I have been around local, a long long time, and there is a fundamental question that has been bothering me – who’ s making money in local? It used to be easy to answer this question - consumers used the newspapers and yellow pages to find local businesses. Margins were monopoly like and the newspapers and yellow pages were printing cash in the billions. Today consumers have a plethora of choices from Google to Yelp and increasingly verticalised mobile first on demand local services. Investors are pouring in. Thumbtack and Porch have raised $100M+; Handy $60M; Washio $17M; DogVacay $47M. And now Amazon, Google and newbies such as Curbside are trying to figure out the last mile of same day home delivery and pickup. Integrated local marketing agencies such as ReachLocal, Yodle, Web and Godaddy are fighting for the small local SMB marketing wallets. So who is really making the money today and who will make it tomorrow?
2. Simon Greenman
CEO ServiceMagic
Europe
London / Luxembourg
• Career highlights:
• CEO, ServiceMagic Europe
• MD Online, European Directories
• Head of Digital, Dex Media & R.H.
Donnelley
• Co-founded MapQuest.com
• Also held positions or consulted
with Accenture, AOL, Charles
Schwab, Merkel Direct Marketing.
• Investing:
– Advisor and former Venture Partner
DN Capital
– Angel investor and director
20+ years of international local digital
management and investment
3. So many new companies in local. But who’s
making money?
Courtesy BIA / Kelsey
4. Where’s the money gone? The precipitous decline of the
yellow pages in just six years…
2006
• $12B revenue
• $6B ebitda
• 10x EV / EBITDA
http://www.prnewswire.com/news-releases/worldwide-yellow-pages-revenues-surpass-
31-billion-latest-simba-market-research-says-58546972.htmll various Kelsey research
2012
• $6B revenue
• $2B ebitda
• 1.75x EV / EBITDA
8. 2014 revenues of $544M, +10.5%
YoY
Operating income +$9M
GM 51%
2014 revenues of $475M, -8% YoY
Operating income - $45M
GM 43%
ReachLocal and Web.com are $0.5B revenue
marketing services companies, but little money
9. 2013 $160M +22% YoY
revenues and -$13M operating income…2014
growth accelerating 30%+
Go Daddy is a billion dollar revenue company and Yodle is
likely $200M+. But still no profits.
2013 $1.1B +15% YoY
revenues and operating income of -$200M Vs -
$279M in ‘12
10. 2014 revenues of $315, +28% YoY
Operating income -$12M vs -$33M
PY
GM 83%
2014 revenues of $378M, +62% YoY
Operating income -$9.2M vs -$19M
PY
GM 89%
So what about the new consumer directories? Are they just
about to starting make lots of money?
11. 2014 H1 revenues £70M, 60%+ YoY
Operating income £16M
Operating margin 22%
HomeAdvisor is a $200M+ revenue business,
profitable and growing 20%+ YoY*
2013 revenues of $190M, +18% YoY
Operating income $46M vs $37M PY
Operating margin 25%
But there are a few vertical starting to make serious money.
OpenTable has 25%+ margins and was acquired by Priceline.
2014 revenues £238M
Operating income £100M
Operating margin 42%
IAC Q4 ’14 earnings announcement
12. So who’s really making the money in local?
• In 2014 Google had total of $62B
in revenue, growing 20% YoY
• Operating income of $16.5B
• Gross margin of 62%
• And how much of this is local?
– Todd Rowe heads up Google’s $5B
reseller channel focused on SMBs
across 25 countries
– So could argue they are making as
much as $3B in SME profit globally
• And Google has minimal sales
costs! Others pay for the sales
channel.
• And don’t forget the yellow pages.
• Nor Facebook.
13. Good margin
lead generation
High margin
transacting verticals
High margin search &
directory
Low margin marketing
agencies
So how do you make money in local? Need scale…get
vertical, get the transaction and own the branded media
Vertical and
Transaction
Horizontal and No
Transaction
Don’t own
the
consumer
Own the
consumer
brand
“Picks &
Shovels” –
margin at
scale?
14. OpenTable and JustEat points to the future of where the
money is going…the “uberfication of the world”
Yesterday
Based on ppt from @schlaf and RRE Ventures
The value chain is being dis-intermediated and reassembled by the
on-demand economy
Tomorrow
15. Everything seems to being “uberfied” at the moment
Transportation, dining, delivery, events, home services, healthy
& beauty, food, travel…Everything On Demand
Steve Schlafman, Principal
Transportation Health & BeautyDining + Drinks
Delivery & Logistics
Food & BeverageHome Services
Travel / Hospitality
Events
16. The money is pouring into the On Demand Economy
(ODE)!
