Smalltown, a company out to help local businesses establish themselves online, is spreading its reach on the web and in the real world by founding a new site at WebCards.com.

We first reviewed Smalltown in October 2006 when it launched a destination site for so-called “WebCards”. These compact mini-sites provide overview information about businesses located in any of 6 Bay Area cities. They are categorized according to business type and designed to show up highly in search results, despite being based entirely in Flash.

By default, they show information leased from a local data source and are displayed for free. However, businesses can claim their webcards for $600/year, thereby taking control of them and gaining the ability to add special content like videos, photos, coupons, and contact forms.

Until now, these webcards could only be found in the areas of Smalltown’s destination site designated for particular cities. But now with the launch of WebCards.com, businesses from the world over can create their own webcards and embed them anywhere on the web. Smalltown has also formed partnerships with companies like Trulia to distribute them more proactively to external sites. And when webcards are visited through search engine results, they’ll appear as standalone sites instead of just part of a local directory.

It’ll cost $9/month for businesses to create webcards on WebCards.com. The company plans to create more destination sites around particular cities on Smalltown.com; just which cities depends on those that accumulate the most webcards on WebCards.com. When new city destination sites are established, business owners will have the opportunity to pay extra and have their webcards posted on them.

CEO Hal Rucker says the new WebCards.com property constitutes a strategy to broaden the company’s scope, in contrast to the depth and focus of Smalltown.com. So far only about 600 businesses have created so-called “enhanced webcards” for $600/year. It’ll need over 60 webcards created on WebCards to make as much revenue as one on Smalltown, where these cards have higher visibility. Businesses will have to be convinced that the cards’ portable nature and SEO juice pays off, although $9/month isn’t a hard sell.

Smalltown differs from other sites for local business information like Yelp in that it focuses on merchant-created content. While Yelp has recently given more power over listings to businesses, it remains a consumer and reviewer-focused site.

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The San Mateo company wants to provide a visually rich site for reviews and listings of businesses that don’t get indexed by larger sites, like dog walkers and babysitters. The display is built out of expanding and contracting modules they call “web cards.”

Web cards come in two flavors, free and enhanced. Free cards allow you to post a picture and a short narrative about whatever you want. They are also used for comment threads. Enhanced cards cost $40 a month and allow you to add 4 more tabs of information that include galleries and printable coupons. Cards can be organized into personal lists by drag and drop and can be easily cross linked.

By default any businesses SmallTown can find in a listed city are included and can upgrade their card to enhanced by claiming it with the site. Only two cities are included at launch but the site will be expanding with time.

I like the multitab option for enhanced listings and the site has some potential to be visually appealing. As it stands though I found the navigation counter intuitive. SmallTown skips the social networking angle that Yelp takes and for listings in small towns outside of hip metropolitan areas that makes sense.

I think the success of this company will come down to the response on the part of its target audience to the Flash UI. I find scrolling more difficult and the illusion of smooth flexibility disconcerting. It reminds me of Famster, the family oriented social networking site that combines heavy doses of Flash and paternalism. I think Flash has its place (I think $1.6 billion proves that) but building an entire site out of it feels awkward to me.

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