IN THIS VIDEO, WE WILL TALK ABOUT:
- How these giant companies are commoditizing home services
- Its impact on trades businesses and
- The possible threats associated with it
Today, we’re going to be talking about big names commoditizing home service space.
Now, unless you’ve just been living in a coma for the last five years, you’ve no doubt experienced and seen this stuff happen first hand.
We have big names, outside companies, sometimes companies that are just, nearly for the sole purpose of getting into the home service space, backed by extreme marketing budgets and lots of funding, trying to get into the home service space, capture leads and then sell our service back to us.
You’ve got HomeAdvisor.
You’ve got Google Lead Ads now.
You’ve got Amazon.
You’ve got Angie’s List.
You’ve got Thumbtack,
and then there’s Houzz.
They generally operate in one or two ways or either
A) They try to book the service through them like a Marketplace.
B) They sell leads.
So, let’s start off with Google Lead Ads, that’s kind of an addition to Google AdWords that’s been set up and it’s available and it’s in some markets namely plumbing, electrical, HVAC.
Those are big evergreen markets.
Those three right there, that’s where lot of things are happening because it’s the biggest, broadest, on these companies.
You can really go in there capture some market share quickly and capture sizeable amount of it.
Smaller trades – they can’t really get enough numbers out of.
But those trades, that’s where all the big actions happening.
We’ve seen Google lead ads set up and start moving in and that’s expanding rapidly.
That’s where, rather than having like a traditional pay-per-click ad up at the top, Google is capturing the lead and forwarding it on to you and charging you for the lead.
I’m not sure if they’re just giving it to you exclusively or if they’re sending it to other people.
This leads us to HomeAdvisor who is a lead-generation service.
They’ve also got like a directory listing on there now where they show the ratings of each user.
Also, they got the kind of quiz funnels, what I’d call it, where they ask you questions about your project to capture your lead, get your information and forward that on.
They’re sending it to multiple different people and charging you.
We’ve all spoken to HomeAdvisor.
I’m sure HomeAdvisor has called your office at least ten times if you’ve been in business longer than a week.
So, we all know what HomeAdvisor is.
The general consensus is, most people are not too thrilled with HomeAdvisor.
Most people aren’t too thrilled with lead — Google lead ads.
And in general, no one is thrilled about all these companies getting in here and commoditizing it because as I said in the beginning, they’re essentially trying to step in between us and our customer.
Capture the customers’ information and then sell it back to us, as opposed to just coming right to us.
So, besides what we got — Lead ads, we got HomeAdvisor.
You got Angie’s List who is basically running a directory and they’re now owned by HomeAdvisor.
Owned by the same operation.
They run the directory essentially and they charge you for premium placement up there.
Also, the customers can leave reviews in there.
And they’ve got the Marketplace, too.
It’s like a groupon type of thing where you can put an ad out for a specific service like an A/C tune-up or a $150 credit for a $50.
You run some kind of awesome promotion.
People buy it on Angie’s List.
Then, the business comes back to you but it’s again, trying to capture the customer, sell the customer on you.
Amazon Home Services is a big one.
That one’s doing quite well.
It came on quite recently and they’re really doing well in the moving and landscaping space. That’s really where they’re focusing their efforts.
If you look at the sheer volume of reviews that people are leaving on Amazon and the host services that they offer in particular, it’s in moving and landscaping.
That’s where Amazon is really taking off right now.
I don’t know if that’s a concerted effort or not but that seems like it would be a wise effort to kind of go in that direction because those are easy to commoditize, and then expand outward.
No doubt, they’ve got you know big plans for expansion but they’re actually booking the whole project, and then taking a percentage of the revenue, and paying it back.
I’m sure that revenue payout is tied to the customer satisfactorily rating your services.
Then there’s Thumbtack.
Thumbtack, I think, is operating like a lead generation type of portal.
I have heard costs on there are going up drastically.
Years ago, they’re leads were like $8-$10, really cheap.
I’ve heard and some recent research and interviews and stuff, that leads are like $65 a pop.
So, they’re going up and they’re sending them all out.
But it’s a centralized place for all kinds of services and the customers leave reviews.
When they want a service provider, they look up an electrician out there.
See who’s got the best reviews and go to them.
So, those are the big names that are out there.
There might be some more that I’m missing but those are the ones that are really on my horizon right now.
They’re all essentially commoditizing us.
They’re basically telling the customer, “Hey, Trust us.
Trust us that we’re going to send you the right professionals.
Don’t care who the professional is.
Just tell us what you need done.
Trust us that we’re going to send the right professional out there.”
And that’s essentially taking away all of our name, all of our branding, and all of our reputation. Now, why the urgency?
Why is this stuff coming up?
