers have a place to go to locate a merchant in their local area to satisfy their particular needs for product and/or service. "From a community standpoint," says Waddell, "MerchantCircle allows local business owners to connect with one another to share ideas about their community, their line of work and more general issues like hiring and getting small business loans."
While some have compared MC to Yelp or Citysearch, MerchantCircle's social network is a platform for the merchant, first and foremost. "MerchantCircle builds its site tools to give the business owners the means they need to market online," asserts Waddell. Both Yelp and Citysearch are very concentrated on the arts/entertainment sector in larger metropolitan cities, while MC services all business categories all over the country, and are especially strong in service-oriented categories like Home & Garden, Health & Beauty, or Professional/Personal Services.
On the consumer side, MC's "Answers" feature has just partnered with Answerbag.com to provide almost 100,000 expert answers to nearly 80,00 consumer inquiries. With a user base of 1.1 million, MC's 5-year goal is to create an online presence for 20+ million US small-to-medium size businesses.
As far as monetization, MerchantCircle drives revenue through three channels including ad revenue, partner revenue and marketing services including search engine marketing, standalone websites, and sponsored advertisements across MerchantCircle.com. While Yelp's and Citysearch's revenue model stimulates sales mainly through ad revenue via a sales team - MC has no sales team -- all product sales are self-provisioned. In the longer term - MC wants to convert 1 million merchants to paying online advertisers.
If MC's network continues to scale quickly, I am sure you will see others following suit in short order. As the early leader in this space, however, it appears their social networking platform does satisfy a good amount of the needs of a small business owners that work off small budgets and have limited access to new business practices and professional expertise. In short and long term, MerchantCircle just might be filling that void.
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