• “Instant, pervasive access to goods and services without the burden
of ownership or long-term commitment”
http://www.slideshare.net/ZachNoorani/2014-ode-report
17. Uber has raised $5.9B at a $40B+ valuation. Airbnb has
raised $0.8b at $13B valuation.
• These companies are only five years old but yet
have massive international scale and valuations.
18. In 2013 $1B+ invested in car services alone. And in 2014
Uber raised $3B and in 2015 alone $1B.
http://www.slideshare.net/ZachNoorani/2014-ode-report
19. Home Services marketplaces are really hot…$100Ms
invested in new names…
• Thumbtack has raised $148,200,000 including
Google Ventures. Why? Porch raised $100M.
20. And Serviz has raised $20M to go beyond the marketplace to
its own “fair price” network of tradesmen
21. HomeServices is being sliced and diced into verticals,
with the cleaning vertical raising $100M+
Handy has raised
$45,700,000 in four rounds
22. And want someone to look after your dog?
DogVacay has raised $67,000,000…
23. And can’t be bothered to do your laundry
Washio has raised $16,800,000
24. The ODE economy is happening not just in
America!
• UrbanMassage is offering
massages brought to your
home in London
• Many ODE companies in
Germany – Quandoo just
bought for $219M, Book a
Tiger…
25. If its bookable online its getting money!
Booker has raised
$77,000,000 in just one
round!
26. You will never have to leave your home again!
• Can book pretty much any local service or product!
http://www.slideshare.net/ZachNoorani/2014-ode-report
27. So where’s the money going?
• The race is on for the On Demand Economy – first
mover advantage exists
• Google is concerned that the front door to local is no
longer its search, but the app (and Amazon)
• If you are going to make really good money, you
need to ensure you scale really fast…
– Get lots of investment!
– Get branded!
– Get into that transaction!
Good morning. It is a pleasure to be here in Dublin and to see so many faces.
My name is Simon Greenman, CEO of Service Magic (aka) Home Advisor Europe.
I have been around local, a long long time, and there is a fundamental question that has been bothering me – who’ s making money in local? It used to be easy to answer this question - consumers used the newspapers and yellow pages to find local businesses. Margins were monopoly like and the newspapers and yellow pages were printing cash in the billions. Today consumers have a plethora of choices from Google to Yelp and increasingly verticalised mobile first on demand local services. Investors are pouring in. Thumbtack and Porch have raised $100M; Handy $45M; Washio $17M; DogVacay $47M. And now Amazon, Google and newbies such as Curbside are trying to figure out the last mile of same day home delivery and pickup. Integrated local marketing agencies such as ReachLocal, Yodle, Web and Godaddy are fighting for the small local SMB marketing wallets. So who is really making the money today and who will make it tomorrow?
So I am going to take a look at the local landscape of companies, business models, and investment and try to work out where the money is flowing.
I have 20 years wearing two hats – (1) an operator and (2) by night, or rather a hobby, an investor in local digital copmanies.
I wanted go through above in detail but I spent about ten years in the US and Europe with European Directors and DexMedia as Head of Digital leading the transformation of directories businesses form print to online. I was lucky to get involved in the Internet in the early days when we sarted MapQuest the first local search service that ushered in the era of Google Maps that you use today.
On the investing side I am an advisor to DN Capital, a European – Californian VC whos most notable investment is Shazam. I also am very active in the Local startup ecosystem as an angel investor and a Director of an angel group.
A few of the investment that I sourced and / or invested in are below.
This slide is courtesy of BIA/ Kelsey. But it kind of sums up the question I have been trying to answer. Who’s making money? And where’s the money being invested?
There are just a whole hell of a lot of new companies in local. There are payment companies, referral management, video adveritsing, social rep management, loyalty programs, mobile marketing companies, integrated marketing, local based services, SEO services, call trackting and analytics, mobile networks, local directories, sem, directory list management, landing pages and websites, ecommerce. There are hundreds of companies. But who is making the money.
It all used to be so simple…the newspapers and yellow pages made money…
This is somewhat anecdotal and not comprehensive, but there seems to be
Collapsing the value chain
Historically consumers used the newspapers and yellow pages to find local businesses. Margins were monopoly like. Today consumers have a plethora of choices from Google to Yelp and increasingly verticalised mobile first on demand local services. Investors are pouring in. Thumbtack and Porch have raised $100M; Handy $45M; Washio $17M; DogVacay $47M. And now Amazon, Google and newbies such as Curbside are trying to figure out the last mile of same day home delivery and pickup. Integrated local marketing agencies such as ReachLocal, Yodle, Web and Godaddy are fighting for the small local SMB marketing wallets. So who is really making the money today and who will make it tomorrow?