Google Home Services and the Domino Effect

Note: Since this article was first published, Google has changed ‘Google Home Services’ to ‘Google Local Services’ due to the fact that all service industries they plan to include are not necessarily home services.

In our July newsletter, I covered the release of the Google Home Services program being launched by Google throughout the U.S. As it rolls out and more information becomes available, I thought it would be appropriate to give an update of the consequential fallout Google Home Services has created or will soon create for contractors involved in Search Marketing. However, in fair warning, if you like the information you’re given to be “soft and fluffy”… there are many other articles on Google Home Services out there you would probably enjoy reading a lot more—articles that won’t leave you with a slightly sick feeling when you’re done reading them like this one might. However, I will try to end it in a positive direction.

As those who know me can testify, I am not a pessimistic person by any means. However, sometimes it’s best to come right out and say a pig is a pig, versus putting lipstick on it to try and make others believe it is not. And that pretty much sums up where I find myself with Google Home Services. You see, what everyone else seems to be silent about, are the ramifications and consequences that will soon start falling like dominoes now that Google is making a play to position themselves as a gatekeeper between our contracting businesses and our customers. For those contractors dependent on using Search Engine Marketing (SEM), especially Pay-Per-Click (PPC), the future does not look very promising and here’s why.

Google Home Services and “the little guy”

To start with, let’s first look at how Google Home Services currently affects the small contractor operating out of a home and without a storefront. Often, smaller home-based contractors have enjoyed top billing on the Google map pack for their town simply because they have an address within the town’s city limits. This benefit for them ends the minute Google Home Service rolls out in their area. Everywhere that Google Home Service rolls out, every business without a verified storefront vanishes from the maps. Google claims that they are doing this to limit contractors from spamming the listings—which is about as draconian as cutting the legs off every dog just so that the few that might run away won’t. However, the net result is that home-based contractors will only be found in the organic listings or if they buy paid listings—which Google Home Services (who just kicked them off the maps) just happens to now sell in their area if they have good reviews and can pass a background check. (*NOTE: Since posting of this article, Google has waffled on this position so stay tuned –dave)

Although this move may initially benefit companies with storefronts, as you read on you may see that, in the long run, it probably won’t matter. Initially, companies with storefronts will benefit since Google is making it much harder to locate the smaller contractors running their business out of their home. However, since Google is positioning Home Services right at the top of the page for most of the searches that affect us, the map will be pushed farther down the page along with the organic results. In fact, everything above the fold going forward will probably be Google properties, at least until Google’s own AdWords program becomes a victim of Google Home Services’ success—but I’ll go over thatlater.

Ironically, many of the changes that Google Home Services creates will be more consequential than deliberate as Google moves forward with Google Home Services. The problem is that nothing happens in a vacuum. Google Home Services is no exception. Simple economics, as well as the laws of cause and effect, will create changes in Search Marketing that will change the Home Service Industry, whether or not it was Google’s deliberate intention.

“The problem with Google is that they think they understand your business…
and then have no problem changing it to reflect their understanding.”

Mike Blumenthal

So, other than the fact that Google owns the sandbox that everyone else had been playing in, why would their program be any more successful than HomeAdvisor or Angie’s List?

The reason Google Home Services will be more successful than HomeAdvisor or Angie’s List is simply because of the “Google Guarantee”. The problem is that it is a game-changer that will fundamentally cause everything to shift when they decide to explain what it actually is to the general public—which they have not done to date. You see, other than a small single sentence with a nondescript “learn more” link at the end that is positioned just above the contractor listings page, Google has not yet educated anyone as to what it means. I believe they are waiting to complete the roll-out and sign up enough qualifying contractors to meet the expected demand, before they actually start advertising the program. When they do start telling consumers what the Google Guarantee means… that is when everything will effectively change for online marketing in ‘Home Service’ industries. 