Why should we care because up until this point, I shouldn’t say up until this point, but there’s generally two camps.
I mean, let me approach it like that there’s generally two camps.
There’s people out there saying, “I’ll never sign up for this stuff. I’m not going to participate.”
And then, there’s people that are slightly to adopt it.
The incumbents, the ones that have been in business for a while or the ones that are really rejecting this stuff.
And then, there’s the newer companies that need business, so this stuff looks like a viable option for them.
They’re just buying leads, trying to get their name out there.
That’s where we are now.
But what I’ve seen particularly as I’ve been following this the last year, and particularly as I’ve been following Thumbtack and Amazon Home Services is what I’m seeing is
- A) Their usage is increasing drastically.
Thumbtack is on a ramping growth path since 2015.
I don’t know any numbers behind Amazon but when you look at the user reviews that are being left you can see a trend, an increasing number of reviews.
If you look at one type of service on either one of these, or one service provider and look at the reviews there last month and come back you know a month later, you’ll notice they’re getting more reviews, and they’re positive reviews.
So, these service providers that these people are getting sent out or the service providers that these companies are sending out that are deleting on these platforms, they are earning positive reviews and the customers are buying them.
These companies, Amazon, Thumbtack, they’ve got large marketing budgets, lots of marketing resources so, no doubt they can increase their user base but behind that the service providers are doing all right.
They’re being acceptable and earning good reviews and they’re getting service providers to sign up.
So, when you think of it like that, you kind of start seeing the big picture and say,
“Hey, these trends — this is a trend that’s coming.
If not, I mean it’s a trend that has already started.”
And I am saying, now’s the time to start taking this seriously and start looking at it.
You don’t have to jump on the bandwagon to each of these.
If you’re listening, you probably have a good business already without them.
But you should be conscious of what’s going on out there because this could be like the hotel scenario 15 years ago when Travelocity, Expedia, Orbitz, and all those platforms coming in the marketplace, the hotels that rejected this stuff, they got left behind and went out of business.
The ones that embraced it and we’re able to adapt their business model to have a third-party handle their bookings and reviews on these other third-party platforms that were getting in between them and the customer directly, those hotels continued to thrive.
Then, just recently we have Uber.
Four years ago, I think, in New York, a taxi Medallion had a value over a million dollars.
I’ll link to this.
Taxi Medallion had a value over a million dollars and I think this year they’re going for a little less than two hundred thousand.
So, they’ve lost 80% conservatively in four years just because Uber popped up, some random company.
Random tech company was able to connect users with drivers, and essentially, commoditizing.
“Hey, we’re going to give you a good driver. Don’t worry about the driver or the company the we’re sending out. If they’re just going to be good. And they’re going to get there.”
Uber did that.
Now, are we going to see things go to that extreme where everybody books through an agency for a hotel or through third-party like we do for a cab?
I don’t know, and I don’t think so because our services are all quite varied.
So, I don’t think it’ll go to that extreme.
But with users being happy with the services that they’re getting from these third-party platforms, I think that the user base is going to keep growing and if you really want to grow your business, you are going to need to, in some way, participate in at least one of these third-party platforms.
As a couple of examples I’ve got, like two years ago about my office manager, and she’s a late 50’s female– she wanted to add in a new room to her house because she was actually adopting a child.
She needed an addition and she went to Home Advisor, got five bids and I don’t know if she went with the lowest provider on there, but she went with one of them that was on there.
I was speaking to her and she’s like,
“Yeah, I go with HomeAdvisor again. I’d use it certainly again.”
And we were talking about, maybe putting my business on there.
We don’t need the business.
Cost per lead is too high.
We can generate leads cheaper than that.
But that said, she’s no longer going to go out there and shop for a customer.
She’s no longer asking referrals.
HomeAdvisor earned her trust on that one project and captured her for the first time.
Earned her trust and now, she’s going to go back to that.
She’s loyal to HomeAdvisor and doesn’t care quite who HomeAdvisor sending her to.
Doesn’t care who’s showing up.
All she cares is, it’s HomeAdvisor and she trusts them.
Let’s see what else is there…
So check this out.
In my area, there’s 20 AC professionals on there listed in my area.
231 of them have reviews left.
Now, do keep in mind, I wouldn’t say that probably half of the people, based on my experience being on Angie’s List, only about half of the people that actually hire leave a review.
If not, less than that.
I’d probably it’s far less than that.
In my experience it is, but say it’s conservative.
So, there’s 231 reviews in my area on Thumbtack for AC specialist or AC companies.
I know that category in my area has only been available for about a year, not long.
So, people are going on there, people are signing up, and people are using it.
That kind of brings up another question because I know some of the people on there are not licensed.
