Local iBank Signal Hill Goes “Local” The Alex. Brown alum ibank, Signal Hill, has decided to carve out the local domain of the World Wide Web. Spearheading the research team is Maurice McKenzie who previously was an analyst at FBR & Co. covering publishing and broadcasting. According to a recent McKenzie report “… (we) expect local search advertising to represent one of the fastest growing internet ad opportunities over the next couple of years, as local merchants follow consumers online.”

Is Signal Hill climbing the right hill?

Mid 90s projections by Jupiter Research forcast local advertising to represent 70% of the internet by 2003. Jupiter’s meteoric prognostications were off by a galaxy and a decade. After a $200+ market cap IPO, Jupiter Research was delisted from NASDAQ by 2002. The firm remains in the market research and analysis business, but a search of their website found no research on the local internet, perhaps a testament to the dangers of the local World Wide Web even in the land of prognostications.

The local build-out of the World Wide Web has taken over a decade to jumpstart. The analog metaphor may be that the distance between Main Street and Wall Street parallels the distance between the local and World Wide Web.

Signal Hill’s primary investment thesis is that “the local market remains under-penetrated.” Citing a Commerce Department estimate that 97% of retail sales occur offline, the Signal Hill view is that this "bodes well for local merchants, and local search, in our view.”

Signal Hill’s coverage in the local arena include: Marchex, Inc <(MCHX) Rating Buy: Online Search Specialist Connects Merchants and Buyers in Expanding Market>, Local.com <(LOCM) Rating Hold: Accretive Acquisition Expands Private Label Search Footprint> and R. H. Donnelley <(RHD) Visibility and Solid Cash Flow Drive Value> whose recent purchase of business.com will position them strongly in the local B2B market .

If craigslist remains the poster child for the ultimate local classified newspaper juggernaut, the local space continues to provide a continuous stream of casualties. Last week, Judy’s Book whose model had morphed from a review-centric local social search to one based on local shopping and search service entered the "dead pool".

Even the Mid-Atlantic’s Midas Touch VC extraordinaire, Frank Bonsal, lost an angel’s penny with the Virginia based, community focused, citizen journalist site BackFence, which closed down back in July. The company had closed a $3 million financing in October 2005 from SAS Investors and eBay founder The Omidyar Network.

Is there a lesson to be learned here - a role model or a business model?

The King of Local is Craig Newmark who built the ultimate local C2C machine with 450 cities, 30 million monthly users and only 25 employees... and without venture capital.

The other lesson: Craig spends most of his time on customer service; which is why Craig lives on Main Street with little concern for the other C Capital. As an example, I have personally emailed Craig Newmark 4 or 5 times, and have been answered by Mr. Newmark himself within the hour.

Where there are opportunities there can often be question marks, but Signal Hill’s commitment provides a positive signal to this opportunity.

Labels: BackFence, Frank Bonsal, local business news

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