Ep 56: Google goes local w/ product search; FTC: HomeAdvisor cheated SMBs; SMBs dislike direct sales model

Part 1 Video start 0:13 - Google goes local w/ product search and smaller stores filter

Part 2 Video start 6:31 - HomeAdvisor accused of cheating service businesses for years by the FTC

Part 3 Video start 11:46 - Small businesses hate the hardsell; SAAS should lean into product led sales

Reference Articles:

1. Google 'Smaller Stores' Filter
2. HomeAdvisor Cheated SMBs for Years – FTC
3. How do SMBs want to work with a salesperson

Transcript Ep 56:

Greg: Welcome back everybody to Near Memo, Episode 56.

David: And it's actually 56 this time.

Greg: well, I, I think we're generally accurate. welcome back. We're accurate, broadly accurate, direct directionally accurate. We're we're excited to welcome you back with me, Mike and David, to talk about what happened this weekend.

Search social and commerce with a kind of local. Uh, inflection or flavor or hint of local or whatever you wanna say. And we're gonna jump right in with me today, starting leading off with Google's smaller stores filter, which I don't, I don't recall how long it's been around, but it, there was some discussion of it this week.

Um, in Google shopping, it's not on the se, but click into Google shopping. And then it's one of a number of filters that are available to you to find smaller stores selling the. Desired item, whatever that is, shoes, sports, equipment, et cetera. Um, and David is a big user of Google shopping, a big proponent of Google shopping.

David: I am I'm guilty as charged. I found myself using Google shopping. I would say at least as much as I use Google regular search when I'm looking for products. Um, I think it's, it's a really terrific interface. I think that this is a really useful and. Sort of societally beneficial innovation on their part.

And I think that it's, if you are skeptical of, or, or if your, if your perception of Google shopping is from the frugal days in the late S um, the product has come a long way. I thought it worked very well for a handful of, I would say extremely long tail searches across a number of different markets, electronics home appliances.

uh, recreation furniture. Uh, it's, I've used it extensively in the last couple of years. Uh, and it's, it's come a long way. I think it's really useful. And I wouldn't be surprised if we see more and more shopping results pulled into the organic results. Uh, as our friend Andy crest from orbit media highlighted in a post

Greg: earlier this week.

We'd like to thank our initial sponsor, Google shopping. no.

David: Well, I mean, given the number of complaints that we've made against Google over the course of this podcast,

Greg: where we have to be fair and balanced, I get, I don't use that phrase. It, it, it's, it's important to point out when they're doing some good stuff.

And I think this is a good thing. The, the check challenges, they also have a nearby filter, which presumably is real time inventory. Um, and, and you can't use the two of them to get small business, realtime inventory. So the, the, currently the small stores filter is purely e-commerce, which is great. It's great that it exists, but I would like to see it expanded to include local businesses that don't have a big e-commerce presence, which is a big challenge, of course.

Um, that's what, why Google by pointy the, the kind of very elegant way of getting small business inventory online. But this is a kind of a long term problem. Now, hopefully, hopefully Google will, you know, people have expressed repeatedly a desire to shop with small businesses and there really isn't a great way to do that online.

You can't really find small businesses easily online unless, you know, you know, you go to Etsy or something, I suppose. But for the most part, it's, it's a challenge. This makes it, you easier. The question in my mind is whether Google is gonna invest in this and try and build this out. Or, or is it just some perfunctory thing that they're testing and they're gonna, you know, let it languish as they do so many things.

Or the

David: cynics might say is a reaction to the antitrust AstroTurf email campaign that they've been running.

Mike: So the there's a post in the can that hasn't been published yet though, that shows how they're now integrating real time inventory into the three pack. And I believe that if they do that, then there's this sort of chicken and egg problem is solved and businesses that are currently not doing inventory online will switch to something like Shopify that will allow them to integrate in real time because the benefits seem to me real and significant. So they. By, they are obviously moving forward and pushing inventory to the front page and making it accessible to more and more businesses, particularly with their integrations with woo and Shopify, et cetera.