If you look up some of their names– well, number one of their listing, they don’t have any licensing information.
But if you look up their names, and I did this to try and figure out if these people are licensed, they’re not.
But they’re on there and they’re earning good reviews, which, let’s go back to the Uber situation, right?
You used to need a taxi license and in some places you still do but Uber basically changed that. They’re like, “Look! Our customers are happy. Everybody is safe.”
Statistically, you’re safer in an Uber, I believe, than you are in a taxi. The insurance that Uber carries is higher.
Their qualifications are higher.
When something bad happens in an Uber, it does tend to get blown out of proportion by a taxi agency.
But by and large, you’re just as you’re safer in the Uber.
So, what’s happening is, all these people are leaving reviews on Thumbtack and suddenly, well it doesn’t matter if they’re licensed or not.
People going on there aren’t caring if they’re licensed.
They’ve just know that they got the good reviews and they’re going with that service provider.
You’re going to get in a situation and some customers already like this.
No matter how much you educate them.
They don’t care whether they’re licensed or not, the reviews that they have on a third-party platform, like the taxis are more valuable than the actual licensing issued by a county municipality.
Now, yes we do have regulations.
The counties do issue licenses.
Sometimes they enforce that sometimes they don’t.
But in the big picture, over time, if we are seeing the trend of the population, focusing on these reviews and ratings from a third-party more than the licensing, it’s not far-fetched to say that licensing goes out the window, or it just becomes less enforced.
Or these agencies turn a blind eye to it because they get overwhelmed by the sheer number of people going on there.
I do see that happening.
I don’t know if that’s going to happen to an extreme or not but it’s happening now and we’ve seen it happen in other industries.
So, now is the time to really be cautious and really take focus.
Maybe consider getting yourself on one of these platforms or definitely start marketing in a way that’s aggressive to where you can compete with them because other thing is happening too, is SEO results.
Organic search results are getting pushed further and further out of the pictures.
So, in some markets, particularly your bigger markets for HVAC and plumbing, what used to be on just 3-pack of ads or three AdWords listed at the top of Google search result that looked like ads, they’d have a yellow background and they’d say ad right next to them.
They’re noticeably different than that, you know, actual organic results which caused a lot of people to skip them and go to the organic results.
That’s becoming a lot fuller.
It used to three now in some cases it’s four.
And then below that, you might actually have your Google lead ads or you might have the Google lead ads on top.
So, you’ve got your traditional pay-per-click then you’ve got your lead ads, then you’ve got the map which is highly local-based.
It can have input from AdWords.
If you’re running locations, or if any competitors or anyone else is bidding for a location space on that ad, and that search result.
It’s also based on who’s highly local, very close by, and the number of reviews.
And then below that, and this was usually on a desktop monitor, this is usually one and a half to two screen folds below, you actually get to the organic results.
So, organic results are getting pushed further down as Google’s making room for their paid results up top.
If you’re not actually doing paid advertising, you’re relying on Google, you really kind of get in the bandwagon.
Customers are also relying on these third-party referral sources.
Look at door-to-door marketing.
That used to be really popular.
I know I wasn’t around selling at this point but I’ve talked to a lot of people that were selling in the 90’s.
That was a big thing.
They’re like, “Well, the internet came along…and then suddenly, they didn’t trust this guy knocking on their door. They used to trust us. They used to be kind of thrilled to see us because you know, they know they needed a roof. They didn’t know who to contact and it was just too much of a pain to look up. Now you’re there knowing and they’re kind of happy to see you.”
Now, in the 2000s, internet era, people want to go online.
They don’t want to talk you.
They don’t trust because you’re at the door.
They trust what’s online.
They trusted what’s on Google.
Now, you’re seeing other platforms get in there and capture the trust as well.
You know, in the past, if you weren’t online, you had to get online and you went out of business. Now, it could be that if you’re not on these third-party trust-building platforms, lead generation platforms, connection platforms, whatever the hell you want to call them, you get left behind.
So, it’s time to start seriously looking at these platforms– taking them seriously.
I don’t think they’re going to go away and I do think they’re going to keep growing.
We’ve already seen them.
Encroached on our business models.
For those of us that aren’t using them.
So, going forward, you really need to be thinking about either,
A) How we can work with these things
B) How we can have enough of a paid advertising platforms that’s engaging enough and captivating enough so we don’t have to be on them or
C) A combination of both which is, what if we use these things to market but then capture the customer and market to them further to retain the customer.
Prevent them from going back on there.
That’s a whole another topic which I plan on covering, either publishing posts about or, you know, doing another video entertainment like this, or a video tutorial, a video podcast, audio podcast, whatever the heck you call it but I do plan on talking about that– how you can compete as these big names commoditize home services.