How ‘Uberizing’ the Small Business Economy Is Driving Growth
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Today’s consumer is more or else demanding all services be “Uberized”. Meanwhile, today one in three American workers offers independent or freelance services — that’s a lot of service supply.
On-demand platforms have entered the fold claiming to provide the best of both worlds — Uber-like convenience for the client, with a high volume of jobs being sent to workers or small businesses.
The reality, however, is that these on-demand platforms are doing a great job at supplying needed work to the unskilled workforce (i.e., delivery, transportation, etc.), however for skilled small business owners (“SMBs”) — like in the home services sector — the jobs are low paying and the clients are “owned” by the platforms themselves.
These venture-backed platforms have revealed themselves simply as an injected middleman taking away direct client traffic to SMBs and slowly becoming their biggest competition.
Easy capital, fast growth.
Money can’t buy you happiness, but it can buy you extended periods of growth.
Some of the most well-known on-demand platforms in the home services space include names like Handy, Care.com, TaskRabbit and HomeJoy (now defunct). Combined, these four companies raised $370 million in venture capital funding to grow operations. The money was raised based on a thesis that consumers will shift their behavior to purchase all home services through these platforms as opposed to going directly to the service professionals themselves.
As a result, much of that capital was spent on consumer mindshare — getting the attention of those same consumers who would normally search and book professionals directly. If you Google “home cleaner,” or “babysitter” or “handyman” in a certain city, you’ll either see ads for one (or multiple) of the aforementioned on-demand platforms on the first page of Google; or you’ll find directories (like Yelp) listed high up in Google, taking you to a more curated and ratings-based search results page where those same on-demand companies are listed or have ads running.
This is fresh advertising capital that no traditional service professional or SMB can really access. Your average SMB struggles to take out a small bank loan to pay for supplies or manage working capital, little alone raised millions of venture funding and launch multi-million dollar advertising campaigns. As a result, more consumers are stumbling into the hands of these on-demand companies as opposed to the websites, Yelp profiles or Facebook pages of the actual small business.
Technology and the customer experience.
Marketing isn’t the only use of venture funds — the rest is invested in a major competitive differentiator: platform technology.