And I think that when you finally publish that article, I sent you, I don't know when I'm just, I'd like a little bit more,

Greg: wow.

David: Public shaming on the podcast. Mike, come on.

Mike: You'll see. Another example of this where they're encouraging is. Smaller local inventory based businesses to participate in the process.

So we'll see.

Greg: And, and just to point out before we segue into your item, Mike, the, um this is not online inventory eCommerce, but local inventory real time pick up in store pick up curbside has been one of their key pillars in trying to combat Amazon's. Uh, e-commerce lead and traffic lead for product search, which thus far does not seem to be bearing a lot of fruit.

I mean, I think it's a smart strategy and definitely I value it. Um, but I, it doesn't seem to have moved the needle so far.

Mike: Well, I think you'll find that it has to be both online and

Greg: in store. Yeah. That's what they're doing obviously. Right. That's how it's gonna work, but yeah. So yeah. You know, years and years and years and years ago, I mean, I don't know even how long it is.

It's at least a decade. Uh, GT's GT's shop local. Uh, was one of many shopping engines at the time that was trying to do that strategy. They were trying to be the sort of one stop shop, as they say for e-commerce and local inventory. And it was always a good strategy, but Gnet just, it never, they were never able to market it effectively, or I don't know, get enough inventory or something, but it, it failed.

Obviously I. Um, and then it became an ad network and now it's gone. I believe, I don't know if the URL still exists, but it doesn't matter because we need to move on to Mike Luital and his discussion of the FTCs. Complaint this week against home advisor for deceiving and manipulating small businesses.

So tell us about that, Mike. So

Mike: in the words of the FTC, they said that home advisor cheat has been cheating SMBs for years. This is their language, not mine, it's quite aggressive language. They, they issued a three C out complaint that. Uh, home advisor misrepresented the quality characteristic and sources of leads.

They misrepresented the rates at which leads convert into jobs and they misrepresented pricing and functionality of upsell that they were theoretically were including for free, that they were effectively billing for. And the, you know, the and characteristics and source leads. They weren't, they were claiming that most of the leads were coming through home.

Advisor site went clearly. They were buying them from third parties. Um, The leads often were not in the area that they were supposed to be in that the small business had said they wanted them in. And that often they. They didn't convert well. And when they were not good leads, you could, or they were bad because they were outside the parameter set.

You theoretically could call home advisor and get a credit. But apparently the, we don't know the exact percentage cuz it was redacted along with 60% of the complaint, but the apparently home advisor would make it very difficult. To get a credit for leads that did not meet the standard, which they had promised.

And so they're facing a 14 day countdown to them having to respond to this complaint at which point, if they don't. And they have said to me, in their media release, they're gonna fight this to the now as the FTC doesn't understand how vibrant small business America works. Um, So at the end of 14 days, then it will go to a adjudication if they, they don't settle adjudication in front of a,

Greg: a administrative law judge administrative law.

Thank you. One, one question I have is how much might this be worth? You know, let's say the FTCs complaint is proven, you know, either there's, I mean, a settlement is a kind of an X variable, but let's say it's proven in an, in, in a, in an adversarial proceeding, an administrative proceeding. . Is there any sort of estimate of what a home advisor might be compelled to do or pay in this situation?

Mike: There is an estimate in the complaint about the amount of money that it costs these businesses in bad, you know, in bad leads, but it's redacted. So I can't tell you the amount along with a lot of other stuff,

Greg: Obvious. It could be quite substantial. Wouldn't you think?

Mike: Yes. And the FTC, this is how they work.

They take very high profile cases that they can put a number on that's visible and compelling. They don't. You know, they they're short staffed and underfunded, and they only take cases where they can make a great case and have a big number to attach to it. So the make an example, as it was, make an example, yes, it's a bully pulp, but more than it is in true enforcement.

And I believe it is a big amount of money. They they've said it's been going on since 2014. Where, where a lot of the time they've been. You both overcharging and under, under delivering. So it's

Greg: it's well, that could be easily millions of dollars. Yes. If it's gone on for eight, eight plus years or something.

