I recall a presentation by Ted Paff, Founder of Customer Lobby, where he asked an audience of HVAC business owners, “How many of you love Uber?” Pretty much every hand went up.
Then he asked “How many of you would rather use a yellow cab?” Pretty much every hand went down.
“Congratulations!” he yelled, “because all of your businesses are yellow cabs!” Silence.
I have been thinking about that presentation a lot lately because Google’s move into Local Home Service ads feels to me like the beginning of the Uber-fication of Local.
Google has gotten pretty good at squeezing most of the profit out of every industry it touches via Adwords, Google Shopping, etc. And Google’s Local Service Ads look pretty much like more of the same.
But the difference is the local pro angle.
Imagine “Dan” works for a pest control contractor. He spends his days hoovering up rat turds, sealing holes and poisoning vermin. If he’s lucky he makes a decent hourly wage. I have no idea what these jobs pay, but let’s say he’s making $25/hour. But his boss, “Doug”, is selling him out for $50/hour. Doug is the guy who booked the business. He’s the guy who has for years invested in his brand, spent tens of thousands on advertising and direct marketing and gotten great word of mouth referrals. Except I don’t really care. I just need someone to clean up rat turds and get rid of the damn things. I’m picky, but it’s not like I have a lot of experience hiring people who are good at this. And I’m too busy checking Twitter for incoming missile alerts to spend much time worrying about finding the absolute best turd expert in my area.
So imagine I search Google for “pest control near me” and instead of clicking on an ad or a local listing, I get a form with a message from Google saying that if I give them a little bit of info about the job, they’ll find me a local pro to do the work at a set price — and they’ll back it up with a Google guarantee.
Now Google has been selling ads to pest control contractors for years. They likely have a good idea about what the going rate is for a customer for most types of queries. And they likely know how much a local contractor is going to charge me to get rid of my turds. And they know while I care about quality, I probably care more about price, particularly if a brand like Google is supposedly going to back up the quality.
Google knows Doug the boss is going to quote me $50/hour for the job, so it is happy to do no evil and tell me that it can connect me with a local contractor for $40/hour.
Google texts Dan, who clicked on a Google ad himself a few days ago about becoming a Google-certified contractor and making some extra bucks in his spare time. Google offers Dan $30/hour to take care of my rat turds. Dan quickly does the math and books the job for his next day off. He is excited about the extra change he is going to have soon.
And he starts thinking that maybe it might be more profitable for him to start taking more days off…
What is that old saying? If you don’t know which business is the turd in the market, it’s probably yours.
10 Response Comments
Andrew you still got it, loved this article. Great call out on that presentation to the HVAC peoples. I’ll bet it scared the crap out of everyone.
Its also scary to think about Google taking over more industries like local services, mortgages, insurance, airline tickets, etc, etc, etc. I mean what is one to do? Businesses are fairly helpless if they have to go against Google.
I guess its what happens when there’s really only one game in search town. Google. No competition for search. They thwarted Yahoo/MSN years ago. Yahoo is gone, and Bing is…. well its Bing and its a very small fraction of search traffic.
Perhaps I was a bit over the top Miguel, but I don’t think this version of the future is unthinkable. Re what businesses can do – just like the rest of us, you just need to keep adapting to the changing landscape. Maybe start a blog?
I’ve long believed that the “proximity” local ranking factor will actually make sense when Google is able to recognize how close an HVAC *truck* is to your home, the estimated time of arrival, etc., which would be very much like a rideshare experience. Google controlling that entire experience is definitely a scary thought for business owners.
Your scenario is not inconceivable Tim. All roads lead to a future that is both beautiful and dystopian.
The Proximity rules, specifically for HVAC companies and other professionals are silly. Why does Google treat a search I do for Pizza with the same radius it treats and HVAC company who will most likely set an appointment and come to my house? Likewise, if I am looking for a hand surgeon, I don’t really care for the closest one, my willingness to travel is so much more. It’s crazy that they treat them the same way.
Interesting outlook – scary though 🙂
Until Google does not “own” the entire transaction from start to end, they will have no clue what so ever about the pricing and the real quality of work done.
Only closed and controlled marketplaces can have that Data play as you illustrated.
Googles DNA unfortunately is to sell untraceable events such as clicks and exposures.. Guaranteeing an offline complex transaction will not work.
p.s not to speak about more complex custom jobs where pricing using an “algorithm’ is not yet a reality.
Daniel, I am not 100% convinced that Google cannot determine price via observations about advertiser behavior, particularly around services that are fairly commoditized. I agree that quality will be a challenge, but Thumbtack, Angie’s List, Service Magic, etc. all use various systems, including customer reviews, to assess quality and keep the marketplace as clean as they can. I am not saying these systems are perfect, but they are likely good enough for a lot of job types. This also may be more of an actuarial challenge – for example, several years ago SuperPages offered a “Super Guarantee” on any work that was done by their advertisers, which I am pretty sure was modeled like an insurance business.
I don’t think you are that far out of the box Andrew. Google Local Services is designed to give the illusion of sameness. Google has set it up to make consumers believe there is there is no longer any consequence of choice. Everyone listed has been checked out, great reviews, and if they do mess up Google guarantees it. In economic terms the program is designed to remove all economic friction. Friction in economics is everything that shapes a decision other than price. Most successful companies today built their business by creating economic friction in order to move their offerings out of a pure price driven market. Since Google’s Local Services platform creates the illusion of a frictionless environment, price is the only deciding factor left as it becomes more successful and companies start to compete for the leads.
I don’t know that price is the only deciding factor – for example, I am currently considering hiring one of the more expensive contractors I found via Thumbtack to deal with my rat turds as he seemed the most knowledgeable – but I agree that it’s pretty much the big one, and all of these lead gen systems seem to want to drive price competition since in the short run it’s great for consumers and companies like Google can skim as much of the profit off the top as possible.