Yelp Meets Netflix with Local Business Search Engine

The next generation of local search engines is here, and it looks a little bit like Netflix. We recently met up with founder, president and general manager Gadi Shamia (pictured right) and VP of marketing Ryan Kuder (pictured left) to talk about Bizzy, ReachLocal‘s personalized local business recommendation engine that launched this morning in San Francisco.

Shamia said there are three ways to discover a business: find what you already know you want in the yellow pages or Google, let the critics decide for you on Zagat or Yelp, or do it the old-fashioned way and ask around. Shamia feels that all three options are missing one thing: that none of these recommendations are personalized. One person’s one-star dive is another person’s five-star hidden gem, and just because two people are friends, doesn’t mean that they like all the same things.

Kuder told mbStartups that he and Shamia have vastly different taste in restaurants. “He eats rabbit food,” he said. “I’m more steaks and martinis.”

On the new site, the first step is to enter your zip code, and then work your way through twenty questions that will define your taste and match you with recommendations from other users on the site who like similar things. As with Netflix, the more questions you answer, the more specific your recommendations get. We answered 20 questions about our favorite places to eat, shop, get a haircut, etc. and were delighted to see on our list of recommendations the name of a shoe store that we had forgotten when we were filling out the survey.

To keep the material fresh, there is an activity feed with updates from merchants and comments from other users. Because people only submit their favorite places, they can be selective without being negative, which might be an attractive feature for merchants who are worried about bad reviews.

The balance between the end user’s happiness and value for the merchants can be tricky. In June, when Bizzy launched in private beta, Bizzy was a communications platform where a customer could query a local business without having to fork over an e-mail address, birth certificate and an 8×10 glossy headshot.

Bizzy tested this model on a few thousand, mostly young adults living in New York, San Francisco and Dallas. But the team decided to scrap it when they discovered that “customers are more interested in discovery than loyalty,” said Shamia.

For merchants, the service is free until the company figures out the best business model. Bizzy is not a typical startup: the site is a wholly-owned subsidiary of ReachLocal (NASDAQ: RLOC), an online marketing company that went public in May 2010. Shamia joined ReachLocal in 2009 as the senior vice president of advanced product development. The key to successful entrepreneurialism, he said, is to stick to one “big idea” but “don’t fall in love with any of the tactics.”

Added Kuder, “The value is in connecting businesses and customers in the real world, online.”

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