Yeah. If it's

David: been since 2014 and theoretically, this was then there would've overlapped substantially with the Google pilot of LSAs through home advisor, which is pretty interesting that they, despite, despite getting preferred most preferred nation status in Google, that they couldn't deliver. The aggregate number of leads at a reasonably low cost.

So, right.

Mike: That's interesting. And then the other minor point about this, you, you covered this in the newsletter this week, is it. The that it represents this along with the reviews with fashion Nova and the new guidance and this stuff in last fall with the 700 letters, you also pointed out in the newsletter, the fact that they were in cases of companies abusing, like, I think it was Clearview or who was a don't remember, but where.

One of the resolutions that the FTC is coming to is they're telling some of these companies to destroy the data and the algorithm that created the data. So it, it, it really reflective of a much more activist FTC, much more emboldened, much more likely to extract their pound of flesh and set examples of standards.

um, obviously over the last 20 years, capitalism has largely gone off the rails and they're trying to, they're trying to put guardrails in place for a system that. obviously, you know,

Greg: I mean, even, even whatever we wanna say about capitalism, I mean, the idea of ethical behavior toward customers, I think is really an important principle that they're trying to vindicate and, and, and consumers in,

Mike: in a different context and towards small businesses, FTD home advisory cases strictly about small business.

So it's both and,

Greg: and in the spirit of small business there was another interesting, these are all sort of small business themed uh, discussions today. Uh, there was another interesting themed Breeden piece of research that was asking small businesses about their preferred interaction with sales reps or lack their visit case maybe.

And they survey businesses that are, you know, one to 20 headcount all the way up to 500, I think. That's right. Yeah. So they've got a pretty broad sample and they found different responses in each of those different segments. So David. Uh, the, the, the most numerous being the small, the very smallest businesses.

So David, why don't you take us through that? Yeah, so they were asking,

David: um, how, how, how do you prefer to work with a salesperson which of these best describes how you prefer to work with a salesperson? Uh, conducting research completely on their own, doing most research on their own, but then open to a salesperson answering questions having a salesperson, a.

You know, essentially leading the, leading the research and then relying ex exclusively on a salesperson. Um, so those are the four options. And I think the biggest takeaway for me was that they do not like no, regardless of the size of small business from one to 500. No one likes a sales led model. Um, the, the largest percentage of sales led selling that, that, that businesses wanted was the larger bus, larger small businesses.

So a hundred to 500 at 30%. So 70% plus of small businesses prefer to do you at least most of the research themselves when they're buying a buying a software solution. Uh, so that just speaks to that, that actually the 70% number squares with a, a number of similar reports that have come out for B2B selling more broadly that 70 increasingly something like 70% of all businesses, small, medium enterprise prefer to.

Do things in an eCommerce type manner, as opposed to having a salesperson sort of get in the middle of the, the transaction. So I, you know, I think it's, it sort of reflects a, a broader shift in the overall B2B landscape and then it's most acute the smaller the business. So the smaller the business, the more they prefer to do their own research, either exclusively or primarily.

Um, so it just, it speaks to the, the, the changing paradigm We, we hear the term product led growth all the time. It's, it's something that we obviously aspire to in my former role at thrive five under Perry Evans, we found it worked really, really well, where you, you could go essentially all the way through the process.

Um, on a self-serve basis, we had a very small sales staff. That was primarily geared at more of a consultative sale. Um, so you'd come in and in our case at thrive five, you would come in authenticate your Google, my business profile. Uh, now Google business profile, we would do an analysis and the salesperson would then give you a call or send you an email or both to try to help you understand the report and, and get into a few more details around our recommendations.

As a path to, you know, selling you on a longer term engagement. So to me, I think, you know, you guys, you guys all know and hopefully our listeners do as well. You know, I think Perry Evans is one of the, you know, premier thinkers in this small business SAS world. Um, it was a model that worked very, very well for us.

And I would, I think that this research from Breeden would indicate other SaaS companies should probably consider a similar track.

