Google plays matchmaker, expands Home Services Ads

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Dean Shafer grew up in Wyoming and learned to paint from his grandfather, who hand-painted highway murals. He learned construction from his father, a homebuilder and factory manager. Flash forward to today and now Bay Area-based Shafer has his own contracting business powered — in part — by Google.

Since joining Google's test group of home service providers for its new Home Service Ads product back in April, Shafer's business is up about 30 percent, he has hired additional workers to meet demand and saves about an hour every day when it comes to managing the business.

"Once it became live, we were very busy for some time. It really was a relief to me to be able to get away from some of these other providers. My website and Google ads is about all we need at this point," said Shafer.

The beta test is set to expand in the coming months. "We're seeing some encouraging early results with our home service ads offering in the San Francisco Bay Area, and look forward to building out the program in 2016," Kim Spalding, general manager, home services at Google, said in an email.

Dean Shafer, Shafer Contracting
Source: Shafer Contracting

Shafer's interest was piqued when he got a call from a Google representative inviting him to join the program. "I am actually speaking with Google here and doing something exciting to start with," he said.

"Beyond that was the type of program that they were envisioning, and that was a way of finding contractors through Google and the architecture and the aesthetics of the lead generation program they were building," he said.

Here's how it works: Google's AdWords Express app lets contractors manage customer inquiries, correspondence and appointments. Ads for their services — handyman jobs, kitchen remodeling and the like — show up when homeowners search for contractors, with whatever reviews they've accumulated.

Google aims to eliminate the issue of false reviews by only allowing customers who have hired Shafer to review his services. "Finding a qualified home services provider can be a challenge. We're addressing that problem with a more intuitive way to connect our users to experienced professionals on Google," said Spalding.

Rising competition in home service advertising

Right now, Shafer is not paying for Home Service Ads because he is part of the test group, working with Google to figure out any glitches. He's happy with the service so far.

"The support at Google has been the best, it's been excellent," said Shafer.

Source: Google

Before working with Google, Shafer relied on organic search results to drive traffic to his website, word of mouth and lead generation services, such as IAC's HomeAdvisor, Porch and Networx. Along with Amazon, Angie's List — which IAC recently tried to buy — and Yelp, these companies are vying for a piece of the home services ad market.

"The thing I found with the other lead sources that I have used is it's been kind of hit and miss. One of the groups I worked with was just fictitious inquiry after fictitious inquiry," said Shafer. "Thus far with Google, all the contacts that I have made have been real."

The majority of Shafer's business is handyman jobs. Using other services, handyman leads typically cost around $15 per, said Shafer. The average job pays between $200 and $400 and around 20 percent of those jobs result in larger follow-on projects, he said. Google would not reveal its pricing model, but it could involve a fee per lead or a percentage of a completed job.

That said, analysts are not yet convinced of Google's potential to capture the market.

"We'd be cautious or skeptical that Google would really have a lot of traction in that market, but the fact is, nobody's had dramatic traction in Internet-izing home services, so maybe Google has a decent shot, because nobody's really cracked the code yet," said RBC Capital Markets analyst Mark Mahaney.

He believes it's unlikely that Google will become the Uber for plumbers, but said that's not the point.

"Google is just looking for more functionality, anything they can do to just increase overall consumers' engagement, and professionals' engagement with Google is good for Google. They know how to monetize that, it's this thing called search and advertising. So why couldn't they do this with home services?" Mahaney said.

The key is building out the marketplace, both in terms of contractors and customers. Yelp has the customer base and Anglie's List and HomeAdvisor have the contractors, but neither have reached real scale yet, said Mahaney.

"It's a tough thing to do, and then the other major issue is like a lot of marketplaces, there's gray market leakage," he said.

"If I find that landscaper, if I find that plumber, if I find that architect, if I ever want to go back to that person, I've got the contact already made, so why do I need the marketplace? It's a systemic risk issue for marketplaces, that gray market issue, and it's probably greater when it comes to home services," Mahaney said.