Classified ad listings are a major money maker for sites such as Craigslist . But Redbeacon is trying to evolve such listings by matching service providers and consumers and using a bidding system that incorporates elements of social media and ratings algorithms. CEO Ethan Anderson claims Redbeacon offers those selling their labour a revolutionary way to do business and hopes his site will become the main destination for finding and booking local services.

>What makes Redbeacon different from other classified and listing sites?

Redbeacon is the only website where you can get a price quote from local businesses and service providers and book your appointment with them online. The entire experience happens on the web, it never needs to go offline. We also help the consumer choose the best providers. We show who their friends and family have used, we show ratings and comments from across the web, we show the credentials and qualifications - all the tools they need to make their decision about who to book.

>What is your business model?

A service provider, for example a maid or a plumber, signs up for Redbeacon and starts to receive job leads by email or text message for jobs we match to them. We notify them and then they put in a price quote for the job. If they win the job then we charge them 10% of its value. So, a USD2,000 house-painting job would give Redbeacon USD200.  

This is revolutionary. They used to pay for clicks to a website or would pay for leads to follow up, even if they didn't win the job. We have made this all pay-for-performance. You won't pay anything unless you get the job and work. It takes the risk out of marketing.

We distribute Redbeacon to partners via APIs or an identifiable widget. It's a job description widget you can embed on a blog, website, social network or a search engine which allows you to request services from providers on Redbeacon's network. You still get the bids and book your job, but the difference is that the partner site that hosted the widget gets a huge proportion of the revenue. We don't need the consumer to come to redbeacon.com every single time. They can access the service from anywhere they look for services.

In our pilot market here in the San Francisco Bay area there are already 5,000 businesses and service professionals who use it. We see a repeat rate of 50% - most people use us again with a month. It's not really possible to be profitable at this stage in a single market. We are investing in building consumer awareness and increasing our geographic footprint. Profitability is our secondary focus.

>Who are your main competitors?

There is a 10-year-old company called ServiceMagic - very profitable, large revenue base. ServiceMagic does lead arbitrage where they do a lot of ad work to attract users to their website. They get information about the consumer and then give them information on three or four local businesses and then these businesses phone to tell you about themselves and win the job. That is the closest competitor we have but the challenge isn't that there are many competitors. It's that we are trying to change consumer behaviour by making what happens offline - asking friends and family and looking in the phone book - move online.

>What is your biggest challenge?

Our biggest challenge is keeping our service base to a very high quality. Our algorithms work very hard to ensure that service providers who do poor work don't get more jobs from us. We can see this from the ratings and reviews they get and then reduce the job-matching for providers that don't do good work. As we expand into new markets we have to continue to keep the quality of those service providers very high.

We are going to focus on entering the major US markets. You have to build critical mass in each major market. Our main focus is the US, although we are doing a trial with BT in the UK where Redbeacon is integrating into the BT phone book on a trial basis.

>What do you think is the hottest trend in digital media?

Location. Everything is about how you incorporate the mobile experience which allows you to use the user's location. Redbeacon is thinking a lot on those lines, finding service providers who are close by to you physically could be very useful.

Facebook is building the infrastructure of your social graph. One aspect of that is where people are. Facebook will build location into its plumbing and anyone who wants to leverage that will. I think that could be very detrimental to Foursquare and others.

VERDICT

Redbeacon is targeting a large local services market that has embraced the web, but has not yet transitioned the whole process online. Making that transition to the web has significant advantages for small service providers. Redbeacon's in-built marketing and the lack of upfront costs are both likely to appeal to smaller firms and individuals.

However, the key issue is scale. Redbeacon may have taken off in the San Francisco area, but the firm clearly needs to be bigger if it is to turn a profit. Making Redbeacon available as a widget may expand its reach, and working with partners such as BT is likely to provide a valuable stepping stone into new markets. But Redbeacon needs a sizable base of reliable service providers in new urban centres to raise awareness among consumers. As Anderson says, breaking into each market takes effort. The key test for the firm is whether workers and consumers in cities without San Francisco's long tradition of online innovation will be as keen to conduct all their business online.

AT A GLANCE:

CEO: Ethan Anderson

HQ: San Mateo

Founded: Nov 2008

Commercial launch: October 2009

Employees: 6

Investors:Mayfield and Venrock

Funding to date: 7.4m

COMPETITORS:

ServiceMagic

Craigslist

Yelp

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Redbeacon bags USD7.4m for local service listings