Service Industry Rent Seeking

I’m writing this out of frustration with the current state of the service industry, and with the unfortunate prediction that things are going to get worse before they are going to get better. I also read Monopolized by David Dayen which leaves an unfortunate aftertaste in your mouth, even after what is supposed to be a rallying call of a last chapter.

In my complaint today, I’m talking about classic rent seeking. This is the type that’s always shown up when honest people are trying to make a living, because honest people pay fees willingly.

I’m talking about platforms like HomeStars, Yelp, Angie’s List, Handy, Homeflock, Flamp, the list goes on. Google and Facebook act in similar ways, but their extraction is to a further degree, as they sell ad space for you to purchase (and potentially off of the traffic they generate from the ads).

Same Pitch, Different Platform

The pitch is always the same, that it’s for the customer’s benefit, but the company profits are the end to its means. The whole goal is to have their platform be the intermediary, because they don’t perform any of the services.

Each of these platforms works by cultivating itself as a place for clients to submit proposals of the work that they want to get done. The proposal then gets tendered to several vendors (depending on who has paid most recently) and the client can select between a few choices.

Any provider who has worked with one of these intermediaries knows their whole focus is to get you to spend more time on their platform, and to use your credibility to increase their credibility.

It means that service providers need to be ready to respond quickly in-platform so that a “slow response time” isn’t posted to their account (unremovable, even as a paying member) which will drive down their ratings.

These platforms also have direct control over the amount of proposals an account can see, or the location they are seeing them from. None of this is to better the consumer, it is to extract as much money as possible from the service provider.

Draining Your Resources

An extreme example of this can be seen with their website plug-ins. They want you to feature HomeStars as a component of your website, with links to them that increase their back-end PageRank and SEO. You might say, but HomeStars puts a link to my website on their page too, doesn’t that help me in the same way? And that’s a pretty honest and fair assumption, which is why HomeStars doesn’t do it. Here’s what Neil Patel (a world-class SEO expert) has to say about why a website would use a “nofollow” link for vendors on their website:

“Why would a website use nofollow links? Because linking to low-quality or low domain authority websites can hurt the link-hosting website’s rankings. So websites will often use these links to avoid destroying their own rankings with a low-quality external link.”

So websites like HomeStars don’t want to risk their reputation by potentially linking to your poorly optimized website, but they’ll absorb all the value they can from you. These platforms rely on the assets of the companies that use their platforms at every point of their business model – parasitic through and through.

It’s just like how Google and Facebook both fight to have web-crawling pixels/lines of code so that they can take as much information. The more crawlers you add to your site, the slower it functions, but the faster it can be indexed, and the more valuable data is captured.

Google Monopoly

Google also works to extract rents from service providers, and recently it is expanding the depth of its reach in this area significantly.

You could already pay to be at the top of the results, or the top of the reviews, or the first results on a “maps” search. Google had already started playing with submitting quotes directly through search, but it recently added messenger on Mobile (a bit over a year now) and Desktop (added within a year) so that people don’t have to leave their search results page to ask their questions directly to the company.

Google is closing the loop on direct communication with clients and service providers, which is one of the only ways that you can further entrench yourself after you already control a majority of internet searches.

Closing Thoughts

The model is the same with all of these rent-seekers, dominate as the intermediary by any means necessary. For Google and Facebook, this means coming pre-installed on devices and being unable to delete them, a standard practice in the mobile phone industry now.

For others like HomeStars, it means betting that they can optimize their online presence better than the local competition and holding customers over the heads of those businesses behind a paywall.

These practices are terrible. There is no benefit but to the intermediary.

As the late David Graeber would say, these are Bullshit Jobs.

And the legal landscape of Washington seems to be changing its tone towards these tech monopolies, which is a good thing for Canada too (and the world, ultimately). I hope we see antitrust and break-ups in the near future, but I’m cautiously optimistic.

The Case Against Programmatic Ads

I’ll start by letting you know that I’m a hypocrite for writing this. I generate revenue from programmatic purchases of Google AdWords. I’ve spent a lot of time narrowing down to some really lean specifics, to get it to a self-sustaining point, but I do use them in a limited capacity.

It’s a net to capture what is already coming through, not a dial to be turned to increase or decrease that amount.

Past that, I was a large supporter for a while, but after not seeing substantial results for years, I can’t help but feel like programmatic ad purchasing is akin to the pre 2008 financial market. The reason for this is because online advertising was intentionally created to mimic the financial markets which had just been turned into highly profitable machines (at the time). The missing piece was the commodification and abstraction of human attention, but the IAB had us covered.

