Why Social Recommendations Are Vital for Local Online Marketplaces

What was more important the last time you went to a movie — seeing a great film or ordering tickets easily? The answer, at least for most of us, is pretty obvious. We first choose a good movie, then use the easiest method possible for buying tickets.

Now consider hiring a local roofer or finding a pediatrician. Convenience in connecting to these providers is clearly a “nice to have,” but choosing a quality doctor or a reliable home service provider is almost always a “need to have.” Spending hundreds, even thousands of dollars on services like these only reinforce the importance of finding a recommended provider, as opposed to an available provider. Making the wrong choice, even for mundane categories like florists or handymen can have serious repercussions.

Which is why I disagree with the conclusions in a recent article claiming that online marketplaces will continue to beat out word-of-mouth platforms. In essence, Adam Burrows of HomeAdvisor argues that despite social recommendations being the gold standard in local search, word-of-mouth platforms cannot win because of infrequent usage, lack of structured data, and no direct provider booking.

There can be little disagreement that building a word-of-mouth platform is difficult. But if social recommendations are the gold standard, why should we expect users to compromise on a sub-optimal solution; one that provides the convenience of scheduling and booking but lacks the trust of word-of-mouth? In reality, it’s not that people want one, or the other. They want both!

Our data suggests that users, when given the choice, prefer quality over convenience nearly 75% of the time. These data are reasonably consistent with Google’s findings, that only 30% of people ever click on a Google ad. Or put another way, between 70-80% of people prefer to find a good fit over being able to simply transact. And finding a good fit is consistent with social recommendations, i.e. people looking for trusted local businesses.

Several companies have demonstrated that adding trust to a marketplace is like adding fuel to a fire. Consider an older example like Ebay. In the early days of the Internet, many sites allowed people to buy and sell used products. Ebay’s magic formula was to match a rating system for sellers, with a mass market of buyers. Adding trust to the marketplace turned a seller of PEZ dispensers into an e-commerce giant.

A more recent example, equally illustrative, is the case of Airbnb. There were couch-surfing sites, Craigslist and many others offering the capability of finding a room to rent. Airbnb achieved escape velocity precisely because they built a trusted platform through which buyers could reliably find, and transact with, renters.

Airbnb is a particularly helpful analogy, because most people thought it couldn’t be done. How might a company create a trusted platform for matching supply and demand in such a sensitive category? It took a magical blend of innovation and execution to solve a truly difficult problem in the hotel/vacation space. But what about local search?

I’m certainly biased, as the CEO of WhoDoYou, but I think we’re just one example of a new wave of companies re-imagining solutions for local search. At www.whodoyou.com we’ve aggregated a massive number of social recommendations (more reviews, I’d venture, than HomeAdvisor), converted them into structured business listings, and are offering the convenience of direct booking in select markets.

As confirmation, we see both the enthusiasm of users on our platform, and the declining trust in the previous generation of industry leaders, Yelp and Angie’s List. The accumulation of lawsuits and complaints (not to mention a soon-to-be-released “shockumentary” film on Yelp) against these two pioneers is beginning to erode their strong grip on the market. Within this vacuum new entrants will certainly emerge that capture trusted, social recommendations, AND offer the convenience of easy booking.

So, rather than expect users to accept only one half of the solution, we as an industry need to drive hard to truly delight our customers. And for those that are truly able to deliver on both, there is an Airbnb or Ebay waiting to emerge in the local search space.

Yoav Schwartz is the founder and CEO of www.whodoyou.com, the first local services marketplace powered by social recommendations. Follow him on Twitter at @yoavschw.