Why Online Marketplaces Will Continue to Beat Word-of-Mouth Platforms in the Battle for Local Business

Share this:


People seek the opinions of their friends. They care what they think, and they trust them to make recommendations on everything from a good meal to a good mechanic. It’s word of mouth marketing — the most prized of its kind since the Stone Age. And its staying power undeniably supports the rationale for a tech-facilitated exchange of endorsements. So why aren’t social recommendation platforms spreading like prehistoric wildfire?

Simply put, it’s because a friend who wants a recommendation from a friend will ask for it — no middleman required. Even more so, it’s because word of mouth platforms fall short when it comes to providing the information and tools that empower consumers to make truly informed choices. The evolved mobile marketplace has hatched the convenience, trust and suitability demanded to do word of mouth better than traditional word of mouth ever could. And it’s got 21st-Century mammoths like Yelp, TripAdvisor and HomeAdvisor beating the longest-standing incumbent at its own game.

Here’s why social recommendation platforms are losing the local business battle:

Faults in Framework and User Frequency
While people may seek recommendations for certain local services — such as restaurants — with some regularity, they require the majority only on occasion. Most people aren’t going to seek a recommendation for a carpenter, a dentist or a florist more than once a year or so, for example. And when they do, it’s unlikely that their needs for these services will exactly match those of their friends — in timing or specificity.

Consider this; social recommendation platforms may show you that your friend was impressed with a local remodeler. But if your friend used the service provider to update her powder room a few years ago, and you’re looking for someone to build an expansive new addition onto your home next spring, you’ve got an unsynchronized recommendation. And an unsynchronized recommendation isn’t a particularly helpful one — no matter from whom or where it comes.

To truly empower informed decision-making, recommendations require a certain level of concurrence and relevance. Online marketplaces simply offer more suitable, more informative ratings and reviews than social recommendation sites — and they offer a lot more of them too.

Insufficient Information and Opportunities for Initiation
Social recommendation platforms may provide business names and contact information for recommended local service professionals, but provider accreditation, pricing information and appointment availability are entirely out of their purview. When interested in a recommended service provider, visitors to social recommendation sites have no choice but to call or e-mail that provider for information. At best, these efforts will lead them down a path of good old-fashioned phone tag to an eventual good result. At worst, they’ll invite a criminal into their home.

Modern marketplaces, by comparison, background check professionals and verify their licensing before including them in service directories. They also provide pricing information, which not only helps consumers understand how much they can expect to pay for a service but also gives them a chance to compare rates before choosing a provider and booking an appointment. What’s more, the bulk of online marketplaces connect visitors immediately to available service providers, allowing them to instantly speak with a service provider or schedule an appointment on demand — phone tag and hassle-free.

Essentially, social recommendation sites leave consumers hanging at the first step in their local provider search process. Online marketplaces, on the other hand, provide the tools and information to guide consumers quickly and easily from start to finish – from reading relevant reviews and choosing a trusted professional to instantly arranging and confirming a service appointment.

Feeble Financials and Questionable Staying Power
Any way you slice it, social recommendation sites and online marketplaces alike are in business to make money — and advertising is one tried-and-true way to get it. But social recommendation sites, which are designed to show recommendations only from friends and family, are limited in their opportunity to display advertisements. In fact, in the typical social recommendation model, it’s appropriate to include an ad only when there’s no prevailing search result to present (i.e., when there is no recommendation from a family member or friend). No shrewd business owner is going to pay good money for an ad with no guarantee that anyone will ever see it — particularly in a small local service area. There’s just no assured benefit to the service provider.

Conversely, online marketplaces maintain control over how and when search results are displayed, allowing for the inclusion of discernable advertisements among other appropriate service provider recommendations. This model allows online marketplaces to create numerous, profitable scenarios — each of which provides mutual benefit to the marketplace, the service providers and consumers at large.

In short, there’s no denying that social recommendation platforms are a good idea. But there’s also no denying that online marketplaces provide better services and make more money. Consumers using an online marketplace have a better chance of finding a trustworthy professional who will satisfy their exact requirements than those using a social recommendation site. And, because online marketplaces are profitable, they’ll still be around the next time the consumer has a local service need. That’s why, when it comes to local service recommendations, I’m betting social recommendation sites go the way of the Stegosaurus. Online marketplaces will prevail.

Adam Burrows_headshotAdam Burrows is SVP of business and corporate development at HomeAdvisor. His responsibilities at HomeAdvisor include general management of HomeAdvisor’s subsidiaries (mHelpDesk and CraftJack), strategic partnerships, and M&A. He has also served as a mentor for TechStars and an advisor for several other successful internet companies.