For Local Services, Marketplace Is Morphing

The online services marketplace has evolved. Consumers and their needs are king, advertisers trying to reach them are part of their court, while publishers that connect them must provide more value to both.

That was part of the message delivered by Craig Smith, CEO of ServiceMagic, keynote speaker on Day 2 of the BIA/Kelsey Marketplaces 2010 conference in San Diego.

In the 10 years that he's been part of the Web service connecting homeowners with some 70,000 home improvement contractors, the online marketplace has shifted greatly, Smith said. And he expects more change in the next two years than in the 10 year prior.

Those changes include evolution of ads into transaction service for booking service provides directly, and growth of online community for finding trusted service providers.

Feedback from transactions based upon those contacts has provided business owners in such industries as plumbing and carpentry with the ability to take advantage of "hyperlocal targeting," he said.

The resulting transactions have provided data for sites such as ServiceMagic to sift through, gleaning information that helps provide a better match for consumers, and, for advertisers, greater transparency in examining the results of their online investments.

From the advertisers, feedback is that they need even more, particularly in the face of a stubborn economic downturn, Smith said

"We as publishers need to deliver more value to advertisers," he said. "We need to make that quantifiable and make it easy for them."

Later in the talk, he noted that those in the home improvement field who are "swinging the hammers" want to be able to concentrate on their businesses instead of worrying about advertising campaigns.

Consumers are saying they continue to want to reap the benefits of competition for their business, and to make it even easier for them to make a selection, he said.

The typical online search still produces a list of results that "consumers don't want to flip through," he said. "I would argue that's too many options," he added. "A booking engine is even better, it allows them to screen [for someone] at an agreed upon time and rate."

An example Smith gave is that of shopping for someone to install a new flat screen TV in order to keep up with the latest from the NCAA basketball tournament. Previously, such a search would produce a number of engine-generated results. The new Web emphasis is on allowing consumers to book a convenient time for an agreed upon rate by a presumably screened competitor, "leveraging the marketplace of more than 70,000 contractors."

In the past 10 years, he noted, advertisers have moved their investment dollars down the advertising "funnel" from the broadcast model of "creating impressions" to the "natural progression" of "booking jobs."

As the power has shifted from publishers to advertisers, the publishing industry has experienced a higher rate of churn among their customers, he said. The publishing industry in 1999 that presented few options for advertisers has exploded into a marketplace that now features social networking sites such as Facebook, Twitter and LinkedIn, he said. Nimble advertisers, unconstrained by old models and long term contracts, were free to jump from marketing opportunity to opportunity, he said.

Another example of the changing landscape is an application known as TaxiMagic, an  iPhone app that allowed him to book a cab after a holiday party in Kansas City. Using the app dispatched the closest cab for an estimated rate. Further, it immediately notified him when the cab was outside with little waiting.

The only thing missing in Smith's mind was a customer feedback option, so he could report on the driver's timeliness and courtesy. "That sort of application translates well into home services," he said.

Businesses that can solve such problems for consumers and the multitudes competing for their business will produce riches for themselves and more disruptive change for the industry, Smith predicted.

"Someone in this room will do it," he said. "Either an incumbent or a startup with the right investment. Thanks to the recession, I'm confident the industry will see more change in the last two years than the last 10 combined."