The Near Memo, Episode 6

Greg: Welcome to episode number six of the near memo, where we talk about what's happened this weekend, search social and local commerce. I'm joined as always by Mike Blumenthal and David Mihm. I'm Greg Sterling, and let's get to it. I get to go first this week.

How are you guys by the way?

David: We're good. And we should note it's by popular acclaim. It's  not a dictatorial decision to go first.

Greg: Okay. All right. Anyway there were a couple of things this week that I thought were pretty interesting, that kind of combined  into one larger theme for me.  There was a Bloomberg piece earlier in the week that talked about how the dominance of Google and Facebook in the ad market, something like 75% of all the ad revenue is flowing to them, is forcing companies to find other ways to support themselves  paywalls, paid content and  that ads are not a viable source  of support.

And think about the news industry.News publishers is one, but  there's paid newsletters and there's fan supported sites and Twitter with it's  paid tweets. And we're seeing all these subscription or paid content models start to show up.  

Also one thought I had was that privacy is playing in this as well. So the disappearance of cookies for retargeting purposes, behavioral targeting, and then on the other side, Apple's impending IDFA sort of deprecation move, making it much more challenging to monetize the web from an ad standpoint.

So I think there's a number of things going on, but the thing that really struck me that was interesting was TripAdvisor announcing, and I'm now forgetting what they're calling it, a new loyalty program that costs a hundred bucks a year. It's basically Amazon prime for travel.

And you pay 99 bucks as a consumer and you get access to special perks from these hotels, the participating hotels, and the hotels also get higher and better visibility on the TripAdvisor site. So there's a marketing dimension to it. And then they also get to waive the commission that they would otherwise pay, which is up to 30% of the booking fee.

So it's a pretty good deal for the hotel and the consumer who's already used to paying. It's pretty good for frequent leisure travelers or business travelers. And so a hundred bucks a year is not a big deal. It'll help them with loyalty. It's  also a response, I think, to Google travel in a certain way, building direct relationships with customers who are going to go there and not go to Google and search for hotels in Miami or whatever.

Mike: So do you anticipate their income model is going to switch from commission-based to well for subscription-based?

Greg: I don't know, I didn't talk to them. And I don't know exactly what their anticipated revenues are. I'm sure they've white boarded the whole thing out; they have some spreadsheets somewhere.

Mike: But I assume they have several hundred spreadsheets.

Greg: Yes. It was just a kind of seat of the pants decision. No, they tested it.

They said in December and they wouldn't have decided to roll it out nationally if it wasn't successful in that early test.

I think they're gonna take whatever revenue they were getting from bookings, and that'll be substituted by the consumer loyalty fees. And they must've done a calculation to say that's a good deal and anticipated how many were going to participate.  They must have modeled it out, but it's like Amazon, the most, arguably the most successful loyalty program ever is Amazon prime.  Maybe some of the airlines, although that's a different conversation because  you're captive to the airlines.

And other people are trying to emulate that. And  some retailers are now  playing with the idea of a paid loyalty program where you get access to benefits and it  locks you in.    

And as we've seen from Amazon  Prime data  those people spend more money on Amazon, almost two X, I think what the ordinary Amazon shopper and more frequency.

And so it really works. So it's an interesting surprise.

David: Yeah. I'm  surprised it's only two X, I think in my case, commodity items that I normally would have gone to our version of Kroger, which is Fred Meyer.  For me, it's always Amazon prime for toilet paper and peanut butter and that kind of thing.

I actually, it strikes me that your observation about  trying to move the party from  Google travel and Google hotels  over to TripAdvisor, I think  is a very astute observation.  Frankly, for leisure travel  I'm almost exclusively Airbnb  these days, but  for business travel  when I was going back and forth to Denver  for three, five days,

Google hotels was my starting point and I can definitely see something like this, particularly if my finance department is paying for a business subscription, really changing my behavior  quite a bit.

So I think it's a really smart move on TripAdvisor's part.  They certainly have  a track record of being far more favorable to hotels when it comes to things like review solicitation and that sort of thing  than many of their other competitors.

Mike: So it'll probably be six and six months before we see any significant travel. And then there'll be another six months before we know how this impacts there.    But it's an interesting situation because it's a decision that benefits both the consumer provided that the perks are good enough and the hotels  and  there's not a lot of those examples online.

David: Yeah. So that's actually a good segue into my--

Greg: That was my idea. It's a set up.  

David: This is why we pay you the big bucks to moderate these things.

