The biggest occupational trend in the restructuring of the economy has been the newly minted entrepreneur. The media regales us with stories about the new startup incubators like Y Combinator, and the success stories of their progeny. All roads to developing a new business point to leveraging the Internet with some sort of social, commercial or mobile business model.

All new entrepreneurs face five hurdles in developing a new online business:

1. Business model. The first step is the hardest. You need to fix a problem, and it’s best to leverage your previous work experience to identify the problem and craft a solution.
2. Programming – what does the app look like and do? The second step is just as daunting as the first.
3. Creating the simple business plan and timeline. The faster to execution, the better.
4. Funding. How to bootstrap this? You won’t likely have a network set up to reach VCs and other institutional investors, but crowdfunding may be viable.
5. Go to market strategy. Execution of course is the most critical step to success.

1. Business model: Identifying the problem.

1. First timers should start local. It’s easier to build traction when focused on a small arena.
2. Building a service is easier than a product (but remember, VCs and investors generally shy away from service businesses because they are hard to scale). The most alluring aspect of building an online product like Instagram or Pinterest, is the potential to explode. Unless you have access to programming or funding, don’t try building a product. One exception is to clone a product idea for the local market using third party services that provide “plug and play” white label templates, like Chompon for building Daily Deals businesses.
3. Use your local network and past experience. For example, there is now a huge window of opportunity to help local businesses develop social marketing expertise on a turnkey basis. If you have established a local network, you can build this service business like Apsides Media Group and Socially Now by partnering with turnkey social media solutions providers. (Note: we help to build these kinds of businesses).

2. Programming

1. Chances are the new entrepreneur has no experience on the Internet beyond buying stuff at Amazon. Hiring a programmer is a major challenge because you don’t know how to create a spec, and it’s impossible to tell if the programmer is good and the price is right. The best way to build the web service is to teach yourself WordPress or use Tumblr to create a simple model of what you want. That’s your homework. I believe building the web service prototype yourself is important to understand how it will enable the business model.
2. The prototype can look clunky. It needs to reflect the business model, and you need to confirm with your peers and potential users/customers whether there is demand for your service. Iterate until it makes sense. Pivot if you’re going down the wrong track.

3. Create a simple business plan

1. The days of a 100-page business plan are over, unless you are the type who likes to do this. Business plans can be conceptually templated by taking hot or successful business models and applying them to new industries, geographies or service sectors. “Shared economy” or “collaborative consumption” business models are 2012′s buzz and can be implemented at a local level because most sharing requires physical proximity. Here’s a list of startups in this space. For example, if you know the hardware business, you could set up a city tool sharing model similar to Toolspinner.com.
2. One more great resource for new business models: The Unhyped New Areas in Internet and Mobile

5. Go to market strategy

1. Before launch, the web service will likely need some professional app development to make the user interface credible. It’s quite possible to continue to use WordPress, especially if you’re flexible to pivoting and plan to change messaging occasionally. By this stage, you should have developed a business plan that can potentially attract a team, including partners or co-founders who can help with technical development.
2. Your goal should be to prove that the business model is viable for a community. The execution stage is obviously critical, and in the next articles, we’ll look at various go to market strategies.

The new shared economy being ushered in by startups like Airbnb, Relayrides and Toolspinner is creating new marketplaces where locals can rent their own rooms, cars and tools to their neighbors. Coined “collaborative consumption“, this new trend enables the efficient consumer sharing of resources and goods that are used on occasion as an alternative to outright ownership and the garage clutter this creates.

What is Collaborative Consumption?

The first phase of the collaborative consumption business model started with B2C (Business to Consumer) companies like Netflix and Zipcars that consolidated inventories of DVDs and cars, respectively, to rent out at lower rates than local video stores and Hertz. The second and current phase introduces the new communal sharing or P2P (peer to peer) business model that leverages inventory owned by consumers (rooms for rent, cars, tools, expertise, time) to create match-based marketplaces. P2P transactions can be executed virtually like eBay where goods are transferred via mail, but the bigger implication of P2P for hyperlocal is in the rise of local social graphs where neighbors trade with and refer each other.

