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In general, there are two ways to achieve this: (1) launch hundreds of local sites and hope that they catch on (wide, then deep) or (2) launch one site, focus on getting rich content, and then somehow replicate that one success hundreds of times (deep, then wide).
IMHO, "wide, then deep" doesn't work for local. I visited the AmericanTowns website for Burlingame, California and did a search for "pizza". I got no results. (Did I do something wrong?) They have another search option to "find more businesses in Burlingame", but that just took me to a third party online directory.
Then I clicked on their "videos" tab and the top video is, ironically, one that Smalltown (wwww.smalltown.com/burlingame) produced for the town of Burlingame. (By the way, that video is copyrighted and used by AmericanTowns without our consent. But that's a whole 'nother topic.)
InsiderPages and Backfence did their own unsuccessful versions of "wide, then deep". There are some more examples here on Smalltown's blog: http://hrucker.typepad.com/smalltown_blog/2007/...
It's a hard problem but not impossible. These sites need two major features done correctly if they're going to be successful, this site has neither.
The problem I see with American Towns is that they try to do lots of things and end up doing all of them poorly. Their news aggregation is a joke, from what I've seen their events calendar is spotty at best, and their business coverage, as Hal notes, is paltry.
Would the site be better if they focused on a few localities? Maybe. But I think it would be even better for them to focus on doing one or two things really well instead.
*cough* Looks like we need to get you in here for an update Matt :-)
Topix has commentary in over 1400 towns *daily* with over 60,000 comments a day, as well as climbing into a top 20 news spot on Nielsen, with over 60% of the activity on our site on *our* content (commentary).
Anyway, yes, there's certainly a market here, but I would hope you stack up the space in line with the scope and success of the various participants.
Chris Tolles
CEO, Topix
Let me know if you and or Matt want to see under the hood here at some point in time.