Greg:  Oh--that was a white supremacy symbol. Sorry. I meant to say zero, whatever. Okay. Can't do. Can't do okay anymore. All right.

David: My story, the story that caught my eye this week, was  one of the more inspiring executive, puff pieces that I've seen in awhile.  It was a story by Fast Company on the CEO and co-founder of Tock, T-O-C-K  who is a restaurateur himself. He's a co-owner of a very, well-regarded a couple of very well-regarded Chicago restaurants.

And he started Tock, which is essentially a DoorDash competitor. I wouldn't exactly call them a clone, but it's very similar from a consumer standpoint. And the story was just about how well they've done during the pandemic. And  I had actually never even heard of them until a couple of months ago.

We were gifted a talk gift card for my wife's birthday and the story really shed some light on a couple of things that I think set them apart from a lot of the other, more extractive  tech companies that they are competing with, which were started by Silicon Valley types instead of somebody from the industry.

So their pricing model is quite different. They take a, essentially a pass through on any transaction charges of  3% for any orders. And then it's a flat $200 a month subscription  which is very different from the per order percentage that  all of these  all of their delivery competitors, where many of their delivery competitors  are extracting.

Which I think is like the TripAdvisor example. I think that's why it was a good segue is that they're doing well by their customers.

And I think the fact that they were started by a guy from the industry, probably gives them considerably more customer empathy and thus I think really good product insights into what's going to work and what's going to sell in this industry then  than similar products built by Silicon Valley types.

So that was a  really interesting story, which we did link to and it did make the cut in one of our newsletters this week as one of the smaller single line links at the bottom.

Mike: How are they handling employee  employees / contractors?

David: So  I don't know the answer to that actually Mike, but  I do know  that they, another thing that benefits the restaurant, is the restaurant essentially owns all their customers. They're not this sort of middleman the way DoorDash and GrubHub are where you don't always get access to the customers.

I don't know the answer  on the Uber prop 19 or whatever the California  bill was. I  don't know how they're handling that.

Mike: I guess we're up to me.

So the article that I found most intriguing, I  feel like a Kremlinologist reading Google's PR around local these days, but there was their “Three new ways anyone can update Google apps” post.

So Google threw a bunch of stuff into this sort of stew press release, and you have to  spend some time factoring it and extracting it to find the the interesting tidbits in there.

But one, they mentioned that there were 200 entities in their local database that included not just businesses, which is probably a hundred, 125 million, but also parks and others.  

Greg:   200 million, 200 million places in their database, which I thought was, yeah. Interesting.

Mike:They also noted that they had reached a new milestone with their local guides of 150 million.

First time they published that number in over a year. I think last time they published it, it was 90 million.  So that's a pretty significant size of active users. These are the people, they noted that 70%, since the inception of the program, 70% of reviews, photos and other user generated content came from this group of people.

So these are the most active on Google  and that they've added 8 million places  to their database  and made more than 17 million  updates, whatever.

So a lot.

And if you do the math and you assume like with most platforms, Google has said that they have a billion users on maps, which makes the platform one of the largest.

But if you extrapolate this 150 million assume it's 10% of their user base, they're probably at 1.5 billion users at this point, which again, they haven't released that information recently.

By marshaling this massive force  these incredibly active users who care about reviews, photos, local content, open hours, et cetera:

One, they have the ability to keep their map data updated more current than anybody else. And two, they have the most entity information based user-generated content of anybody.

So I'd say it is a huge competitive advantage and to leverage this they created this Local Love Challenge, right? They're further gamifying, what's already gamified with Local Guides and the game  is stacked in favor of the house.

Google gets a lot of work done by these people and very little reward.  They basically give away existing promos to the New York Times that say get 30 days free the New York times as a local guide.

David: I haven't seen them run this playbook before, Mike, it's shocking!

Greg: That's one of the ways they're supporting journalism. :)

Mike: There you go.

In this Local Love challenge their stated goal is to get a hundred thousand businesses updated, certainly in the spirit of of supporting our world in this time of crisis like everything Google does.

They're always thinking about both the accuracy for the searcher, as well as the quality of the data set. And  I don't want to be cynical, but this is a good way for them to capture what is obviously rapidly changing data. As we move forward, as the economy recovers, and we move to opening  which stores are still open, which ones are  which ones have updated ours, which one's are closed.

This is a great way to  put a stake in the ground on that and get current information in a context in which this local data is just changing  very quickly.

Greg: So I would, Oh, go ahead, David.

David: Sure. I was just going to say all kidding aside, I do applaud Google's efforts to encourage people to help local businesses in their communities, which is not something we've seen Yelp do, for example  in terms of actively soliciting reviews.

