Good Start, Let’s Uberize Everything!
Source: Getty Images
It was just merely two years ago when service marketplaces were all the talk in town (I mean, in Southeast Asia). ServisHero (US$3.45 million raised), Kaodim (US$4.55 million raised) and so on – they all snatched investments considered substantial at that time.
It was a time when everything under the sun could be “Uberized”, and investors saw big potential in that. Even the demise of Homejoy in the US did not stop some of the service marketplaces in the region from splashing money on acquiring users online.
Fast forward to today, no one talks about it anymore – even ads that used to show on my Facebook feed no longer exists. Have these guys run out of money?
Flawed model, but thank you for the jobs
At a quick glance, the business models of charging a fee when you contact the customer who enquires, or when the job is completed seem to be legitimate.
However, there are many flaws with these models.
A fundamental one that many entrepreneurs and investors failed to grasp is platform leakage. A smart service provider (which means most of service providers) can easily bypass this system by simply offering their services directly to the customers.
Of course, this was an issue ‘well thought about’ by founders of these marketplaces. “We will introduce a rating system so they value being on the platform”; “let’s punish those who try to cut a deal with the customers directly”; “the system masks their contact numbers and force them to chat in-app such that leakage will not happen”. We have seen different permutations of these statements from about a dozen or so service marketplaces we decided not to invest in.
So what?
Alas, such expressions overestimate the bargaining power these marketplaces have, by a massive margin.
Customers have many alternatives: Google, yellow pages (for a dwindling segment though), friends, and security guards in case they live in a condominium.
Services providers have alternatives as well. So banning them from one service marketplace does not really bother them, at all.
And being forced into doing something that is unnatural to them (wait for five quotes or use in-app chat) for no obvious benefits is just NOT going to work for customers.
In addition, the lack of frequent use contributed to limiting the bargaining power of service marketplaces.
For example, I only need to clean my air-conditioning once every quarter. Do I really need to keep a service marketplace app in my phone and check once every few hours? Will I get my services faster than just Googling a name, and calling them?
Reality sets in
By now, many marketplaces have pivoted and signed deals with corporates to put their service providers to use, or expanded into other categories such as home renovation.
To us, there are desperate attempts not only to monetize but also to show revenue traction at all.
Alas, such plans are difficult to realise the same way it is difficult for consumers. Corporates with recurrent demands for a service would have an incentive to work directly with service providers.
Blockchain coming to the rescue?
Is there a way out? Maybe.
Source: Getty Images
We might be expecting innovative solutions to address the current problems besetting these startups. Even “Uber-like” transportation app ICOs are already being dangled in the markets.
Just imagine a service that charges little or zero transaction fees. Instead, it uses smart contracts to determine if service providers are paid, (or) if customers go back to the “app” and request additional services to enjoy a discount.
Tell us your thoughts of an online crypto-currency created and backed by real labour?
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Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].
