Google Going Local?

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The word on the street for quite some time has been that Google wants in to the home services racket. The marketplace represented by all the work done by people like plumbers and lawyers is simply too huge to ignore. At the moment, most folks in the space (like Search Initiatives) focus on helping local businesses and national businesses with lots of locations drive business to those storefronts. Some sell leads, some build websites that do well in search, and some help those businesses spend their ad dollars to maximum effect. A great many of those ad dollars are going to Google, where the click prices for local search terms like “Plumber San Diego” are insanely high — over $40 a click in the case of that particular query.

The announcement last week that Google is buying HomeJoy and rolling their team into the Google-opolis reinforces the suspicion that something is afoot. The HomeJoy guys were essentially an Uber for house cleaning. They had raised a good chunk of funding, but were struggling with their latest round. They’re also getting into hot water in places like California, where the issue of their cleaners actually being employees rather than contractors was getting nasty.

Google now owns HomeJoy and a business reviews and profiles platform called Thumbtack. They represent different angles on the same space, and it’s likely that eventually, Google will pick a path and jump in.  The smart money says that Google will follow initiatives they have been announcing recently, where they become a vendor rather than only being the marketplace where all vendors compete. In local services, this means that a local plumber signs up and agrees to cut Google not how many clicks it costs to get a potential customer, but a piece of the actual value of the work involved. Amazon is trying something similar.

It’s likely that when they roll this out, the top results on search won’t be the people willing to pay the most for the click, but rather the people willing to cut the largest check out of the job value. The math runs something like this: it varies wildly, but many businesses will spend up to 10% of the value of a job on marketing. For example, an air conditioning repair guy will have to pay about $15 a click to have any chance of getting found on Google, actually closer to $30 to guarantee top spot, but $15 should get you some visibility. We know it takes around 5 to 10 clicks to get a solid lead, and most businesses close about 25% of all jobs they quote. That means a local business has to buy something between 20 and 40 clicks to get that billed job. That’s roughly $300-$600 of marketing cost per billed job in this case. As you can easily see, it’s tough to make money in the local search market where amateurs bidding on search terms are causing huge price spikes.

Given that Google is already earning a ton of money from this area, it will be interesting to see how they pivot into competing in the space. Convincing local businesses to buy search has been hard. I can’t imagine convincing them to sign over part of the contract value will be much easier. There will be questions like: how do they check on what got billed and paid? Is the job booked and collected by Google? What if the contract goes bad, and someone gets injured? Is Google essentially becoming the prime contractor and back office for local business?

It’s a massive opportunity, but also a huge potential pain in the neck. Local is hard, really hard. It’s the “Russian Winter” of the online space. It will be fascinating to see if Google has the stomach for the fight.

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