By Leslie Walker
Washington Post Staff Writer
Thursday, December 9, 1999; Page E01
Local services are among the last Internet holdouts--but not for long.
So many entrepreneurs are rushing to drag dentists, housekeepers, plumbers and the like online that I'm convinced their efforts to wire the fragmented market for local services looms as one of the biggest Internet stories of next year. Not necessarily a success story, either.
Many of the ventures are signing up local providers into new national networks, believing electronic scheduling will save the local merchants money and help them achieve the kind of efficiencies enjoyed by larger corporations. Venture capitalists are pumping hundreds of millions of dollars into this movement.
Some are tackling specific categories. ESalon.com will launch a one-stop Web site for local beauty salons in February. Teetimes.com allows golfers to book rounds at local courses. ImproveNet.com pioneered the concept by helping consumers find and hire home-improvement contractors online.
Others are trying to span every service category imaginable with hopes of drawing enough consumers to become a one-stop shop for services, much as eBay is the Web's premiere flea market. The service start-ups have names like Handshake.com, Imandi.com, Fundu.com and EFrenzy.com.
"We are targeting people who tell us they prefer the Internet as a lifestyle choice over the yellow pages," said Ajay Shah, the 23-year-old co-founder of Handshake.com. "Our site will provide more information than the yellow pages--pricing, reviews from consumers, and eventually scheduling information."
Make no mistake, these entrepreneurs face some of the most treacherous potholes in cyberspace--holes so deep that I bet 90 percent of their newfangled yellow-pages sites never see a second edition. I thought about this over the past four days as I picked up my old-fashioned telephone to request help fixing a flat tire, reschedule a missed hair appointment, find a plumber and confirm my appointment to have high-speed Internet access installed at my home.
Nary a Net connection in the bunch, even though one actually involves the Net. I quickly realized that the software required to plug their complex operations into the Net either does not exist yet or is in its infancy. And Internet commerce, by and large, is too expensive for local merchants to go it alone. A fully functional e-commerce site can cost $1 million, plus hefty operating costs.
Selling local services online is even more complex than selling merchandise. Services are especially tricky because most have off-line components (hair snipping and lawn mowing can't be done electronically, for example); consumers typically demand more information to choose a provider than they do to buy goods; and most service industries are fragmented geographically, with few national players. That means more legwork for Internet entrepreneurs trying to sign up merchants. Services also involve more two-way negotiating.
But services represent more than 70 percent of the U.S. economy, and with a potential payoff so huge, venture capitalists are more than willing to back a few losers.
E-service start-ups must compete with established Internet players who also are trying to string local service providers into national networks. Ticketmaster Online-CitySearch Inc. (which is a partner of The Washington Post's new-media subsidiary) is inking deals with start-ups to plug their scheduling software into its network of city guides. Reverse seller Priceline.com is going directly after local services, branching out last month from airline and hotel reservations into car sales and grocery delivery. Also in the local race are the yellow pages from phone companies.
Perhaps the toughest decision entrepreneurs face is which local services to tackle. Some are mistakenly trying, I think, to do everything from a single site. Imandi.com offers to help consumers find both goods and services--from Pokemon trading cards to payroll. As a consumer, I find it confusing to see diamonds listed alongside hotel reservations. That's not my idea of smart shopping in cyberspace. Goods and services may coexist happily in off-line yellow pages, but they grow overwhelming when extra information is added online, such as photographs and customer ratings.
Most Web service centers work basically the same way: Consumers submit requests describing work they want done. Those are e-mailed or faxed to merchants, who send back bids which the customers can review at the sites. The Internet service brokers hope to make money by charging merchants a small slice of each transaction and by selling advertising.
Imandi.com launched in July. Handshake went online in October, as did Dallas-based Fundu.com. EFrenzy.com will launch early next year, created by three Harvard business school graduates.
Palo Alto Coffee Co., another California start-up, has developed special scheduling software to let consumers book appointments online with local beauty shops, dentists, car-repair centers and restaurants.
Handshake.com says it is getting 50 consumer requests a day, which it routes to the appropriate providers among the 650,000 merchants who have agreed to accept requests via the Web, e-mail or fax. "We found roughly 80 percent of small businesses we work with are not Web-enabled," said chief executive Shah. "That will be our biggest challenge."
Some companies are focusing on technology, licensing their software to others to market. PointServe Inc., for example, targets mobile professionals using artificial-intelligence software originally designed to control satellites. The company modified the program to provide driving directions and monitor the time that home service workers spend at each stop, so companies can better inform customers of arrival times. "Some services lose 40 percent of their customers every year. That is partly over dissatisfaction about the time window for home visits," said PointServe Vice President Rick Briesch. "It's annoying for customers to wait all day."
Ticketmaster-CitySearch has licensed PointServe's software, which is being tested in Utah. One financial backer of PointServe is the nation's largest local service franchiser, ServiceMaster, with nearly $6 billion in annual sales and familiar service trade names such as Merry Maids and TruGreen ChemLawn.
Kenneth Hooten, who directs ServiceMaster's consumer Internet strategy and its venture-capital fund, has been trying to wire local service providers for more than five years. He agrees the market opportunity is huge but thinks success remains three to five years away. Of those charging up the hill, he said, "half the people don't understand itand the other half underestimate it."
After spending time testing Web service centers and talking to their creators, I agree. But I'm convinced this is one Internet project we should monitor closely. Consumers and merchants will greatly influence the evolution of local services online by deciding which sites deserve their business. In so doing, they will help shape the next generation of local commerce.
© 1999 The Washington Post Company