Greg: And we like to thank our second sponsor Perry Evans .

Mike: And, and I would point out that this ties back to this is the problem that home advisor and Yelp and everybody in local has had, which is this expensive acquisition is well acquisition through sales people.

On the phone dialing and redialing and BA you know, literally harassing small businesses to get their attention. And then

Greg: let me, let me just interject a close it. Let, let me interject an anecdote, which is illustrative of that point. So um, hopefully this doesn't get anybody into trouble. I don't think so.

um, back, back in the days when there was a lot of discussion of salespeople at Yelp offering to change or manipulate reviews for the benefit of advertisers. Right. And that was a widespread perception. There was nothing ever proven. Um, but that was a, a belief that existed for a long time. So Yelp Yelp allowed me to come in at one point and listen this, oh, you know what ha what prompted it is that I had a plumber coming to my own house.

And I said blah, blah, blah, Yelp, where, you know, we were talking about how I found him. And he gave me a version of the story where somebody, I. Allegedly said this to him, that they would do some stuff to his reviews if he, if he became an advertiser. So I communicated this to, to Yelp and they said, come in and listen to the calls for this guy, right.

This particular plumber. So I listened to one sided calls because they weren't recording. They were only recording their sales people and complies with California law. So I listened to one side had Versions of these calls. And in fact, there was no offer to manipulate reviews to this guy, but yet he perceived that.

But what I'm the reason I'm bringing up this very long-winded story is because there were probably 30 or 40 calls and they couldn't get an appointment to talk about . I mean, it was like, it was like they went through one, there was one sales rep and then it transitioned to a different sales rep. They went on and on and on, and this guy was just not.

having it, you know? So it's like back to you, Mike, I mean, this is a, an anecdotal version of the wasteful inefficient, you know, use of sales people to try and acquire small business customers that aren't ready to be sold on something. Right. And, and you

David: know, where should that, where should that budget go?

I think Breeden argues it should certainly go to content it, to, you know, help businesses understand more about what you're offering. I would argue. It should also go to product and engineering to try to. Build sort of lightweight freemium type extensions of your, of your paid offering to try to bring people into your product with a teaser that will hopefully increase their, their adoption of it.

Uh, the other thing I think this highlights and Breeden was, was. Right to point this out. You, you really want the, if anything, the alignment between sales and marketing is even more important when you're selling to small businesses as to enterprise, because you really need to be telling the same story with your marketing content for the 30% of businesses who are, you know doing before the, before they re, before they talk to a salesperson, the 70% is doing their own research that you really want that.

Research experience to have resonance. When you finally do get a sales call, if you get a sales call after 40 40 tries. So I think that there's a number of really interesting takeaways from, from the survey. Uh, none of them particularly painting sales in a favorable light when it comes to SMBs

Greg: the, the there's another survey it's not a survey actually.

It's a sort of a database study byta that I linked to from that item that the breeding item. That talks about this, this, this sort of freemium product led growth performance. And then it has some, I, I won't summarize it here, but it has some very interesting findings, which basically validate a lot of the things that you're saying.

And there's some nuances in terms of number of products adopted and churn and so on and so forth. So it's worth, it's worth checking that out out as well. If you're interested in this conversation. So

Mike: just a note, I've created a new holiday for Sunday. It's called the verbal Equinox. It's where everybody gets equal time in your life to express their opinion.

Greg: That's just a complete non what?

Mike: What's the source total? Well, just in closing, the ver Equinox is coming up. I rode my bike. It's a beautiful day here. It's a beautiful spring and we see all go out and enjoy it. But so

David: particularly now, particularly now that we may be approaching permanent daylight savings time.

So the sun, the sun is out here in Portland now until almost seven 30 these days. And I agree with Mike, hopefully it's similarly the nice where you are and you can get out and enjoy a little bit of outdoor

Greg: time and I'll, I'll be participating in a various pagan Ridge tools, this to celebrate the.

All right. Um, thanks for listening everybody. And stay tuned for a new survey that we're gonna push out shortly about some new product ideas we have, and we want your feedback on those.