From my experience building local takes either a long amount of time (Craig’s List took years to be successful outside of San Francisco and is still a fantastic service) or you need an incredible amount of money (Microsoft built Sidewalk.com and then merged with Citysearch now an IAC company) to pay for editorial as well as the technology that gives consumers a voice.

It is not a sexy business. It is not a quick flip for a VC. Yelp, however, may prove me wrong. It does have great growth and is focusing on restaurants and other needs of 20 somethings. This is a solid approach. I don’t recall how much they’ve raised but I guarantee you when all is said and done they will have raised $50M-$100M before getting bought by a larger entity or going the public route. And the multiples for the acquirer probably won’t be as big as other industry segments.

Interestingly there are some tangential business that would like to figure this local problem out but can’t either see the larger picture or invest in the long-term (10-15 years) future. The television networks–think about your local CBS, NBC, or ABC affiliate–should be able to own this space. The yellow page directories should be able to own this space. Companies like Ebay–that miss out on a huge amount of goods sold/traded locally should own this space. And, last but not least, the newspaper industry should own this space.

Backfence had the right idea. We knew how to make revenue, we knew how to commit to a community. What we didn’t know how to do was cost-effectively grow across hundreds of communities at the same time. And, as aluded to, we had some internal issues that ensured we never had the chance.

Judy’s Book had the right idea. They were able to get tens of thousands of sought after reviews (I used them for plumbers, locksmiths and other trust-specific local needs).

Tribe.net had the right idea. Use your social network to determine who you trust, why you trust them, and how to get things done–locally–as most social interactions are inherently local.

Unfortunately we didn’t put all the pieces together successfully or we focused on two many aspects and made to many promises to investors that wanted to see Myspace-like or Facebook-like growth.

Rather long-winded, but I’m hopeful this explains some of the issues the local segment faces. I’m looking forward to seeing what companies like Outside.in and Fatdoor (and even MerchantCircle) can do. Hopefully someone will get it right. Also, don’t discount IAC (Ask/Citysearch/Evite is a pretty powerful combination), Google, or even Yahoo!. And, going forward the social networks will definitely try their hand at local. With $240M from Microsoft, Facebook will probably make some effort.

I’m looking forward to the next round of companies that take this huge challenge on. Let’s celebrate Judy’s Book’s effort and companies like it. Inevitably someone will get it right and it will make all our lives easier/better–local affects you and me on a daily basis. The Internet is the perfect medium for enhancing local connections in all their forms.

Yelp is thrashing all comers.