Why do I say this? It’s simple. Why would a consumer not go through Google if it costs them nothing extra and Google guarantees the job? I’m not basing this on theory, but on human nature that is easily tested if you want to take the time to do it. We did, and the results were scary to say the least. In a focus-group-like setting, Lori Smith, who runs our MORE marketing program, asked 25 homeowners who had no real relationship or tie with any HVAC company which company they would call from a Google search if their furnace or air conditioner failed. We wanted to know how they would choose a contractor and what factors were important. Initially, there was no clear group consensus. However, that changed when we showed them a screenshot with Google Home Services at the top and explained how their program worked, and what the Google Guarantee was. When we asked the same question again as to how they would choose a contractor, 25 out of 25 said they would click on Google Home Services because of the “free” Google Guarantee. 

The sad part about this, as I pointed out in my previous article on Google Home Services, is that many contracting companies I deal with already have money-back guarantees that are not only better, but that actually cover the client’s satisfaction—not just that the work is done right. However, the 12.7% of the population using Google who don’t know what contractor they want, by definition, also don’t know what guarantees they offer—but they do know Google. Unfortunately, most people see Google as a helpful utility-like third party—a benevolent entity they can trust to honor their promises. As a contractor, this makes trying to compete with the Google Guarantee an expensive proposition, if not pretty much a non-starter.

The Domino Effect that will occur due to Google Home Services and the Google Guarantee

As I stated earlier, many of the changes we will see will be more consequential than intentional as Google moves forward with Google Home Services. One obvious consequence we will see is that HomeAdvisor (and Angie’s List with the coming merger) will probably double-down on their advertising in response to Google’s play for our customer. When asked about Google Home Services, Craig Smith, President of HomeAdvisor is quoted as saying:

“We’ve seen this coming for a long time. While Google is clearly a great source of local traffic for us, we have eased our reliance on search over the past few years and have focused on building a solid direct brand with homeowners. This year, we are spending $40 million on national direct response TV ads and are crushing it.”

For those who don’t speak ‘Ad Agency lingo’—which, by design, always uses a lot of words to say very little, I will translate. What Mr. Smith is saying is that he knows HomeAdvisor can no longer count on Google Search to drive customers to them, so the only defense they have, is to spend a ton of money to try and get consumers to type in their name directly. How this will affect you is that, not only will Google be trying to become the new gatekeeper for consumers using their search engine, but you need to expect a full-frontal advertising assault by HomeAdvisor/Angie’s List on the airwaves in 2018 as they try to re-educate your customer on how they need to locate their contractor.

Domino # 2 – The demise of Pay-Per-Click,
and the predicament of the companies selling it to you!

Of everything I’m covering, this domino toppling will probably create the most upheaval for Search Marketing in the Home Service industry, since it will independently cause a chain reaction of other dominoes to topple as well. Remember the 25 out of 25 homeowners who said they would use Google Home Services once they learned about the guarantee? That being the case, why would anyone click on the Google PPC ads where there isn’t a guarantee, when they can choose the Google Home Service box directly above the ads, where there is? The net result is that consumers clicking on AdWords, as well as any ROI from the program, will disappear for contractors in direct proportion to how well Google Home Services succeeds in explaining their program to the general public. 

The reason this creates a problem for companies selling AdWords is simple. Should you be invited to participate in Google Home Services, all you need to do to advertise in the program is fill out a simple form describing your services, set a weekly budget, and submit the zip codes that you service. That’s it! There is absolutely no reason you need to pay a company to do it for you. This creates a real problem for all the web marketing companies out there dependent on the revenue generated from doing AdWords management for their clients. If your marketing company tells you that you need to pay them to run the Google Home Service program for you (which I’ve already seen one do)—they’re not being completely truthful. For good or bad, Google has deliberately cut out the need for a middleman in order to participate in Google Home Services. 