Consumers now have more options to rent over purchase, and this dampens retail demand. There’s literally no need to purchase a chain saw unless you’re a landscaper. Obviously, brands and retailers lose when their products are rented out or sold in the second hand market because they make no money. Yet, in the face of the shared economy, many local retailers will need to recoup lower sales volume by opening inventory to rental, just like Hertz on Demand and BMW’s Drive Now were created to counter the Zipcars concept. Adapting to radically new business models like rental will be traumatic for brands and retailers alike , and will present an opportunity for retail consultants versed in social media and social change who can connect consumers directly to these new rental businesses.

The Role of Hyperlocal Media in Collaborative Consumption

The big hurdle facing collaboration consumption startups is developing local traction. Main Street has never heard of Zaarly or Taskrabbit, and startups don’t have on-the-ground resources to educate consumers and brand in more than one market at a time. Hyperlocal media can take on the role of educating consumers; it can publish directories for consumers of the literally hundreds of services that are chasing niches ranging from dog-sitting to bike rental. Even better, media or tech companies might create aggregate sharing services center for their community in the same way daily deals aggregators filter deals sourced from hundreds of sites. And yes, there already is de facto local aggregation platform – it’s Craigslist, but its clunky user interface is inefficient and its user base has no credibility rating system.

Hyperlocal media should encourage collaborative consumption because it brings consumers, their neighbors and businesses into value laden conversations as they negotiate the errands of daily life. Media values this participation. However, there are two business reasons why traditional media companies may not immediately embrace collaborative consumption. The model won’t make them money unless they run their own shared services platform. It also threatens local advertising revenue from retailers faced with lower sales and pressure to reallocate marketing budgets to social marketing.

Last week at Inman Connect, a real estate technology conference, Jeff Jarvis discusses two ideas we believe in:

1) Real estate professionals can leverage their networks to become hyperlocal media resources. And by doing so, they benefit from building the community networks they need to source referrals for their real estate business.

2) Real estate professionals should be thinking beyond what used to be the work of real estate sales. As the industry changes and makes real estate a much tougher career, Jeff suggests that Realtors, as hubs of the community, can build new local businesses, like social media marketing, based on the work they do with their community.

Here are six trends in 2012 that will impact hyperlocal media and business models. This was originally published at Street Fight last week.

1. Cross platform conversations

Livefyre and Disqus show glimpses of how conversations can move from Facebook and Twitter to online media and blog commentary. Local conversations happening on social media, especially Facebook, simply aren’t crossing over onto local media. Note the interaction on a city community page like San Francisco; it’s huge, but random in topic.

The big opportunity is to organize local conversations that are now happening on, say, the community page above, into topics like sports, culture, movies, things to do, business, family, etc. In 2012, cross platform systems that facilitate community engagement across all social media along these topics will develop. The current best example of local topical engagement is sports media like SBNation and Bleacher Report that encourage sports blogging and fan interaction at the local team level.

2. Influence peddling at a local level

The advent of Klout and other new forms of social influence tabulation mirrors the slow power shift of media influence from traditional to social channels. Anybody with a voice can build a following, and the new business models evolving around influence metrics allow businesses to reward influencers with the hopes of converting them into advocates.

On a national level, social influence has naturally followed the celebrities; Britney, basketball players and Obama come to mind. On a local level, social influence is still up for grabs. Many sports bloggers became part of the SBNation empire simply by being bloggers for their local team. The implied business model is local influencers will attract rewarding opportunities, whether it’s in the form of a media job or simply a perk from a local business wanting to engage them.

The recognition of consumer generated revenue opportunities

A candid consumer recommendation, or a compilation of great Yelp reviews, is far more credible for a business than an advertisement. Local businesses will be able mine and filter local conversations across the social media, and participate in social marketing their services to elicit favorable reactions and revenue opportunities. For example, high school and college students often use Facebook to set Friday night plans. The most influential of them will move crowds, and local businesses, like pizza restaurants and movie theaters, will build relationships with influencers using rewards, loyalty programs, or simply a friendly dialogue.

example: using Needium to create business building dialogue

Startups are developing to provide localized services to filter, monitor and engage consumers on behalf of small business. For example, Needium monitors Twitter for specific keywords and phrases such as “looking for a lunch spot in Union Square”, that signal consumer demand for their local business client, and then converses with Tweeters on behalf of their client. They are basically building a personalized geolocated mobile response system for local marketing.

