Merchant Circle Seeks to Provide YP Alternative

“Small business,” “marketing tools” and “viral marketing” = a new generation of Yellow Pages that will really help businesses get more local customers. Or so hopes Merchant Circle, a well-funded startup that officially launches in June.

“People who sell FEAR like the Yellow Pages cannot sell the hope that the local Internet delivers, said President and CEO Ben Smith. A more viral type of company, like Merchant Circle, needs to be built “because a $60B Local Internet advertising market depends on a low cost of acquisition channel for bringing 10M small merchants online.”

The project, still largely under wraps, began development at the end of 2004 at Rustic Canyon Ventures, the $550 million fund that The Chandler family, of Times-Mirror newspaper fame, plans to invest to catch the next wave of local and national advertising. The startup has also been joined by Bank of America Ventures and Walt Disney’s Steamboat Ventures, and several smaller investors (Maybe that means that Disney’s ABC TV network and owned-and-operated stations might end up playing a role in all this).

Since its conception, the service has been constantly tweaking; adding and deleting features based on whether or not they actually help the small business customer, and would attract their business. But viral marketing is at its core.

Like a blogroll, small businesses add other small businesses from their community to their network, trade ads, and get mutual attention from local consumers – hence the “Merchant Circle” name. Other features on the current, pre-beta version have been more come-and-go.

The current roster includes a state-of-the-art mash up of local apps: business search; coupons; lead generation (“request a deal”); image upload and management tools; Google Maps; thumbs up/thumbs down user ratings; newsletter and email management; Topix news headlines; activity tracker; and local blog postings and conversations.

Three Tiers of Service

There are currently three tiers of service. Tier one is “free.” Every local business gets a listing, and some basic tools. These include coupon creation; a business blog; a newsletter for up to 50 people; and participation in the local Web merchant net.

The other two tiers are the revenue generators. They include the “basic package” for $30 per month ($360 per year), or an “ultra package” for $800 per six months ($1,600 per year). Both packages highlight paid search deals on Google. Basic customers get one rotating ad, while Ultra- customers get four rotating ads.

Basic customers also get premium placement; a premium badge (a “good housekeeping”-like seal of approval); customized maps; and a newsletter for up to 500 people. It also has some negative inducements. These include a promise by Merchant Circle to answer emails from merchants; and the ability to place their own picture next to their listing, replacing a stock, meaningless photo.

Ultra-customers get all that for the extra money, plus a good awareness package. In addition to the Google placements, their newsletter can be sent to unlimited customers. They also get an Internet-managed, local TV ad (presumably SpotRunner); a phone ad (probably, ads that precede free Directory Assistance calls) and media consultation.

According to the CEO….

President and CEO Ben Smith, a Rustin Canyon entrepreneur in residence (who co-founded Spoke Software with Chris Tolles of Topix), told Local Onliner that everything’s in flux prior to the June launch. “It is all about testing. It is not close to being done. We are constantly revising. There is lots of new stuff coming for launch in June and then a second wave in late June.”

But some basic goals have been established. “The milestone here is to get 20 percent of merchants” in a community, said Smith. While Merchant Circle has a ways to go to meet such a goal, Smith notes that the site is not starting from ground zero. Indeed, it has surreptitiously gathered a large number of merchants via an underground campaign on Google and other sites that Merchant Circle (or its investors) already owns. This would presumably include Quigo, which is another Steamboat investment.

“We’ve been doubling the number of advertisers every four-and-a-half weeks,” he said. “You will be amazed.”