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.

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Local On-Demand Economy: What's Driving Supply?

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.

The success of companies in the local on-demand economy (LODE) hinges on creating network effect and balance in two sided marketplaces (supply and demand). These must grow together in unison, and in a step function that usually leads with adequate supply (i.e., enough Uber drivers).

Last week we examined demand, so now it’s time to zero in on these supply-side dynamics. There are many factors including economic (unemployment rates), geographic (urbanization) and generational (millennial work habits). These are all colliding to form the “1099 economy” at the heart of LODE.

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.

Supply Side: The 1099 Economy

The two-sided marketplaces that define LODE mean that user and service provider growth must happen in approximate balance. There are unique market factors that create that balance and drive growth on each side of the supply/demand equation. The demand drivers were just covered.

For the supply side, LODE is keeping pace as its financial and lifestyle benefits are made known to service providers. This is important because the step function that defines LODE’s supply/demand balance usually starts with the supply side (i.e. enough Uber drivers).

This has been driven (excuse the pun) partly by high unemployment rates that create a larger eligible pool of service providers. For example, Uber had 160,000 drivers at the end of 2014. 40,000 signed up in December alone, and its cumulative total is doubling every six months.

Adequate supply is also driven by larger trends such as the percentage of the population that is concentrated in urban areas. This creates a larger eligible pool of suppliers. It also concentrates demand within a defined area, which provides ROI incentive for suppliers to operate.

Drilling down to more direct and tangible motives, there are often economic benefits for service providers. As mentioned above, reduction in marketing and operational costs enable individuals to sidestep traditional barriers to entrepreneurship. And some LODE services offer quick revenue.

A study by Princeton economist Alan B. Krueger reports that Uber drivers earn $19 per hour on average, and a majority are very satisfied. Drivers were also proven to work fewer hours and earn more than taxi drivers (though they must handle some expenses that taxi drivers don’t).

The Kreuger report also shows that driver growth isn’t receding even as some factors — such as high unemployment — abate. And as Uber lowers rates to the initial detriment of drivers, it argues that increased demand counteracts potential losses (per second order effect outlined earlier).

Punch Out

There is also the matter of flexibility. LODE is causing a cultural shift in the way people think about work. It’s chipping away at a centuries-long societal construct and mindset about working for companies. Ask any Uber driver how much he likes being able to create his own hours.

Though corporations absorb risk and create community — a benefit established as 20th century industrialization and urbanization created the welfare state we now know they also require sizable and sometimes inconvenient commitments from their employees.

And so a key constituency of the emerging 1099 economy has become individuals that require this flexibility out of necessity: students, contract employees, parents, people with multiple jobs. The ability to define one’s hours has been one of the biggest boons for LODE service providers.

For example, most Uber drivers work less than 15 hours per week, according to the Krueger study. According to a driver survey in the report, most are already employed full or part time. Earning additional income was stated as the primary benefit of being an Uber driver.

This flexibility is also perfect for a demographic group examined above in a different context: Millennials. The characteristic flexible hours that several LODE services offer could be form-fitted for a generation that doesn’t want to be told when to come to work.

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Local On-Demand Economy: What’s Driving Supply?

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.

The success of companies in the local on-demand economy (LODE) hinges on creating network effect and balance in two sided marketplaces (supply and demand). These must grow together in unison, and in a step function that usually leads with adequate supply (i.e., enough Uber drivers).

Last week we examined demand, so now it’s time to zero in on these supply-side dynamics. There are many factors including economic (unemployment rates), geographic (urbanization) and generational (millennial work habits). These are all colliding to form the “1099 economy” at the heart of LODE.

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.

Supply Side: The 1099 Economy

The two-sided marketplaces that define LODE mean that user and service provider growth must happen in approximate balance. There are unique market factors that create that balance and drive growth on each side of the supply/demand equation. The demand drivers were just covered.

For the supply side, LODE is keeping pace as its financial and lifestyle benefits are made known to service providers. This is important because the step function that defines LODE’s supply/demand balance usually starts with the supply side (i.e. enough Uber drivers).