Local brands move to app development

The rapid adoption to mobile platforms impels brands like Walgreens and Starbucks to create apps specific to the needs of their mobile consumer. Local brands are headed down the same path. Yes, being on Yelp, Foursquare and Google Places provides social visibility but it limits the consumer interaction to just a check-in deal. A local merchant should have its own app complete with loyalty program, special deals, inventory search and topical information that its customers need. Building a mobile app is still beyond the pale of 99.9% of local merchants, and it’s surprising I haven’t seen a startup financed to create turnkey mobile apps for small business.

Emergence of the local social media marketing agencies

The dearth of startups serving local business with mobile app development is indicative of a larger hole to fill: there are still few turnkey social marketing agencies serving the over 4 million small businesses in America. Local business needs turnkey solutions because the resources required to learn, implement and execute a comprehensive social marketing are daunting. 2012 will bring scalable turnkey service companies like Main Street Hub devoted to managing local social marketing for SMBs.

The New Role for Bricks and Mortar

Retailers can’t escape the impact of Amazon Price Checker and Groupon on their business. In-store price checking and daily deals threaten customer retention and profit margins respectively, and they certainly aren’t going away. So how will bricks and mortar remain relevant to, and more importantly, build loyalty from local consumers?

Before social media, the decision to visit a local business was based on personal need. Now, more decisions are based on serendipitous search for things to do, what to eat, where their friends are, and special deals. Bricks and mortar can position themselves to be destinations simply by making sure they are visible, preferably with attractive offers sprinkled here and there, in all the media consumer use to find them. They remain relevant because there are potentially more tangible reasons for people to go out! Foursquare and Yelp check-ins, events planning services like Meetup and Plancast, and mobile location services will be the currency that supplements local traffic to business.

Twylah is a service that aggregates a Twitter feed and compiles the articles they link into a Flipboard like display.   Many reviewers have explained the mechanics of Twylah in far more detail than I can:

• Robert Scoble: “Twylah lets media brands and celebrities monetize their Twitter stream”
• Neal Schaffer: “Twitter SEO? Think Twylah“

We’ve been working together with Eric Kim, CEO, and Twylah to create “breaking news” Twylah pages for the Twitter feeds across our 300+ city Breaking News Network. These Twylah rendered pages are subdomains of our Breaking News cities, and can be viewed on many of our Breaking News cities by including the subdomain title “news” preceding the Breaking News URL, such as news.breakingsfnews.com.

The current iteration of Twylah pages sit separately from our Breaking News websites and don’t have a direct link to the website itself, only the Twitter feed. We’ve been waiting for Twylah to unveil their embed system so we can embed the page directly to the site itself. Thus, all of these subdomain pages are completely hidden, findable right now only through search engines.

So our experiment simply measures how Twylah performs to drive search engine traffic based on breaking news to hidden Twylah pages. Here are the results:

Approaching 900 uniques per day

Number of Google indexes over span of 3 months for selected news sites:

CONCLUSIONS:

1. It’s well documented that Twitter has become the leading social media for broadcasting “breaking news” nationally and locally. People constantly search for breaking news about a city. Twylah’s service allows breaking news tweets to be indexed and discoverable persistently, not forgotten as most tweets are (according to bit.ly, the average half life of a link on Twitter is 2.8 hours). Simply put, Twylah delivers organic traffic from sets of older tweets even when the pages it directs to are hidden (and therefore not discoverable by any other means).
2. Twylah automatically facilitates conversations around brands. Through Twitter, we can curate the key influencers associated with a brand and, through Twylah, deliver their commentary to an audience who wants this information in a coherent published format. For example, a well curated Twylah page can deliver real time information about specific movie openings by aggregating content from the media, arts and events publishers on Twitter whose use Twitter to monitor movies. Moreover, on the Breaking News Network, every city already has a set of curated local influencers across a variety of topics, so it’s possible now to develop hyperlocal Twylah channels devoted to movies, the arts, sports, or any other topic. This approach to hyperlocal branding is still in its infancy, and we’ll be focusing on this subject extensively over the next few articles.
3. Twylah, via Twitter, delivers a broadcast solution to brands that other social networks can’t. Eric Kim states: “We are targeting Twitter publishers (brands and personal brands), who consistently create and curate valuable content on any topic.” This type of “broadcast” branding is where Twitter excels over Facebook, which seems to moving towards developing its news feeds favoring personal transparency over commercial branding. It is especially powerful for delivering ticker tapes of breaking news and media feeds that wouldn’t be as effectively distributed across platforms like Facebook where such news might be perceived as excessive.