In 2014, the group released an extension of its 2004 work that standardized the concept of a “viewable impression.” To achieve a viewable impression, more than 50 percent of the pixels in an advertisement must occupy the viewable space of a browser page for greater than or equal to one continuous second after the advertising renders.

There are tranches set up that capture the bottom half of the internet, mostly patrolled by bots and other web crawlers. Then they merge these weak purchases with the strong purchases simultaneously and the buyer has been heavily (if not entirely) removed from the process. This is the exact type of framework that led to the 2008 crisis.

What is different about the present-day online advertising system [compared to older, non-programmatic advertising] is the extent to which it has enabled the bundling of a multitude of tiny moments of attention into discrete, liquid assets that can then be bought and sold frictionlessly in a global marketplace – (Tim Hwang, Subprime Attention Crisis, 2020)

Combine this with the fact that all of the consumer data available in the world, the very same data that is the input to these incredibly complex algorithms, is strikingly wrong a lot of the time. A recent PwC study found that “1/3 of supply chain costs in the programmatic ad space represented an ‘unknown delta,’ which could not be attributed to anything.” I don’t know anyone that likes the concept of 1/3 of a budget going into thin air, but I do know a lot of people that advertise on these platforms.

I had always thought ads could show up in strange places (and I noticed that they did on my programmatic “discovery” campaigns), but was assured that this was a glitch, or a minor issue. Scaled across an entire industry, it seems pretty clear how the feeling of the 2008 financial crisis looms closer and closer.

And just to add some canine teeth to this post, I’ll add links to 2 more interesting articles that cover this topic. The first one compares Ad Tech to the internet bubble of the early 2000’s. The second is a first-hand experience of Nandini Jammi trying to change what online advertising looks like.

Like I said at the start of the post, I use a small and highly concentrated set of keywords within Google AdWords, but not much else in terms of online programmatic purchases. I’ve found that using the free platforms those same companies offer (Google MyBusiness and Facebook Groups) harness the exact same financial results as when I pay for programmatic.

That doesn’t stop the Google Account Specialists from trying to get me to purchase display network programmatic, which I just don’t have the stomach for anymore. I hope the online digital buying platform is reworked within the decade, because there are much better ways to advertise than the current model. I think that has become overwhelmingly clear during covid-19.

#25) How I Turned $13,820 into $229,402

Let’s look at some of the fundamental reasons why this marketing season was a success.

The first is that I work as a marketer for a great product, and it’s executed by an even better team. $98 Exterior Window Cleaning (this get’s people in the door) and we 100% Guarantee our work. It’s a low-cost provider that simultaneously offers great service and guarantees the result. There are not a lot of businesses that can say they offer the lowest price AND a quality guarantee.

So I have a great product, which makes my job much easier.

And I have a sales team that is able to work magic. Part of that magic has come from having my working desk in a call centre for the past 2 and a half years. I get to hear the pulse of the company, whether or not I want to. It can feel overbearing at times, but the value in hearing what customers have to say at different points along their purchasing and servicing journey is an intangible asset.

I can’t tell you how many of my own ideas have been proven wrong just by listening to the other end of a client call. There are invaluable lessons hidden away in your clients, you just have to listen.

So I’m close to the action, and I keep my finger on the pulse of the company. The last piece of the puzzle is that I’ve actually been a window cleaner (albeit for a season and a half only) but I’ve done the work. I’ve seen the look in a client’s eyes when they look at a home of perfectly cleaned windows. Knowing what that is like, understanding the feelings going through a client in that moment – that’s the magic.

It can’t be rushed, it just has to be worked away at consistently. You will begin to see the patterns emerge over time, and you’ll continuously interpret and re-interpret. It’s all a part of the cycle and it’s all good. Keep thinking, learning and challenging your assumptions.

So that’s the background on my understanding of the service offering, execution of the service and the client interpretation.

Now where did I spend the money? Digital, mostly. Of that, mostly Google AdWords and Bing, bidding on specific keywords and trying out different programmatic ad strategies (which I now recommend against using). I also used Mailchimp, and spent about $2K on a small radio buy.

A quick note on using Bing. First, they let you import your campaigns from Google AdWords, which is just incredible. Second, there’s much less competition, so you can easily dominate results. Finally, the people that use Bing are older and less tech savvy, someone that uses Internet Explorer. They are more likely to click on ads and they are likely to be older. This was our target market, so it was a great fit. I don’t expect companies to sleep on Bing forever, but it’s a solid platform if you know what you’re doing. This is mostly because it mimics Google, but what’s new?

The keywords and campaigns that I use on Google and Bing have been refined over the past 2 and a half years. I have trimmed all the fat on them because from the get-go they needed to be self sustaining. I didn’t have a burn rate until after I didn’t need it anymore. The first year it was a tough conversation to get any money for advertising that didn’t immediately drive sales.