If you read the blogs and newsletters put out by marketing companies dependent on the revenue from managing their clients’ AdWords accounts, they are all “breaking out the lipstick” (see above reference regarding pig), trying to put a positive spin on the situation. They are saying that the Home Service ads are only for ‘service-related’ searches, and that you’ll still need them to set up Pay-Per-Click campaigns for installation. The fallacy of this logic is that Google Home Services may not show up when you use the word ‘installation’, but it does when you type in anything with the word ‘replacement’ in the query since this is also a ‘service’ term. So much for installation queries being their own category.Their logic also doesn’t stand up to scrutiny because, as anyone in the business can tell you, the majority of installations come from people who thought they just needed service. The minority of people who actually go out looking for equipment replacement on their own is quite a small subset of those using search to choose a contractor for service. This logic is further flawed, because Google AdWords is run like an auction. If Google Home Services captures all the service queries, and every PPC marketer now focuses on new-equipment-installation, or long-tail, based searches, as the pond shrinks and becomes more crowded, the cost of those clicks will skyrocket. This will effectively end PPC as a viable customer acquisition tool in our industry since the results will be low and the cost-per-click will become prohibitive. The only game in town left standing for all practical purposes will be Google Home Services.

If you are using Google AdWords, and believe that all you’ll need to do as this shift occurs is simply move your PPC budget over to Google Home Services, it may not be that cut and dry. If you think it’s good news that Google Home Services doesn’t require optimization and is cutting out the middle-man… then let me give you the bad news. There is no optimization with Google Home Services. 

Where we are currently testing the service, our advertising cost to direct revenue generated is running about 18%. Mind you, this may change as the winter season picks up, but it is still a huge chunk of the actual revenue the program is generating. The biggest reason for this excessive cost is that, with no filtering or optimization, you end up paying for a bunch of ‘junk’ leads. In our test case leads cost about $26 per lead. Unfortunately, it’s not unusual to see our client and two of his competitors* pay Google $78 between the three of them to fight over someone who wants a quote to get a $4 filter replaced. Ordinarily, one would abandon this type of a marketing program. However, as our simple focus group suggests, if Google can convince 25 out of 25 homeowners to want their ‘free’ Google Guarantee, what will be your alternative?    (*NOTE: Since publication of this article Google has stopped selling the same lead multiple times–however my belief this is just temporary until their program gains momentum)

As far as the secondary dominoes that will fall due to the PPC market vanishing, I don’t expect to see companies currently dependent on selling PPC just giving up, quietly folding their tent, and packing it in. I do see them trying to push ancillary products like retargeting (which really doesn’t work well for our industry), as well as trying to reinvent themselves and move heavily into organic search. This is really no different than when you see the ‘new construction-only’ guys all start advertising themselves as residential service companies when the housing market slumps. 

Simple economics says this shift will probably help local contractors in one respect. With a glut on the market of people claiming to be “SEO experts”, there will be a lot of competitive pressure driving web design and organic search optimization costs downward. This will take a lot of the ‘fluff’ out of how many companies have been pricing. The downward pricing pressure likely to occur is a good thing considering: A) the return on investment with organic search will probably take a big hit due to the collateral damage of HomeAdvisor monopolizing traditional media in order to survive… and B) Google potentially taking a large share of consumers out of the search market because they’ll want to take advantage of Google’s ‘free’ guarantee.

Putting it all into perspective

If all of this is leaving you with that slightly sick feeling I warned you about in the beginning, let me give you some perspective that may help. First, as I said earlier from the national survey we do every two years, the number of people who use search engines to choose a contractor is actually down this year from 2015 when it was 15.6% of the population. In fact, it’s down by almost 20% from 2015! Please understand that, by the word “choose”, I am referring to the number of people who go looking for a contractor without a clue. I am not referring to the people who use Google as a handy directory by typing some form of your name into the search box specifically to find you. Those people do it because of your reputation or word-of-mouth—not because of your web or SEM guy. 

The statistics I’m sharing are based on the people who don’t know who to call, and who use the Internet to discover someone to do their HVAC. As of August of this year, this accounts for only 12.7 % of the population. This 12.7% of the population are the ones your PPC and organic search are targeting. If you have been using PPC and have seen your results go down in the last two years—as most contractors have been telling me—the 20% drop in this group is probably a big part of why. Basically, the pond we’re all fishing in using PPC and organic keyword bait, has been quietly getting smaller in the last two years. Unfortunately, it’s the same smaller group of ‘fish’ in this pond, who are also the ones most at risk to be reeled in by the new Google Home Service ads. 