And I think that Yelp will of course come back and say, “Oh  this is more proof that our reviews are better because they're less biased”. I personally don't see any bias in asking for  and Google asking for reviews  of local businesses.

The more than mirrors  as far as I can tell, I'd be interested to know how many local guides are leaving reviews of truly local spots, as opposed to Walmarts and targets and those sorts of things.

And if that's a qualification for this local love program, Yeah,

Mike: I don't think there's any qualifications to participate just as a side note, but--

Greg: a couple of points.  I think  the whole local guides program has been astonishingly successful for Google.   It's gotta be one of the most successful community Programs by any company.  

It's just unbelievably successful, essentially, a Yelp, a rip off of the Yelp elite squad on a global scale, but they have just managed  to engage so many people  who are pretty genuinely enthusiastic.  They really feel a sense most of them, or many of them feel a sense of kind of ownership  and responsibility and commitment to the platform, which is an amazing thing that they've been able to do.

The 200 million business number entities number that you referenced, Mike. Yeah. So  I hadn't seen that. I hadn't focused on that in the post, but  what was interesting, what's interesting to me about that is if that's a global number  how does that compare to the total universe of local businesses out there?

They're 30, 30 million or some number approaching that in the U.S.

Mike: So  I've talked to InfoUSA about this and Google and the number that are in Google's local database, which is. physical locations, which are really not businesses, is 16.5 16.8 17 million is what's in Google's database, not the 30 million that the government says exists.

Greg: Yeah. There's a lot of service-based businesses  and people  working out of their houses and  there's a lot of  solopreneurs or whatever  Soho's whatever you want to call them, that aren't going to be captured in that. But that's an interesting, that's an interesting point.

The final thing I would say. Is there's this kind of irony in my mind between  “Hey business owners don't use any financial incentives or any incentives to get reviews on your own behalf, but then Google has various incentives that they use, or they used to use more sort of swag and Android stuff and  to get people to participate in contests.

So  they were fully incentivizing people with different perks in order to get them    to leave reviews.

Mike: Yeah, their argument is that it's not a conflict of interest for them to incentivize any review about any business, where it is a conflict of interest for the business to incentivize the reviews about their business, a subtle difference, but that's what they insist.

And finally, in this to support all this, they released a new feature that they're calling “photo updates”  which is a new content type on Google. That's  very visually oriented Post type  of input.

It's very similar. In fact, resides on Google Maps to the same place as business Posts.  Very image focused though with a small amount of text.

So it's not quite a review. You don't leave stars.  It's not just an image, but it's an image with some text that shows up in the updates area  which is interesting to me, because it's indicative of Google's trend towards visual search.  

It's a very, Instagrammy kind of presentation, very image heavy.

Greg: And mobile and mobile friendly, which is where most of the traffic is.

Mike: It's also, as David pointed out to me offline, it's a reminder, should be a reminder to every business in the world that you don't own this space. You barely rent it. You are,  it's more of a, what do you call a serf in relation to the land here? It's something similar to that.  

So  it certainly visually or accentuates that position.

But what's intriguing to me it's also part of this gamification and it's a source of both textual information and visual data, which Google is now able to translate into entity information.

So the visual data, they've gotten really good at image recogniyion. So they know if somebody posts a picture of an bag and it's a handbag and they're able to associate that with the entity.

So it gives them another sort of leg up at the deepest levels of the knowledge graph as they're building out this understanding of the businesses.

So it's just, it was, again, I felt like a Kremlinologist. You  have to read this with this frame of what is Google and what are they doing?

But I thought it was a very informative post by them.

Greg: Yeah. Very interesting.  David, any final thoughts before we adjourn for this week?

David: One quick one, which is, I think all three of us will be speaking at the Streetfight Summit  on May the fourth. Our friend Damian Rollison said there will be plenty of  Star Wars jokes at the event as a result.

But  you guys should all check out Streefight summit. If you're interested in hearing more commentary, both from us as well as plenty of  smarter and other  folks  in the industry that are participating in the events.

Mike: And as long as we're highlighting events, if you're looking for a very tactically focused local event, LocalU is doing  an online event, April 7th  which they're giving away a number of scholarships for.

So if you're in a situation where you're not able to pay that relatively low entrance fee,  there are scholarships available as well. So that's at localu.org where You can sign up for it.

Greg: All right on that note.  Thanks again and have a good weekend, everybody. We'll talk to you next week.

David: You too. Thanks Greg.