ServiceAlley.com, which launched three weeks ago as a partnership between Teachstreet and the Washington Post, is taking on the major verticals in the home services space. The partnership poses challenged to Angie’s List, IYP’s, Valpak and ServiceMagic for leadership of the home services vertical in the D.C. area and is looking for additional major media partners.
Developers redeployed the platform and metrics from its original TeachStreet success, powered by $3.5 million in investment capital. The interface includes aggregated likes, reviews, and coupons. ServiceAlley’s business model is a modified pay-per-lead directory, which is also designed to “bubble up” providers with the best reviews, largest fan bases and most robust content, rather than just upgraded listings. Other unique features of the platform include:
• Use of Facebook Instant Connect to enable rapid social personalization and capture/verify reviews.
• A free-to-consumers model in direct competetition with the top provider, Angie's List, which charges consumers monthly fees.
• A freemium to modified pay-per-lead model accommodates different sizes of businesses, and competes with ServiceMagic and Valpak.
Background on the company
A key strength of the ServiceAlley platform is the company and experience behind it. The platform is repurposed from TeachStreet.com, an established partner of the Washington Post’s Kaplan education division. In an interview with CEO, David Schappell, we looked at key strengths of that business model and platform.
TeachStreet matches students with classes, and has more than 350,000 active (claimed and registered) class and course listings. Instead of classes, Service Alley offers coupons from providers and counts downloaded or printed coupons as “activations," or leads in its pay-per-lead model.
TeachStreet’s model also found a way to solve the chicken-egg situation of building a paid listing site that has enough listings to be useful, by investing strategically in content creation. Partnering with a media company is an added bonus for the company, since it built the original TeachStreet business without this advantage.
Schapell says he was personally schooled on the “chicken/egg” situation in the directory space at Amazon.com where he worked for seven years in the 3rd Party-Selling divisions (including Amazon Marketplace, Auctions and zShops). Simply put, he says, “E-bay crushed us in the auction space early on, but we kept iterating and eventually created the extremely successful Amazon marketplace."
At TeachStreet, he would avoid similar mistakes. A major reason for the $3.5 million over three rounds of capital was to invest in acquiring content, partners and listings."
“You can't just build a pretty web site and wait for classes to show up.”
Instead, TeachStreet hired a team to scour the web for classes on a city-by-city basis. After the classes were input into the directory, the businesses were then emailed to claim their class listings, with outbound calls to follow-up. The investment paid off by driving the claim rates beyond 25%.
About the unclaimed classes, “after a period of time, we just removed them.” Now almost all classes are claimed or created by teachers, making the site the most robust in its vertical, even with nearly 100% of its listings claimed and updated regularily by users.
The three year old Teachstreet uses what Schappell calls a modified pay-per-lead model in which individual teachers pay $3 per month to list a class, with bigger regionals schools paying $30 a month to list and large national partners like Kaplan, pay on an affliate model - either a percentage or cost per lead - every time they sell a course. So there are roughly 8 or 9 different ways to pay, depending on what the clients wants.
“The bigger schools prefer to get on one of our performance basis that alligns our interests,” says Schappell.
Strategy for building Service Alley
Originally approached by the Washington Post, Schappell's team had its first major client before it repurposed the platform to home services. They built-out Service Alley as a tiered business model like TeachStreet, designed to accommodate both small home services providers as well as larger regional companies. The new platform also copied freemium aspects of the model: It’s free for businesses to list and execute three leads, then after three leads, businesses pays $30 a month for unlimited number of leads.
It’s also free to add coupons (see coupons aggregation widget and individual page in the images to the right, click to enlarge). However Plus (i.e. Premium) businesses pay $3 every time a customer activates the coupon, and Basic businesses pay $9 per activation. The pricing gives Service Alley an advantage over Valpak which charges for distribution with no activation guarantee.
Since the company has a technology development team, they also created a group deal platform for the site. The Group deal resides in a top right 300x250 ad slot, right where it's expected on news platforms, and takes advantage of the huge email list the Washingpost already has. To give an idea of the power of this list, think ten cents per name name in gross revenues per deal from day one; our estimate (not Schappell's) is that the deals alone could bring in $30,000 to $40,000 a day from a list that is 800,000 e-mails strong.
Modified directory rankings
A key advantage over IYP’s from a user standpoint is that rankings are not determined by who pays, but instead by an algorithm that takes into account user preferences. Listings that rise to the top meet a variety of criteria, including being rated highest by users, having been added most often to “favorites” lists, having the richest content, and being members of associations or posting other forms of accredidation. So while adding paid content helps lift the ranking, user-generated feedback is also primary and blended into the score.
Solving the chicken-and-egg problem
Like TeachStreet, ServiceAlley has an aggressive launch strategy designed to build critical mass quickly. Unlike TeachStreet however, it can take advantage of the WashingtonPost's massive reach and email lists. Live for just a few weeks (as of January 20) in Washington, D.C., the site started out with licensed data which has been cleaned. Then businesses were emailed to claim their listing and get up to three free leads. Phone sales have followed up. The Washingtonpost.com has committed fixed positions on its site to promote the project (the group deal could easily outperform the directory for the first year).
Schappell says the biggest competitor to ServiceAlley in major markets is Angie's List, so a key advantage of Service Alley is that it’s free. The advantage over IYP’s is that the rankings are build around consumer interaction. The coupons on the site also compete with Valpak, who does not have a pay per lead model. ServiceMagic is also in the space with pay-per-lead, but Schappell says, "there's very little for a customer to 'browse through' (to read reviews, check friend ratings, etc.). In that way, we're extremely different -- we think the richness of information from friend recommendations, Association membership, content created by service providers, and more really help the customer make their own informed choices."
The group is already talking about additional partnerships. "We could have another party up on Service Alley in a month if the Post finds the right partner. We just need to secure the data and clean the data. Technologywise, it's already thought out."
"The size of the market will be the biggest driver," in selecting new markets, Schappell says, "along with the likely presence of a leading media partner (similar to The Washington Post in their home market in the DC Metro) that's excited about making Service Alley a success. Everyone always says that they don't focus on competitors, but if all else is equal, we'd be more likely to first expand to markets without clearly dominant players. That said, certain brands such as Angies List and others are fairly strong in many markets, so that wouldn't likely be a deterrent."
Our take: It looks like the sum is equal to more than the parts in this partnership. The background of the company and its first partner is an A+. We also like the way the pay-per-lead model competes with IYP's, use of Facebook to capture reviewer information, the simple thumbs up/down review option and partially user-generated rankings. The interface is clean with the main navigational elements in the right places. In short, this business model looks thought-through from a market position standpoint and staffed by an experienced team.
On the downside, media partners who take up this model need to be prepared to make a significant investment in gaining content upfront in order for the model to work. Not a good fit for small companies hoping to link to a directory and collect passive revenues without investing in content. ServiceAlley requires deploying a telemarking team to follow-up with vendors and create critical mass for several months, in return for a winning strategy in a key market sector.
The author, Alisa Cromer is publisher of a variety of online media, including LocalMediaInsider and MediaExecsTech, developed while on a fellowship with the Reynolds Journalism Institute and which has evolved into a leading marketing company for media technology start-ups. In 2017 she founded Worldstir.com, an online magazine, to showcases perspectives from around the world on new topic each month, translated from and to the top five languages in the world.
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