VentureBeat

Judy’s Book, a site that let you search business listings for discounts and coupons, has hit the end of a $10.5 million runway and shut down, raising more questions about local business listing and community sites.

The collapse of the Seattle-based company follows the closure of BackFence this summer. BackFence said it had experienced unspecified “internal” problems, suggesting its failure was company specific. But the subsequent failure of Judy’s Book raises more questions about the sector at large. Judy’s Book started as a place where neighbors could share information about their communities, and shifted its model over time to search business listings.

Did both of these companies face a problem of execution or are there deeper issues with the local web site model as a whole? Regardless, locally focused sites continue to raise money, and it’s not clear that the sector is doomed. Yelp, for example, has done a solid job of local business and event search and continues to grow steadily, with around four million users.

Judy’s Book, like Yelp, aimed high and expanded nationally quickly. But unlike Yelp, its traction never kept pace with its ambitions or the expectations of its investors. As the company’s chief executive, told the Seattle PI, “our investors were tired…The board members said there wasn’t enough terminal velocity to see the types of returns that they were looking for.”

The company was backed by investors that included Mobius Venture Capital (itself going out of business), Ignition Partners, Ackerley Partners and angel investors.

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New start-up Smalltown is going after the local business listings market with an ambitious, focused social network model. It has a charming “smalltown” feel, and seeks to build a community of users around those listings. This company will be one to watch.

It launches today (Tuesday). It has received $3 million in venture capital from Formative Ventures.

Founder and chief exec Hal Rucker gave us a demo of the site. It aims for comprehensive listings of businesses, and has a hyperlocal feel. It is designed to give each community its own look — more so than other local social network/listing sites, such as Yelp, InsiderPages, Judy’s Book or BackFence. (See image at bottom of this article for market positioning).

Smalltown is useful because half of all businesses still don’t have their own Web site. And half of the businesses with Web sites haven’t changed them since creation. Smalltown gives even the tech-phobic business owner easy tools to update their site on the fly — they are handheld by a wizard.

Smalltown is so comprehensive, and so orderly, in fact, that we’re on the fence on deciding whether it will be a spectacular hit, or suffer from requiring too much investment of time, and therefore not reach its full potential.

Smalltown has started out smart, by focusing on one small town in Silicon Valley: San Mateo. It will build out from there.

There are three main features to Smalltown. The best way to follow along is to read these feature descriptions, and then to click on the video image here to see a screencast.

1) Smalltown has designed a so-called Webcard for every business in San Mateo, from the pizza joint to the guitar shop. You can consider Webcards mini-web pages. These Webcards can be searched, so that if you search for guitar shop, the Webcards for guitar shops will come up. These Webcards are essentially company “listings.” They make up the Yellow Pages-like feature of Smalltown. The default is a basic, non-paid Webcard listing. This basic card has lots of company information, such as photo and address. Paid Webcards, where businesses pay Smalltown $40 a month, allow even more information: Businesses can add things like links, menus, galleries of photos and so on. These paid listings are highlighted in gold, so the user can tell.

2) Webcards can also be built for reviews, too. So if a person wants to review a guitar shop, they can create a Webcard to do so. When you search for guitars, you see the listings in a tab, but you also see the reviews in a separate tab.

3) Webcards are also for discussion. You can create a Webcard to talk about anything, such as responding to someone’s request for information about where to buy guitars, or to sell a product, or to mention an event that is happening in your neighborhood. You can attach these reviews to listings or to reviews, or to other people discussing things. You can insert links in them, and create separate tabs in them to hold all kinds of information. They’re searchable in the search bar.

The screencast above will give you a good look and feel for how Smalltown works. You may find the first minute slightly jarring — it takes a while to get used to Smalltown’s unique visuals. About a minute into the screen cast, at the “cheeseburger search,” you’ll start getting it.

Smalltown is designed to allow you to discover things in your local community; it has designed a balance of free and commercial. There are no paid-for-placement features, and no traditional banner ads. It is family friendly. It is entirely Flash based, and has a quick but insulated feel to it. But each Webcard has a unique URL, and so they can be searched from outside, and linked to. One unanswered question is how much control Smalltown will give to the local administrators it will hire to run local sites. This is important because that person can choose what pages are featured on the front page. Rucker says he’s also still thinking about how much to open local sites to national advertisers who may want to create their own Webcards in a community.

There are other features, such as the ability to drag Webcards to your favorites.

Smalltown has a patent on Webcards. Rucker has a background in user interface design, having run his own company Rucker Design Group. He designed parts of the WebTV, Placeware and Ariba sites. The company has eight employees.

Yelp, the Web site offering user-generated reviews of bars, restaurants and other places, has raised $10 million in venture capital from Benchmark Capital.

We recently mentioned Yelp’s wave-making with its parties.

Yelp, like other recent Internet companies, is challenging incumbent sites like Citysearch by developing a community of local reviewers. By encouraging loyalist users to review often, Yelp bets its site will be fresher and more compelling.

It is noteworthy that the venture money comes from Peter Fenton at Benchmark. We recently featured Fenton’s argument that companies should only get funding after they’ve achieved some traction with customers. Yelp had 1.5 million unique users in September, a 200 percent increase from January, the company says. So it fits in the “post-adoption” category, Fenton told us today.

Fenton will join Yelp’s board.

After launching initially in SF, the SF-based Yelp has since launched in Boston, Chicago, Los Angeles, New York, San Jose and Seattle.

Yelp’s other investors include Bessemer Venture Partners and PayPal Co-Founder Max Levchin.

Rather than unleashing armies of people to go out and build a massive repository of reviews, like Citysearch did, Yelp has managed to build a local community that keeps reviews fresh, giving Yelp a more lively feel, says Fenton. And with more reviews, you can begin to parse them in different ways — for example classifying them to show which one are written by 20-year-olds, and which ones by 40-year-olds. That way, users can judge reviews based on their preferences.

Fenton said he made the decision to invest after talking with several locales, including Quince, a restaurant in San Francisco. He asked the waitress if she’d heard of Yelp. “Have I heard of Yelp?,” she asked. “I obsess about Yelp.” Fenton said she described in detail a negative review, and remembered the date the customer visited, and what went wrong that evening.

Fenton says $14 billion is spent each year on yellow page advertising every year in the U.S., and that he Yelp can make money by getting advertising on its sites from local establishments. Yelp is not yet making money.

The company had raised $6 million previously.

When asked about the girl-kissing-girl photos appearing from a recent Yelp party, chief executive Jeremy Stoppelman said the actions weren’t staged, and that the photographs underscore the “festivities and celebration and excitement going on in the valley” right now. The parties help to drive Yelp’s community building, he said.

Besides Citysearch and Yahoo Local, there are also new competitors like Judy’s Book and Insider Pages. Stoppelman said that the relative depth of Yelp’s community is what encouraged Benchmark to invest.