ReachLocal Co-Founders Back in SERVIZ with New Marketplace

Serviz ReachLocal co-founders Zorik Gordon and Michael Kline have formally launched SERVIZ. The successor to ReachLocal’s ClubLocal, which was spun out when the two left the company, they call SERVIZ “an on-demand home services company.”

I might use the more descriptive term “end-to-end marketplace.” Regardless of the precise terminology, SERVIZ joins a segment of companies and startups creating complete marketplaces that handle everything from discovery to booking and payments. There’s also a set of merchant-facing tools to help them operate their businesses.

OpenTable is perhaps the original example of this idea (although payments was just added). More recently there’s Uber and AirBnB. But established local companies such as HomeAdvisor (the former ServiceMagic) have  moved into this arena with the recent acquisition of Mhelpdesk.

Gordon distinguishes SERVIZ from Angie’s List, Yelp, Thumbtack or YP.com by saying that the company isn’t simply trying to aggregate listings and reviews and hand off traffic to a local merchant or service provider. The company aims to develop a consumer brand more analogous to Uber, which consumers directly seek online or access via the company’s mobile app.

SERVIZ is currently only operating in the greater Los Angeles area but will be expanding geographically soon. Impressively SERVIZ has already secured funding of $10.7 million, led by Groupon (a potential buyer down the road).

Serviz 2

Like Uber, the business model is transaction based. SERVIZ will take a 20% margin on top of the base price of the job.

Gordon promises that SERVIZ will “disrupt” the huge home services industry by charging consumers “50% less” and paying service professionals more. The company is recruiting skilled professionals who are either independent or working for other companies but making less than they might be with SERVIZ.

SERVIZ will be undercutting the pricing of the numerous branded home service companies such as ServiceMaster or Roto Rooter. The company also aims to have transparent pricing for consumers and offers a 100% satisfaction guarantee. Consumers will pay between $45 and $60 per hour depending on the category (and probably later the market).

To some degree this is similar to the ReachLocal model, which sought to bring greater efficiency to local marketing services. The difference is that ReachLocal sells traffic and leads with fulfillment from third party networks (e.g., Google SEM). SERVIZ controls “the entire funnel,” from traffic acquisition to transaction.

By controlling the transaction SERVIZ is able to do a number of things that may ultimately bring it competitive advantages. First merchant ROI isn’t a question the way it is with many SMB marketing services programs. Fulfillment is through the platform itself; service professionals will be paid by SERVIZ in the same way that Uber pays its drivers.

Serviz

Another potential advantage is the way in which SERVIZ can optimize its own online marketing campaigns. It’s not buying keywords or managing campaigns on behalf of thousands of advertisers with small budgets. It’s just buying traffic for itself.

SERVIZ can buy Google keywords that are most likely to lead to sales because it has complete visibility into the entire purchase funnel. Thus it will understand which terms convert in which categories and can bid more intelligently.

One thing that may appeal to some service professionals is the idea that they can simply not worry about the complex “outside” world of online marketing. There’s no worrying about ranking or SEM, no Facebook and Twitter updating and so on. SERVIZ will deliver all their jobs — provided it’s working and growing.

Local digital marketers would likely argue that SMBs should be building their own brands and shouldn’t walk away from that objective and responsibility. However many SMBs will be happy to turn marketing over SERVIZ even if it means they’re not building their own brands.

Gordon says there were many lessons from the earlier experience with ClubLocal and that SERVIZ represents a significant upgrade and improvement of that original concept. Currently SERVIZ is targeting roughly 300 home services “headings” but Gordon believes the model is broadly applicable beyond home services.

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One Response to “ReachLocal Co-Founders Back in SERVIZ with New Marketplace”

  1. Service Central - Australia's Marketplace says at

    Very very interesting on so many levels!

    Firstly, its interesting that the Reach Local Co-Founders are more interested in buying traffic for a single brand, rather than advertising on behalf of thousands of SMB’s. Are they saying that the Reach Local Model is broken, or simply too hard?

    Secondly, shocking name!!!

    Thirdly, interesting to see that their main funder is Groupon. Groupon!!!

    Fourthly, “charging consumers “50% less” and paying service professionals more”. How does this work???? Greg you have reported in the past of the plumber who had to spend $300 on leads to win $350 worth of work. So how is this company going to (a) get the real converted customers so much cheaper, (b) capture the payment from the consumers (especially when no-one really knows how much a local job is going to cost in advance), and (c) pay the contractors (or they employees) in the process.

    Fifthly, in regards to the last point. This structure is very very likely to fall into the category of having “employees” rather than “contractors”. We are already seeing Uber run into this issue a bit, as well as a house cleaning startup that moved to hiring employees rather than contractors. So this is a massive factor. Are they going to hire thousands of employees to make this work?

    A lot to work out!!!

    Plus the $10m from Groupon isn’t going to get you very far when you are competing against Thumbtack @ $150m raise, Houzz @ $150m+ raised, and Porch @ $27m raised.

    Big Money in this space!!!!!

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