Journalists continue to search for a viable business model that supports online hyperlocal publications, but they won’t ever reach the threshold of revenues to maintain operations if they rely solely on traditional advertising fees from local merchants. That doesn’t mean local advertising is also poised to fall off a cliff. On the contrary, BIA/Kelsey states the prospects for online local advertising will double by 2015, but much of that growth will come from new mobile applications and daily deals category vendors. Here are five reasons why hyperlocal news faces hurdles to profitability:

1) Hyperlocal audiences are too granular to support traditional revenue models. Local banner ads aren’t economically viable. Traffic to online hyperlocal publications is inherently small due to geography, and total ad revenue based on CPM (cost per thousand views) won’t even cover the costs of the ad sales force.

Report on AOL’s hyperlocal network Patch.com’s traffic sourced from Business Insider “Leaked Reports on Patch traffic”

Article comment:

Chris L on Jun 24, 1:18 PM said:

If their page views really are only 783K for a month in So Cal, that translates to less than $5K in revenue for a month. I doubt they can build a sustainable business on that. Revenue = (783,000/1000)*3*$2 Assumptions: $2 CPM (generous) and 3 ad slots per page.

2. Local advertising alternatives are proliferating. Newspapers lost their classifieds revenue to Craigslist. The growing number of pay for performance business models including paid search, daily deals and the new mobile ad applications are cannibalizing media spending. Advertising options will continue to expand for local merchants, leaving a smaller piece of the pie to hyperlocal news.

3. Hyperlocal media resources are proliferating. Traditional media has relegated the business community to being simply the “advertisers” and not involving them in content sourcing. Yet on the local social media, many committed bloggers are the business owners who want to discuss their industry and community, and by extension market themselves. Traditional media needs to incorporate the business community as journalistic partners instead of trying to sell to them all the time.

New community service business models are developing that focus on engaging the community around local news and providing free advertising to businesses, adding further pressure on traditional ad sales. Facebook and other social networks may also evolve into hyperlocal community platforms that center on community sourced and shared news. In sum, hyperlocal news resources will proliferate as alternatives to traditional local media, simply because it’s easier to build these properties now.

4.  Local merchants are learning how to self market using the social media. Roost reports merchants believing it is four times more effective than paid search. Those merchants that can’t do it will be taught or be serviced by local social media / ad agencies, or even the traditional media publishers themselves. Gannett wisely set up GannettLocal.com to engage with local businesses as their social media marketing educator and partner.

5. There is a visible example of an unworkable local media model. Patch.com, AOL’s effort to build a hyperlocal news network from scratch even when local news revenues were falling, demonstrates and even confirms the high hurdles in building a profitable local ad model.

After a year and $150 million, Patch doesn’t seem to be gaining the revenue traction it needs to warrant further investment, and AOL is working with investment bankers on restructuring. The Patch exercise may shut the door on the idea of building a scalable hyperlocal network based on paid content.

My article “Hyperlocal as Community Service Media” on Streetfight discusses why building local media resources to serve the community makes sense. Creating local media is no longer the province of media companies, curation and aggregation tools make it easy for anybody to develop a simple local media resource that maintains itself 24×7. The disruptive concept behind “community service” media is to scrap the classic advertising business model. Why? Simply for the good will of the community. Business owners, not relegated to being the target of ad salespeople, can now contribute local content topical to their business. Publishers of this new local media can provide access and guidance to any contributor in the community, and make sure that this access does not veer into spam.

I believe the pool of local advertising revenue will continue to slide because more local merchants will realize they can control their brand distribution via social media, and cut their ad buys. Real estate agents, once the cash cow of local classifieds, have cut back drastically because they are learning social media marketing, one of the crazes of current brokerage training. The real estate industry, with its intense focus on community marketing, tends to be the bellwether for local marketing practices.

Free local advertising also puts pressure on traditional local publishers’ fee structures. The comments on the Street Fight article demonstrate how foreign the community service concept is to local publishers who rely on ad revenue, and can’t imagine otherwise. What they miss is hyperlocal media does not necessarily need a traditional business model to thrive as long as the community is engaging in it. There are benefits to providing good will to the community.

