Local On-Demand Economy: Is "On-Demand" the Anti-Search?
This post is the latest in a weekly series of excerpts from BIA/Kelsey’s recent report on the Local On-Demand Economy (LODE). The series will lead up to BIA/Kelsey NOW, a conference on LODE that will take place June 12 in San Francisco.
One of the marks of the local on-demand economy (LODE) is compressing the traditional local search process. We see it with companies like Uber: instead of searching, viewing listings, reviews, calling… you simply press a button and a car shows up.
Of course that’s easier said than done: Ceding the decision to Uber of which driver shows up requires a great deal of trust. Consumers are accustomed to the traditional local search process of choosing their individual driver/cleaner/lawyer, etc.
So successful LODE startups will build that trust over time using technology to match buyer and seller more quickly and reliably than local search. Beyond technology chops, it’s all about building balanced two-sided marketplaces, and network effect.
Meanwhile Google, the king of search, is already building its way into this LODE paradigm with tools like Google Now, and its rumored move into on-demand home services. LODE might be the anti-search, but Google will have a part in its future.
A related excerpt from our LODE white paper is below. Consider it a primer for the discussion we’ll have on stage at BIA/Kelsey NOW. Let me know if you’d like to participate (mbolandATbiakelsey.com) and stay tuned for lots more coverage.
Next week’s excerpt: LODE’s Impact on Local Media.
The New Search
LODE threatens traditional “local search” with a user value proposition that is more natural and natively designed for smartphones. It does this by compressing the supply chain. In other words, it eliminates steps of the traditional process of using a search engine to find local services.
The mobile local search process currently goes something like this:
1. Tap (or speak) words into a search box.
2. See results.
3. Click the most attractive one — sometimes leading to directories with additional navigation.
4. Read reviews or other decision criteria.
5. Choose a business that appears to be the most reliable, proficient or inexpensive.
6. Contact that business to inquire about or retain its service.
7. Schedule service.
8. Fulfill and transact.
LODE’s comparison is:
1. Launch a LODE app for a designated service.
2. Push a button to indicate an immediate need.
3. Service provider comes to or contacts you (paid automatically once approved).
Flipping the Model
LODE’s departure from local search has important ramifications for marketers. Stepping back, consumer behavior has evolved from print directory lookups to search engines and even social networks to find items or services that fulfill specific needs with varying degrees of urgency.
These models have progressed towards more of a user pull and less of an advertiser push. The trend has also moved towards more targeted advertiser placement, to establish positioning in front of consumers at strategic times and places of explicit commercial intent.
In a print directory context, this means physical positioning — through size, color and heading priority — to capture that coveted phone call at a time of consumer need. For search engines, it means formulating the right keywords and ad groups to likewise capture high-intent clicks.
With search came certain efficiencies in reaching high-intent consumers in a more cost-efficient way than traditional media. LODE continues down that evolutionary path by aggregating real time consumer demand in a given service category, allowing nearby providers to respond accordingly.
So instead of a consumer search for a business — requiring a previously devised marketing plan where a message is placed in front of that user — LODE flips the model. User demand is captured and revealed for service providers to react in real time to a marketplace now made transparent.
“There’s no advertising in these apps, it’s purely a grossed-up transactional value,” Comcast Ventures Partner Michael Yang told BIA/Kelsey. “Local isn’t reviews anymore, it’s on demand… The business model is consumer pay, and the merchant is being aggregated into a network.”
Put another way, the need for advance advertising to stay competitive is eliminated in some cases. Service providers thriving with LODE don?t need to market themselves proactively to generate demand. They’re now given an operational tool to capture demand reactively.
This is analogous to the Just in Time manufacturing principle. A Japanese innovation popularized in the U.S. by Harley Davidson, and more recently by Tesla, inventory is produced much closer to its sale. This improves cash flows and reduces capital requirements for cost of goods sold.
In LODE services, capital requirements for customer acquisition are likewise reduced. Demand generation at the app level creates marketplace transparency to deploy inventory ? for example, a service provider’s finite set of appointment slots — exactly where it’s needed in real time.
“What we?re seeing is yield optimization,” MyNeighbor CEO Brendan Benzing told BIA/Kelsey. “Uber in early days had a brick business which was town cars, but it was all the time in between rides that was the mortar. That’s the value that technology is finally extracting due to mobility.”