Why Redbeacon Founder Ethan Anderson Returned to Local

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Ethan-Anderson-RedBeaconIMG_0307A little over a year after selling Redbeacon to Home Depot, the company’s founder Ethan Anderson is back on the scene with a new startup, MyTime. The company, which launched last month in Los Angeles, aims to build a marketplace for local services that can rival Amazon and Zappos in user experience.

At launch, MyTime’s big feature is dynamic pricing — the ability to peg the price of service to historical data to maximize returns. Long a staple of the travel industry, the startup has integrated with scheduling software to enable local businesses to automatically discount timeslots that traditionally go unbooked, and raise prices for peak hours — and then update a business’s calendar with the new appointment without missing a step.

Street Fight recently caught up with Anderson to talk about life after Redbeacon, building a local marketplace, and finding a seam in a cluttered hyperlocal space.

It’s been a year since you sold Redbeacon to Home Depot. Looking back, how has the service evolved from what you initially envisioned?
Before we sold [Redbeacon] to Home Depot, we raised $7.5 million in venture funding, and [the business] was doing okay. It wasn’t huge, but it was growing pretty fast.

To some extent, [Redbeacon] was a step beyond Service Magic because it was selling leads. But in another sense, it was also an arbitrage play where you’re trying to bring traffic to your site. You’re trying to intercept people who were looking for a contractor, and trying to convince them to request a service. Then, you’re making money off the conversion when someone selects a service.

Home Depot and others saw the service through a much different lens. They thought of [Redbeacon] as a loyalty program that could answer a fundamentally different question: “We’re a $70-billion-plus retailer with hundreds of thousands of people to coming in every week, so how do we get them to shop here and not Lowe’s? How do we get them to come back?” With the Redbeacon integration, Home Depot could tell its service service providers: “If you do your shopping at Home Depot, we’ll give you more jobs through Redbeacon; and the more you shop at Home Depot  the more jobs you get.

Home Depot has integrated the platform into the point of sale [through] its PayPal Here card reader, which it gives to service providers so they can take payments at a client’s house. The service providers shop at Home Depot; and Home Depot knows the credit card. And they know when [the service provider] is spending money. The more they spend, the more leads Home Depot provides. So its all integrated as a loyalty program. Full credit to them, I never thought of Redbeacon that way. I never said: “Let’s build a loyalty program for a retailer.”

Like Redbeacon, your current project, MyTime, is built around selling leads to local service providers. From a strategic perspective, what have you done differently this go-around?
Two things I took away from Redbeacon: one is that I think you need to do more than just farm out leads. A lot of local companies just end up being lead farms. There is zero repeat usage; there is zero brand loyalty and appreciation for the experience. So it becomes a one-and-done relationship.

The second is that you also really have to be obsessive about the conversion rates for local businesses. Acquiring traffic is expensive, and if you’re not getting conversions you’ll quickly go out of business. Redbeacon had a challenging conversion funnel, in my opinion. The user requested a service, then had to wait a day or two to receive a bid. A lot could happen in the meantime — maybe you got impatient and called the business on your own.  Or maybe you went to Yelp. Or maybe you just never saw the email. For whatever reason, a lot of people didn’t come back after they asked for a bid. That cost a lot of money. And the conversion rate really suffered.

Was the delay in pricing a technological problem or a natural consequence of how Redbeacon’s market — mostly, contractors — functioned?
When I would go on ride-alongs with with service providers [for Redbeacon], I realized that these contractors and plumbers just cannot price these things ahead of time. They don’t know what the price will be until they see it. That’s a big reason why MyTime is not going after those types of businesses. I want to find fixed-price, fixed-availability services like haircuts, oil changes, dentist’s appointments.

MyTime goes much further into the buying experience than Redbeacon does. How do you think about building a shopping experience — in addition to a lead generation service — for local businesses?
When I was at Buy.com, one of the things I learned was that there are some principles that make a great retailer. This is true for both online and offline businesses. There’s selection — what’s in your store. There’s availability — things that are in stock, so when people want to buy something they can. There’s price — people are obviously going to shop around for the cheapest project. There’s the shopping experience — people need to enjoy shopping in your store. And then there’s customer service.

With MyTime, I wanted to build a retail experience for shopping for local services that was as good as Amazon or Zappos.  I want to have quality businesses, so we vet everyone. We integrate into their appointment calendars, so we have availability in real-time. We have dynamic pricing, which means that the consumer is getting the best price possible. We look a merchant’s calendar and determine which times are hard to fill, and discount the hard-to-fill times significantly.

Outside of its partnership with OpenTable, Yelp has largely stayed out of the commerce experience. What’s stopping a major publisher like Yelp from building out commerce services, and effectively undercutting MyTime by replicating the product for its 100 million unique visitors?
Yelp is very married to the advertising model. I think it limits [Yelp’s] flexibility in terms of what they can do since [their model] amounts to selling sponsored links to businesses. If I’m a very good business and I have a five-star rating and a ton of good reviews, why do I need [a Yelp] sponsorship? I  don’t need to be at the top. If I’m a bad business, and you put me at the top, then it adversely impacts the consumer experience. So, I think they’re somewhat stuck. They really have to badger the businesses to buy the ads, and it’s not even pay-per-performance; it’s a subscription model like the Yellow Pages.

Generating consumer traffic as a local startup is always a challenge. Talk a bit about some ways in which MyTime is building a consumer audience?
We’re doing contests, some social media, and search ads sparingly. But we’re also looking to use our merchants to help grow our consumer audience by providing our merchants with free businesses cards. The cards are standard — they have the business logo, phone number, address etc. — except at the bottom, it says “book online” at a vanity URL which links to the merchant’s MyTime page.

And while we’re not making money on these transactions since they’re existing customers, we’re bringing people to MyTime who might want to use the service to find something else. Its good for both parties. The other thing that’s important is being very disciplined about sticking to one geography. We can’t just launch across the U.S., because our coverage would be too thin. It would negate the performance of our word-of-mouth marketing and merchant referral.

A lot of folks are expecting a big year from hyperlocal in 2013. What should we look for in the year ahead?
I think there will be more services like Uber. The concept of enabling consumers to buy something that they want right now is compelling: “I don’t want to plan ahead. I just want this thing right now. Who can provide it for me? Who can promise me a high quality service, accurate availability — all on my schedule?” Hotel Tonight, Uber, and even OpenTable all do a reasonably good job with this. Mobile phones are changing consumer behavior, and immediacy is a big part of it.

Also, I think we’ll see more companies tying ecommerce to the local marketplace. Its not enough anymore to just have directories. The Yelps, CitySearches, and Yellow Pages – that’s all [very much dated]. The companies that will succeed are going to allow people to find information, book an appointment, a close the sale – effectively, do everything except service delivery – in one place.  Those companies will make up the next generation of the next local players.

Steven Jacobs is Street Fight’s deputy editor.