That last sentence is probably painful for any marketer to hear, because anybody worth anything in the marketing world knows that things take time. Just because you can have better ads or copy today, doesn’t mean that people will buy it immediately after you change it.

And yet you do need to make change happen, and the faster it happens, the better off you will be.

As far as I can tell, Elite Window Cleaning creates a significantly larger amount of content than any other window cleaning company on the planet. This means that there is a lot of material for me to work with as a marketer. It also means that we’ve found a way to harness creativity in our teams across a collective brand identity. That last point is critical, because it means that we will consistently be producing high volume and high quality content. Both of these things bring us ahead of the curve, but it’s what we do next that solidifies it.

We engage with and post in localized groups and platforms in the areas that we operate in. Specifically, I use our Facebook organic presence, Facebook Groups and Google MyBusiness. I use these platforms first because they are the ones that I see consistent returns on (except Facebook organic in certain situations).

We also post on Instagram, TikTok, LinkedIn, Twitter and occasionally Snapchat, but the point is they don’t drive consistent revenue, so this is where I spend my spare time, not my priority time. I post on all of them, because each of them has the ability to go viral in some capacity. We recently had a Facebook video start to track globally 12 weeks after it had been initially posted. It’s pretty cool for a window cleaning video, but it also didn’t lead to any additional revenue yet. I expect that video to lead us to significant revenue in the future, the value of it just hasn’t been recognized yet.

The value that recognizes itself immediately is the spend that gets a client on the other end of the phone or filling out our quote calculator. I had to scrape the bottom of the barrel with free posts and free email blasts (limited to under 2000 people) to generate the revenue, then I could justify putting spend behind it.

That’s the same strategic mentality I use with paid channels of advertising.

“Lock down” revenues with proven methods, improve those methods consistently, then use that success to allow you to operate in unknown territory. Cover your bases so that you can have the freedom to express your creative ideas, without worrying about the security of your position.

This season I ran a pretty tight ship as a one-man-marketer, but that doesn’t mean I could not have done a better job (just see the last week of June to early weeks of August below). I was also, essentially, just pulling levers and making sure things looked good, while I was mostly occupied with experimenting on a bunch of other ideas, or going deep into analytics to try to find more inspiration.

I also was able to run a tight ship because I had a lot of design work from a former colleague who helped bring a professional flair to our brand image and another who was an AdWords genius. I had the luxury of working with both of these people for just 8 months, but the work that they put in during that time will continue to pay dividends for years to come.

Anyways, we’re almost at the juicy part of the post (the actual numbers). The marketing bookings for the first 4 weeks were all generated through free channels, SEO or email blasts. This is what I mean when I say “Lock Down Revenues with Proven Models”. Build on what naturally occurs (such as a huge influx of calls and searches in Spring) but also don’t try to fight fire with money.

The end of June to the beginning of August is a definitive dip. I’ve graphed it in a multitude of ways, yet I still thought I could just throw money at the problem in the same channels we were using. I was wrong. I should have been looking for a different and more creative approach to the mid-season dip that we see every year.

The work that you do diligently in your spare time, the stuff that you know will make a difference down the road – you’re right about it. It will make a huge difference. In fact, it’s the reason why I didn’t need to spend marketing dollars in May this year, but I couldn’t start with the long-term solutions, I had to chip away at them consistently over a few years. It’s a marathon, not a spring, you’ll get there.

Next year, I won’t make those same mistakes, I’ll make new ones. And I’ll make sure to cover my bases first again.

-Jake

Week	Total Marketing Spend $	Total Marketing Booking $
May 3	$0.00	$9,496.00
May 10	$0.00	$21,998.00
May 17	$0.00	$12,772.00
May 24	$0.00	$13,360.00
May 31	$259.46	$5,406.00
June 7	$519.98	$8,871.00
June 14	$685.71	$8,956.00
June 21	$636.51	$14,189.00
June 28	$620.11	$2,616.00
July 5	$499.87	$6,532.00
July 12	$1,111.92	$7,719.00
July 19	$791.33	$5,471.00
July 26	$974.70	$5,693.00
August 2	$644.80	$3,375.00
August 9	$861.45	$5,438.00
August 16	$773.17	$3,465.00
August 23	$607.91	$13,247.00
August 30	$955.68	$15,302.00
September 6	$670.69	$8,403.00
September 13	$695.53	$17,843.00
September 20	$841.37	$14,826.00
September 27	$504.52	$7,305.00
October 4	$379.70	$7,105.00
October 11	$411.47	$5,704.00
October 18	$374.22	$4,310.00

	$13,820.10	$229,402.00

Source: Elite Window Cleaning 2020