The classic, and perhaps only business model supporting hyperlocal journalistic efforts like Patch.com and other local media is local advertising. On StreetFightMag.com last week, Ted Mann, Digital Development Director for Gannett NJ, discusses why Gannett’s hyperlocal experiment InJersey.com failed. The main and obvious reason is simply local advertising cannot adequately cover expenses. So…

What if local media were positioned as a community service without the advertising model?

Can hyperlocal media thrive and engage the community as a good will service?

1. The value of hyperlocal is in the information

I paraphrase from Alex Salkever’s June 24 article Hyperlocal’s Automated Future. The website platform and curation tools now exist for any individual or business to develop local media cheaply. A WordPress blog is an easily customized platform for anchoring the news system. Curation and aggregation tools, plus hyperlocal social applications like See Click Fix can provide a panoply of local interest content.

Although still an immature technology, an automated news aggregation and publication service like paper.li or Twylah can be embedded to display in newsprint “Flipboard” format.

2. It’s not just the website… hyperlocal spans across social and mobile media

A community media service must now span across all social media for hyperlocal engagement. Twitter, a perfect media for broadcasting real time local news, can be used to curate the best local Twitter feeds into lists.

Facebook is becoming the arena where the locals will gather to discuss local news, events, even the Daily Deals around town. (Ted Mann’s point #9 – use Facebook as the local watering hole). The social “metrics” for engagement are high for local news:

3. Partner with everyone

Ted Mann’s #4 recommendation for developing hyperlocal content. Companies developing applications serving hyperlocal audiences, like SeeClickFix above, want to partner with local publishers to gain traction. Local publishers want to partner with new application developers to deliver unique local content to their audience. It’s mutually beneficial to overlay new social content, even social commerce applications across national hyperlocal networks. Even better if there is a business model associated with the application for revenue share opportunities between publisher and application provider. One long term mission of a national community service network is to create exposure for a variety of social hyperlocal applications that would not normally get exposure from traditional media.

4. Support the business community

Local businesses are integral to engaging the community because they have the commercial incentive to create content that helps to publicize their business, directly or indirectly. Local food critics own restaurants, real estate columnists are Realtors. Yet, the classic advertising model forces them on the sidelines because that kind of publicity has tangible dollar value that traditional publishers need to extract. So why not support the business community by embedding the most compelling websites and blogs of local merchants into hyperlocal media as content free of charge?

A full website presence has far greater utility for the featured businesses and for the reader than a tiny banner ad selling at $500-1,000 per month. Engage the business community, and they will make the effort to engage locals because 1) it’s free to them, and 2) it’s their marketing vehicle.

5. What is the business model anyway?

Hyperlocal media systems like Breaking News are easy and cheap (often less than the cost of a one-month banner ad) to develop for individuals and groups wanting to create a community media presence in their city. The business model for the owner is not to make money, but to serve the community and be positioned as a local media star in order to enhance the business development prospects of their “day job”.  It’s the same rationale for serving as a Chamber of Commerce president, or even 50 years ago, starting your own local newspaper; it just helps your career. The owner of the community media service pays it forward.

6. What is the impact of hyperlocal media as community service?

The greater impact of the community media service model may be disruptive. The perpetual discussions revolving around how to monetize local journalism have yet to point to a cashflow positive solution. An automated media model that requires few resources and supports the local business community can put pressure on traditional local publishing models. Yes, the content is curated, aggregated and automated, but it’s real time local information that readers want. In time, the new social local applications now being developed can be easily added to supplement the information stream and generate the local engagement needed to survive, even prosper within the hyperlocal media landscape.

Reference:

Airbnb, according to Techcrunch and others, is planning a mega-round raise at a $1 billion+ valuation, and validated social travel in one swoop. It redefines what a “hotel room” is, even one year ago the only viable short term rental space for the masses. Airbnb allows anybody to rent out living space – a refurbished basement, an in-law, or even a guest room – and relies on a social reputation system of references, reviews and personal connections to ensure both renter and host are reliable and trustworthy. It opens up a brand new segment of the hospitality industry that will inevitably grow and expand the supply of short term (and eventually long term) rental inventory.

