This article, written by Rahul Gupta, Product Manager at Lexity.com, was published in issue 07 of the Social Technology Quarterly. Summary: As the Internet transforms the way people consume, disintermediation has offered consumers direct access to products and information that otherwise would require a mediator. Although this is an advantageous aspect, this can affect and impair the way local businesses run.

1. 42
The Internet was never friends with local
and small businesses. One of the most
prominent ideas spawned on the Internet in
the last decade is that of “disintermediation”,
a term technology entrepreneurs use to
describe “getting rid of the middlemen” and
to “eradicate inefficiencies”.
The Internet allows businesses to directly
connect with customers anywhere in the
world. Eventually a possibility of infinite
demand is created, economies of scale
bring in supply chain efficiencies, and prices
fall for consumers.
Amazon sells books directly, disintermediating
distributors and small bookshop owners.
Expedia sells flight tickets and hotel
reservations directly, removing the need for
the local travel agents. Monster finds us jobs,
disintermediating recruitment agencies.
All online businesses provide services
no different from local businesses they
disintermediated. However, because of
scale and deep pockets they could out-
price and out-market their smaller local
competitors. I call it the ‘Walmartization’ of
the Internet.
For most of the previous decade, local
businesses and the Internet remained at
odds with each other. Local businesses
did not quite know how to use this ‘thing’.
Also, the Internet did not quite know how
to make it work for local businesses. For
example, Google allowed me to buy the
most authentic Japanese macha tea from a
quaint and online store in Tokyo, but has no
clue when it comes to my relationship with
the local businesses around me.
However, several new developments
over the last many years have begun to
change this.
Cheaper Computing Platforms
The widespread adoption of smartphones
and tablets by small businesses and their
As the Internet transforms the way people consume,
disintermediation has offered consumers direct access to
products and information that otherwise would require a
mediator. Although this is an advantageous aspect, this can
affect and impair the way local businesses run.
by Rahul Gupta
Internet and the
Local Business
Communities

2. Kuliza Social Technology Quarterly Issue 07
Photo Credits
Top: Dawn
Middle: Johan Larsson
Bottom: Johan Larsson

3. the node, search was the key driver and
keywords became the connection between
a business and a prospective customer.
In the beginning, many small businesses
benefitted, but slowly large businesses
with large marketing muscle drove prices
of common keywords high, which pushed
smaller merchants out. Keywords became
expensive and to optimize on SEM (search
engine marketing) became time consuming.
Of significance is that not every business
relationship begins with a search. I may
get to know of a pastry shop while walking
around in my locality or through a friend,
without exhibiting any intent of looking for
and hence purchasing a pastry.
Facebook and Twitter provide a more
personalized way for local businesses to
connect with their customers. If people
like a local business they can connect
with the store owner (“Like” or “Follow”),
your friend may get to know about it, and
visit the store if interested. This is the
digital version of “word of mouth,” which
businesses today seek.
Local deals companies such as Groupon
allow local businesses to reach out to new
customers who pay online for an offline
experience, such as eating at a restaurant.
It works similar to pay-for-performance
marketing for local businesses.
A small business in one part of a city does
not really have to reach out to people in
another part of the same city. Also, a small
business would not be able to afford the time
and money to acquire skills or resources
for search engine marketing. Social media
and group deals offer easy-to-understand
and cost-effective means for small local
businesses to market their offerings to their
local market.
The era of internet-enabled devices, along
with the social web, presents a number of
opportunities for small local businesses.
From being the largest online sellers of
apparels to even paper plates, there are
hundreds of ideas that entrepreneurs can
work on to empower millions of small local
businesses to compete with the larger
online players. It is time to disintermediate
the disintermediator.
References
Whittaker, Zack. “IDC: iPad retains tablet share
crown, Android rapidly catching up.” ZD Net, 05
Nov 2012.
Five Star Equities, “Number of Smartphones
Around the World Top 1 Billion - Projected to
Double by 2015.”Yahoo! Finance,19 Oct 2012.
customers is creating opportunities for
developers to build tools and applications
that can access larger markets than ever
before. There are more than one billion
smartphones used in the world today.
About 28 million tablets were shipped in
Q3 of 2012 and the overall tablet market is
growing at a rate of 50 percent.
These powerful and easy to use computing
platforms will have apps for small businesses
to manage their inventories, create a better
sale experience, devise loyalty programs for
regular customers, conceptualize marketing
campaigns (Facebook, Twitter, Glyder),
collect payments (Square), pay taxes, and
so on. This was impossible to accomplish
in the era of the personal computer.
People as the Node of the Web
Before social networks, websites were the
node of the web. There were hundreds of
tools that allowed us to make websites.
Small businesses used these tools to
create their online identity. Search engines
scanned them and ranked them. People
‘googled’ and discovered these small
businesses.
Social networks, on the other hand, allow
individuals to create their identity. People who
thought this is useful created a Facebook
account because that is how offline world
works - people connect with people.
This is especially true for a small and
individual business. The identity of a mom
and pop store is the mom (or pop) running
it. The identity of a small photography studio
is the photographer running it. The identity
of a travel agency is the travel agent running
it. Social networks thus illustrate what
identities small businesses can create for
themselves.
The Evolving Landscape of Social Media
Marketing
The second important shift is the changing
dynamics of digital marketing. One of the
offshoots of the website and search engine
world was unaffordable and unmanageable
marketing costs. Since websites were