This has been driven (excuse the pun) partly by high unemployment rates that create a larger eligible pool of service providers. For example, Uber had 160,000 drivers at the end of 2014. 40,000 signed up in December alone, and its cumulative total is doubling every six months.

Adequate supply is also driven by larger trends such as the percentage of the population that is concentrated in urban areas. This creates a larger eligible pool of suppliers. It also concentrates demand within a defined area, which provides ROI incentive for suppliers to operate.

Drilling down to more direct and tangible motives, there are often economic benefits for service providers. As mentioned above, reduction in marketing and operational costs enable individuals to sidestep traditional barriers to entrepreneurship. And some LODE services offer quick revenue.

A study by Princeton economist Alan B. Krueger reports that Uber drivers earn $19 per hour on average, and a majority are very satisfied. Drivers were also proven to work fewer hours and earn more than taxi drivers (though they must handle some expenses that taxi drivers don’t).

The Kreuger report also shows that driver growth isn’t receding even as some factors — such as high unemployment — abate. And as Uber lowers rates to the initial detriment of drivers, it argues that increased demand counteracts potential losses (per second order effect outlined earlier).

Punch Out

There is also the matter of flexibility. LODE is causing a cultural shift in the way people think about work. It’s chipping away at a centuries-long societal construct and mindset about working for companies. Ask any Uber driver how much he likes being able to create his own hours.

Though corporations absorb risk and create community — a benefit established as 20th century industrialization and urbanization created the welfare state we now know they also require sizable and sometimes inconvenient commitments from their employees.

And so a key constituency of the emerging 1099 economy has become individuals that require this flexibility out of necessity: students, contract employees, parents, people with multiple jobs. The ability to define one’s hours has been one of the biggest boons for LODE service providers.

For example, most Uber drivers work less than 15 hours per week, according to the Krueger study. According to a driver survey in the report, most are already employed full or part time. Earning additional income was stated as the primary benefit of being an Uber driver.

This flexibility is also perfect for a demographic group examined above in a different context: Millennials. The characteristic flexible hours that several LODE services offer could be form-fitted for a generation that doesn’t want to be told when to come to work.

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Scoping the On-Demand Home Services Market: Women In the Lead

TaskRabbit, HomeJoy, HomeAdvisor, Handy, ClubLocal, Pro.com, Amazon Home Services and, most recently, Google, to name just a few, have entered the exploding home services market to provide in-home labor and professional workers fast access to their local market. According to a recent The New York Times article, the market is valued between $400 billion and $800 billion annually by the companies chasing this newly accessible revenue.

With that massive revenue target in mind, BIA/Kelsey is in the process of segmenting and understanding the keys to the home services, research we’ll be introducing at our upcoming NOW: The Rise of the Local On-Demand Economy Conference on June 12th in San Francisco. In this posting, we’ll discuss who the primary customer targets for these services may be. In upcoming installments, we’ll look at when potential buyers will be most ready to pay for work that has traditionally been “free.”

Of course, in economics, nothing is free, but many factors are often very poorly measured or simply ignored when talking about the value of labor in the home. With the arrival of logistics systems that aggregate supplies of labor for the home, many new costs and expenses can be included in the economic decision-making of the household. That expansion of measured labor will certainly change the perception of the work that homemakers and home repair enthusiasts have previously treated as “free labor.”

Building a paradise or hell?

Logistics and information technology has dramatically improved productivity in large enterprises. They can transform local services, too, if entrepreneurs take the time to assess their customer’s needs and ability to pay in relation to the value of work that traditionally has been treated as contributions to the family.

What’s the real opportunity, to provide services to wealthy homes or to make home services affordable for many more people than today? Home services are often dismissed as a San Francisco-bred phenomenon brewed from a mix of overpaid Millennials and under-employed local workers who will take the lowest possible wage, because they have no other options. In reality, the emerging home services market is the product of enhanced coordination and logistics made possible by technology.

