How Far Can Google Local Services Expand?
In this regular Street Fight feature, local marketing gurus David Mihm and Mike Blumenthal kick around some of the biggest ideas affecting the local search ecosystem and the broader industry. Send us an email or leave a comment if you have specific topics that you’d like them to touch on in future columns!
David: Hope you had a Happy Thanksgiving, Mike. How was Local U Advanced? Bummed to miss it, but I just had too many trips already on the books this winter (including the LSA Cloud Adoption Summit in two weeks and Street Fight Summit West in January).
Mike: Man, Thanksgiving was EARLY this year and totally snuck up on me…. But it was great and I hope yours was too.
David: Absolutely, lots of football, turkey, and craft beer. 🙂 I’m sure you were riveted by the Vikings-Lions game.
We’ve obviously both been thinking about Google’s Local Service Ads (nee Home Service Ads) push a lot recently, but it seems like there’s no shortage of things to talk about with them. We touched on the incredible market fit, and briefly on the economics in our last conversation.
Mike: Well when you go to their website they interestingly position ads (note the lower case) as just one capability of their Google Local Services. Having just attended a Top Contributor meeting in Mountain View, I came away with the distinct impression that they are going to get MORE aggressive in local…
They have over the past year rolled out or did major upgrades to 7 products for the GMB dashboard each appealing to a different vertical. This has to be compared to years and years of neglect. I wonder just what more aggressive might mean?
David: LOL — ads in lower case. Give me a break. For Google, Ads are the “A” in Alphabet.
As I’ve posited multiple times this year, local SERPs (and Maps) have been some of Google’s least-monetized real estate.
Regardless of what they think is in the best interest of the searcher, they have no choice but to accelerate their monetization in Local to keep their revenues growing at a healthy clip and Wall Street happy…particularly as Home starts to cannibalize at least some of those former mobile-local searches and Amazon enters the market in earnest.
Mike: Well ads are just one tactic for monetization. And certainly they are moving towards monetizing every possible surface in the local SERPs from the Pack to the Knowledge Panel and even the base level of the Maps. None is sacrosanct.
But Local seems to offer many, many ways for Google to disintermediate local brands and insert themselves into the selling cycle. At some point their need to profit growth to fuel their Alphabet push and to feed their ambition has to push them beyond ads, no?
David: As you know, I think they’ll have to find another revenue vehicle as voice search adoption grows. No one wants this Internet-of-Things nightmare.
Google’s initial push beyond ads seems to be in transaction-facilitation, as we’ve seen not only with LSa’s (I’m sorry, that just looks bizarre!) but also their partnerships with MindBody, OpenTable, and others. From where I sit, they’re leveraging those relationships to gather as much data as they can before rolling their own product in the most profitable categories. Those “partners” are playing a very dangerous game.
And transaction-facilitation is an area which will survive and even thrive in a voice-first world.
Mike: Yes, I don’t doubt that they will cannibalize many of those scheduling type relationships in favor of their own product if it really scales well.
I would posit (and use as reference their Business Builder) logistics, payments, scheduling, loyalty as likely possible areas of huge local $ opportunity for them to explore.
David: The first three, yes. Loyalty, I’m a little skeptical of. That’s antithetical to their market position.
In their perfect world, consumers would perform a search prior to conducting any local transaction. Helping a business stay top-of-mind so that the consumer doesn’t even need to search for it is the last thing they want to do.
Although I suppose Google’s happy medium for a loyalty product would be driving consumers to branded searches: they’ve already demonstrated their eagerness to monetize branded Knowledge Panel interactions with these parasitic Groupon ads (and may also be getting a kickback from those MindBody/OpenTable-type partners).
Mike: Upon reflection I agree with you that loyalty doesn’t create the churn that they need to sell more ads and keep their marketplaces active. Particularly if they are willing to guarantee a local business’s work. Then a consumer has very low friction in choosing a different local vendor each time.
From a consumer’s point of view there are business relationships that are more or less sticky. Some relationships would take too much energy or thought to change. A primary care doctor would be a good example of a hard-to-change relationship. Whereas a tire replacement might sit at the opposite end of that spectrum. And a consumer would be willing to switch, particularly given some form of Google guarantee, at the drop of a hat.
David: Which is why, as we talked about last time, businesses that find success with LSA’s (I just can’t do the lowercase thing) will need to leverage those initial customer transactions into reviews, loyalty communications, and possibly even subscription businesses.
Mike: It would seem that they are in fact trying to become the local commerce engine not just the local search engine. And in that do you see Google effectively disintermediating local brands? Essentially every local business becomes a sub contractor to Google’s commerce engine?
David: The possibility of local brand commoditization is certainly there. (To be fair to Google, Amazon’s trying to do exactly the same thing with non-local brands.)
Local service businesses may need to evolve their entire business models to protect themselves from Google’s disintermediation efforts.
Our local mechanic, for example has started a Tuneup-as-a-Service where we pay $15/month for unlimited oil changes, tire rotations, fluid levels, and other basic maintenance whenever we want take the car in. We’ll never search again–we’ll just schedule online from his website.
Regardless of how they do it, as LSA’s inexorably get more expensive, local businesses will need to extend the lifetime value of the customer in order to make the costs pencil out, rather than simply attracting one-and-dones.
Mike: Would love to know how successful that is for him. I fear that those that don’t figure out a way to retain brand loyalty will become “Uberized.” And their income opportunities will become less and less as they race to the bottom.
After more than a decade in local search, David Mihm now runs Tidings, an email newsletter platform for small businesses that leverages their everyday social media activity, and his own weekly newsletter, Minutive. In 2012, he sold his former company GetListed.org to Moz, helping over 3 million businesses get better visibility in Google and other search engines. Along with Mike, he’s a co-founder of Local University.