Before Airbnb, the owner of a rentable space could realistically only offer monthly leases, and deal with the contractual legalities and problems of landlord tenant issues that may come with it. Airbnb creates a branded exchange for property rental that solves the arduous process of finding reliable tenants, up to now the province of Craigslist and classifieds. Now rental can be accomplished piecemeal, almost always at a better daily rate than what could potentially be received from monthly tenancy. Rental inventory increases because any space, even a guest room in an apartment, can become a virtual hotel room.

AirBnB opens up revenue opportunities for commercial property owners/managers that have rentable property but up to now did not have the distribution opportunities of an exchange to attract short term tenancy. Vacant properties and developments in overbuilt tourist areas in, say, Florida and California can be converted to rental property, even ad hoc bed and breakfasts quickly. For example, I’ve proven that I can easily rent out my previously difficult to rent no-kitchen in-law space in San Francisco for $70 per night, for potential monthly revenues of $2,000. At $70, it’s half the price of a three-star hotel room, and next to Golden Gate Park, where there are few hotels. This changes “cap rates” by augmenting revenue streams, particularly in cities and areas with high tourist or traveler demand, like resorts and college towns. Property managers can source more revenue for their clients simply by managing rental inventory on Airbnb, and charging commissions to do so. Expect new affiliate businesses – property management applications, Airbnb profile designers, local cleaning and other hospitality services – to serve a new virtual hotel room industry.

Finally, Airbnb socializes travel. The attraction and comfort of staying in the homes of friends and acquaintances becomes easier to accomplish when applied across Facebook’s social graph. Last month, Airbnb introduced Social Connections, a social discovery application that basically identifies friends of friends for rental and home stay. Airbnb is an aiming for the tipping point of adoption when travelers, both business and pleasure, can find like-minded people through their social networks at every “port of call”.

Related:  Quora – is Airbnb’s valuation ridiculous?

Through one of my new favorite “social discovery” services LetsLunch.com, I had the pleasure of lunch with Sarah Lacy. She brought me her latest book Brilliant Crazy Cocky, a tome to the universal entrepreneurial spirit in six countries she surveyed last year. I read most of it over the weekend (and recommend it highly).

One point Sarah made at lunch (and I’ve always wanted to hear) is the inherent contradiction that startup incubators weren’t the best places for entrepreneurial companies, and therefore, entrepreneurs themselves. The most overt supporting evidence is that even the most visible incubators haven’t launched billion dollar companies. The assumption Sarah makes, and chronicles in her book, is entrepreneurs thrive best in the “wild” where they work within distinct, even foreboding parameters, financial and institutional, that require creative thinking and networking to reach next levels.

Incubators provide a nominal financial safety net and prescribe a blanket strategic system for building a startup, and this fosters a kind of groupthink. For example, ever been to a tech conference like Web 2.0 and baffled by how little you learn listening to tech pundits who haven’t applied their practices to a real business? I learn more from real estate technology conferences about how to implement practical solutions. Incubators tend to be run (and overrun) by younger technophiles, and there may be a gap between the products they build and the users they serve because the institutional connections to the real world business or industry may be lacking. In earlier eras, MBA programs have been criticized for inculcating academic business cultures to 20-somethings that were similarly pragmatic only to the point of getting into McKinsey or Goldman.

And now we see similar arguments about how college education is overpriced based on the perceived return of investment on the cachet of an Ivy League degree versus the real life return. Over the weekend, Sarah discusses how Peter Thiel believes college education has become overvalued due to the trade off problem of a huge student debt burden for the implied earning potential value of a name brand degree. Pursuing a Stanford degree and getting into Y-Combinator are prestigious, but if it instills an attitude of entitlement and creates an environment in which hard work becomes secondary to playing the “game”, then the goal of contributing meaningfully to society might get diluted. Peter Thiel’s proposed solution is to bypass the four year college process by offering smart kids $100,000 over two years to start companies. Throw them into the “wild”.

Yes, these are three examples on the value of their particular brand of education – the MBA, the incubator, and the Ivy League degree – but it all points to the larger picture that education in today’s world, where everything is changing much faster than any textbook re-edit, needs to also adapt just as quickly to be relevant. I think Sarah and Peter are on to something with their concept that baptism by fire may be the best educational route for young entrepreneurs.