Are my observations on the future of Search in our industry a done deal? Of course not. Google can still blow it. Google risks blowing it by the chaos they are creating internally with their rapid launch schedule. If ever there was a situation where the right hand is totally ignorant that a left hand even exists, all you have to do is talk to the reps who are recruiting contractors to see it firsthand. The reps can barely explain the program, they sometimes return calls, and they give out wrong information—although passionately believing it to be true. Obviously, they’re missing their calling and should be in politics. 

When our HVAC company was contacted to participate (FYI: the Detroit market is in the next wave), the rep swore that you only paid for the leads you chose out of what was generated—which sounds great, but is completely ridiculous since consumers would not be guaranteed anyone would call back—not to mention that’s not how Google has set up the program elsewhere. However, as much as I would like to say that their initial internal confusion and chaos will cause them to fail—betting on Google to fail would be naive. The reasons are simple: 1) they own 80% of the search market…, 2) they have all the capital in the world to fix their issues…, and 3) the huge ‘pot-of-gold’ at the end if they can become the Industry’s ‘Gatekeeper’, is not something they will just walk away from. 

Besides their initial disorganization, they are also walking a fine line with trying to get national contractor coverage without losing the interest of the contractors in their network should they delay too long in actively telling the public what the Google Guarantee means. In fact, I would not be surprised if HomeAdvisor, with their contractor network already established, doesn’t pre-empt Google if they delay too long and come out with their own guarantee. However, it would be more costly for them to honor such a guarantee than it will be for Google. This is because the ‘contractor screening’HomeAdvisor brags about on TV so much is, by comparison, based more on a contractor’s ability to ‘fog a mirror’ as he breathes than on his review history and the background of his employees. It is nowhere near as stringent as what Google is attempting. 

Yet, as much as I hate to admit it, HomeAdvisor has the right idea. The best defense in this potential new world is to get the homeowner to type in your name when he needs a contractor—not to search ‘AC repair’ in your city. The good news here is that you can accomplish it easier than HomeAdvisor, without spending the millions they have to, since you live in the community and have home-court advantage. As contractors, I’m sure everyone knew that the day was coming when Google would demand their ‘piece of flesh’ for all the leads their search engine generated. That day appears to be here. You can either enter their ‘cattle pen’ willingly, or make the decision to change how you go to market. Remember, as our August survey showed, it’s only 12.7% of the people who find their contractor using search—but more than 60% who go by recommendation and word of mouth when it comes to choosing their contractor. So, why aren’t we actively focusing on this group? 

My article last month titled “Understanding the difference between your Service Area and your Market Area”, is part of the key. The rest of it is to start engaging personally with your market—and I don’t mean just paying someone to do social media. Social media is great, but only if you can get others engaging with your company enough to start talking about you on it, rather than you-talking-about-you on it. BIG difference between the two scenarios! 

To become the guy who everyone knows in your marketplace, you need to look for opportunities to engage with your marketplace—and that doesn’t mean simply buying an ad on a park bench, newspaper, or placemat. Instead, look for unique opportunities where you actually meet people or they begin to identify with you. For example, instead of paying $1,000 for a newspaper ad that probably doesn’t work, fill a service truck with water bottles, park it at the soccer field on a hot Saturday, and hand out free water with a flyer and coupon to everyone! It’s a lot easier and cheaper than an ad or a home show, and I’ll bet you’ll generate as many—if not more—questions and meaningful conversations. 

Just so that you know that what I’m communicating here is not just me blowing hot air from a soap box, you need to understand that our company is deadly serious about this, and we are putting ‘skin’ in the game because of it. For the reasons I’ve covered in this article (and a few I haven’t), we see that ‘business as usual’ is probably going to be a train wreck in the very near future. Because of this, we have refocused our entire programming goals and are currently developing and testing ways to use our client’s websites to promote and encourage community engagement as easily as possible. By the end of this year, we will have spent well over $100,000 in new product development and testing. Our goal is to start rolling out systems in 2018 that utilize our client’s HVAC website as an automated platform built to facilitate profitable engagement with their community, rather than just a place on the web to hang out “keyword bait” for finicky search engines.
So far, the results are looking very promising—but more about that in another article. Wishing you all the best ‘til next month— dave

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