BIA/Kelsey Analysis: Citysearch’s CityGrid ‘a Local Game Changer’

Citysearch officially rolled out its CityGrid publisher network this week. The network moves Citysearch away from an exclusive focus on its individual sites (“Citysearch.com,” “Insiderpages.com,” “Urbanspoon”). Instead, it works on a distributed basis with partners (i.e., “SuperPages”) to marry local content and advertising.

In the short term, CityGrid represents the new face of Citysearch and the next evolution in the local market. It allows the company to leverage its existing infrastructure and content, and reach down into the distribution channel with a more automated and cost-effective option versus a focused business development effort. For its publisher network, and its 500,000 local advertisers — projected to jump to 750,000 by year-end — it also represents a real alternative to Google.

Overall, our enthusiasm for the product is as high as it was when we were first walked through it some 14 months ago. Here’s why we like it. The local market fundamentally suffers from two broad problems. First, it’s hard to make money without a substantial investment in sales. Even then, success is not assured. Second, content is expensive to create. Yes, user reviews can be acquired, but there are still large swaths of categories that still lack deep engaging content.

In theory, CityGrid addresses both problems. It gives small and large developers local content and local monetization together in package. The power of this cannot really be underestimated since both of these are hard to come by, not to mention expensive. Urbanspoon used this to great success and eventually was acquired by IAC (Citysearch’s parent). Nearly every review and ad on Urbanspoon was from Citysearch.

We have seen some reports that this product is a reaction to other companies in the field entering the space. It’s not. If anything, it simply takes the winning strategy of opening up an API to developers and letting them build products on robust infrastructure. Think Google Maps, for example.

To our knowledge, there is no one else doing this model with the same scale and focus. Indeed, 100 developers signed up to work with the API within the first two days of its release. We expect, however, that more people will enter this market quickly. But not before Citysearch gets a major head start, if Citysearch CEO Jay Herratti gets his way.

“My vision is [that it will become] the leading content and ad network for local,” he told us, adding that it is no longer just about Citysearch.com as a destination site. “This is Citysearch,” he says. “It isn’t distributed in one place. It is part of many places, all around the Web.”

The result also provides an alternative to Google. “We look at what Google is doing with local as a major competitive threat,” says Herratti. “It controls access to the Internet.

“Last year, we were building and rebuilding,” Herratti notes. “This year, we are very, very focused on execution.” Still, the current product is relatively primitive and will be rapidly evolving. “Right now, we are talking about version 1.0” he says. “Twelve months from now, there will be new geotargeting solutions, new ways of creating content. We’re taking all of these pieces and putting them together. The next thing is to optimize, and optimize.”

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