The arrival of data-driven coordination and management could result in an inhumane system of exploitation in which workers fight for scraps or it can lift more people into work that serves their neighbors, their own goals and those the community values. Only the latter approach can result in a robust local economy.

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VCs: Will LODE Displace Local Search?

Local On-Demand Economy (LODE) apps were the largest recipient of VC funding in 2014. And it makes sense given the favorable unit economics that LODE services can accomplish, along with several other metrics that VCs tend to like. This was…

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Local On-Demand Economics: Conversational Intelligence will Supplant SEO


If search engine optimization is the primary marketing tool of the Web era, call analysis will be just one tool in the marketing optimization quiver for local conversations. A new category, Conversational Intelligence, will emerge to address the demands for deep personalization in online and physical sales engagements.

As the Local On-Demand Economy (LODE) evolves, more interaction between merchants, brands and customers will take place in rich media environments where the click is only one step, albeit still important, to improved customer engagement, satisfaction and conversion rates. We’ll be covering this emerging economy at BIA/Kelsey NOW in June (sign up today for the early-registration discount), but the topic is a hot one at our NATIONAL Conference this week.

“You’ve got so much information from just the click [on Google], but we have hundreds of keywords [in each call],” Jeremiah Wilson, founder and president of LogMyCalls, said in an on-stage conversation. That is an important insight that extends beyond marketers to political operatives and all breeds of persuasive messaging will need to embrace in the Local On-Demand Economy. It requires immense listening skills, algorithmic creativity and judicious use of insights to engage the person at the other end of a transaction.

The explosion of data in the enterprise during the last decade will be arriving in local markets through hosted services and resellers, such as media and marketing services companies. Search, which has dominated the past decade will continue to grow, but as we’ve heard repeatedly throughout the BIA/Kelsey NATIONAL Conference, there are many more steps to personalize the engagement with consumers.

The conversation, the basic unit of human communication (tweets, to provide contrast, are fragments of conversations), will be the new locus of analysis as the digital engagement model diversifies and lengthens the customer relationship to include pre-sales to post- and repeat-sales delivered to individual users. People think primarily in terms of their local context when

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Will Tesla’s Elon Musk Kill Uber? Thinking Demand-side Economics This Week

Leading up to the BIA/Kelsey NOW Conference, which will debut in San Francisco this June, we’re kicking off a regular series of blog postings on the Local On-Demand Economy (see our white paper). Twice per week, we’ll wrap notable news, fundings and executive moves in the LODE world.

(Click below for full stories)

Does Elon Musk’s Future Include a Place for Uber?
Uber may be the “greatest job creator” in the world right now, adding 50,000 drivers a month since the beginning of the year. But consider Tesla Founder & CEO Elon Musk’s vision of a world without drivers. In an interview at an NVIDIA conference this week, Musk said: “”In the distant future, I think people may outlaw driving cars because it’s too dangerous. You can’t have a person driving a two-ton death machine.” He predicts driving will eventually be illegal.

Bus rides, by contrast, may not be good LODE targets
Leap Transit launched its high-end bus service in San Francisco this week. A roughly 15-minute ride costs $6 and includes coffee, wi-fi and techie luxuries including an onboard concierge of sorts, according to this entertaining article from The Atlantic’s CityLab. This very unLODE model requires a steep capital investment in buses that appear to include reclaimed wood walls and Starbucks-like seating.

FundBox tackles the accounts receivable space
Accounts receivables delays cost small business significant lost opportunity the longer they drag on. If they can get paid faster, the revenue can be redeployed for growth, marketing and other purposes. FundBox, a San Francisco startup announced a $17.5 million round of financing from Khosla Ventures, Ron Conway’s SV Angel and other individual investors, to address this painful business problem.

Meanwhile, is syndication working magic for BuzzFeed?
At South by SouthWest in Austin, Texas, this week BuzzFeed founder Johan Peretti explained that he has effectively outsourced his site hosting to social networks where his company’s content is shared by users. While BuzzFeed.com attracts approximately 200 million users each month, its syndication network, which includes Facebook and Twitter, generates 18.5 billion impressions a month.

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