The on-demand service economy continues to grow – leading examples being popular providers such as Uber and Airbnb – and online players are now expanding into areas such as home services. The Internet giants are now getting interested...
The home services market is booming. The players in this market are meeting the burgeoning desire of well-off people in developed countries to delegate household tasks to outsiders. Online service platforms such as Angie's List are growing in number every day, drawing on state-of-the-art digital technology. Angie’s List is used by over two million householders in the United States who are looking to find the best local suppliers of home services and healthcare. In 2014 the online service generated $314 million. A similar intermediary, San Francisco-based TaskRabbit, founded in 2008, which is today the leading social network-based services platform, puts its users in touch with people able to supply a range of services, from helping with a house move to putting together furniture, all of whom have been checked out in advance by TaskRabbit.
Depending on which source of information you take, the home services market is estimated at between $400 and $800 billion annually. And its growth potential is now so high that the major Web players – with Amazon and Google topping the list –.are investing in this market as part of their overall strategy of diversifying and extending their core businesses.
Amazon Home Services enters the fray
Online retail juggernaut Amazon has just entered the market with its newly-launched Amazon Home Services platform. The service started up in March in 41 US cities, including San Francisco and New York. Amazon Home Services is a marketing operation, connecting the user to home services providers, ranging from plumbers to yoga teachers, who are thoroughly vetted and listed on the site on an ‘invitation only’ basis. Customers buy the services they need directly on Amazon.com at prices which are set in advance and guaranteed, and the platform charges 10% to 20% commission. Amazon Home Services has in fact been set up in partnership with TaskRabbit, whose service suppliers can be booked by Amazon users in several cities. The venture is entering a market which lists 700 service categories. At launch, Home Services boasted 2.4 million service offers. "We have 85 million Amazon customers who have shopped for products this past year that often require a service afterwards," pointed out Peter Faricy, Vice President at Amazon Marketplace.
The expansion of this online retail colossus into the on-demand personal service industry is part and parcel of a diversification strategy which has become crucial, given the competition in the Internet market and the constant urge to innovate. In similar vein, Amazon has also entered the food sector with Amazon Fresh (groceries ordered online for home delivery), the electronics markets with products such as the Kindle tablet, TV series production, and more recently Amazon Dash, a device which allows you to order goods from anywhere in your home. Meanwhile Google has a slightly different goal: the Internet search specialist wants to underline its commitment to the ‘smart’ home market, which also covers home services.
Amazon Home Services connects users with home services providers
Google about to launch its own marketplace for home services
Having garnered turnover worth $16.52 billion in 2014, Google is now on the point of launching its own marketplace to enable it to connect Internet users with suppliers of home services directly from its results pages. The Mountain View giant is due to announce the launch of the service at its annual I/O conference on May 28-29 at Moscone Center West in San Francisco. Of course Google’s interest in services to the individual is not new. Having bought Californian home automation company Nest (known for its smart thermostats and smoke detectors) in October 2014 for the staggering sum of $3.2 billion, the firm invested $100 million in March, via its Google Capital fund, in San Francisco startup Thumbtack, a company whose mission is to help people accomplish their personal projects by putting them in touch with the skilled workers they need. While advertising is the central plank of Google’s business model, accounting for 90% of the brand’s turnover in 2014, i.e. $14.3 billion, Google is constantly looking to diversify its revenue sources. Entering the personal service market is thus another demonstration of this diversification strategy. Given the different services that have recently been rolled out such as the Google Compare platform, we might conclude that the search engine specialist is trying out new ways of connecting users and service suppliers without having to go through advertising.
While the on-demand personal services market is clearly attracting both small and large companies, larger firms have the substantial advantage that their size and financial resources allow them to reach more people on both sides of the transaction – online customers and service suppliers.
These advantages are sound business arguments for going hand-to-hand with innovative startups when you consider that the market is growing as fast as they are. It is certainly the customer who is triggering the dynamic creation of a real innovation ecosystem here through his/her increasingly exacting demands. Coupled with the fact of the latest acquisitions and partnerships in the personal services market, the growth argument strongly suggests that the Web giants will continue to partner with, or acquire, the leading startups in this field in order to achieve market domination.