The Potential of Digital Marketplaces to Destroy and Enhance Professional Services
MC: You’re listening to Rattle and Pedal, diversion thoughts on marketing and growing professional services firms. Your hosts are Jason Mlicki and Jeff McKay.
Jason Mlicki: So Jeff, I read the other day that there is a dog walking app, an app to connect dog walkers with people who need dogs walked, that got a valuation of $300 million. Actually, I don’t know if it was the value. Actually the investment was $300 million. And there’s another dog walking app that provides the same service that got $150 million. And, you know it got me thinking about one of the very early episodes we did on the marketing trend devaluing your business, which was really all about how VC backed SAS companies are sort of coming out of the woodwork to destroy whole industries. And it got me thinking about marketplaces. And so today we are going to talk about marketplaces. And to do that, I’ve invited a kind of a new friend of mine in a way, Barron Caster, who’s the director of growth at Rev. So, let me real quick say hi to Barron and hi to Jeff and let you guys both say hello.
Barron Caster: Hello. Thank you for having me. Great to be here today.
Jeff McKay: Jason, you’re so negative. You are just so negative.
Jason Mlicki: How am I negative?
Jeff McKay: You said that these software companies destroy whole industries. They’re not destroying them. They’re reinventing them. They’re adding value. They’re not destroying them.
Jason Mlicki: Yes. In full disclosure, and sometimes we talked about this in the prep for this, they’re creating whole new industries that never existed. And that’s what I always loved about the app store, the idea that out of nothing emerged a multi-billion dollar economy. Right? But I’m excited to hear from Barron. When I first connected with Barron, and I reached out to him and said, “Hey, you know Barron, we did this podcast on SAS companies swallowing professional services and I think Rev is kind of a proof point on that.” And so we talked to him and he’s like, he started talking to us about marketplaces and I think we both turned our head and said, “What?” And so I want to start there, Barron. So help us understand when VC companies and SAS companies talk about marketplaces, what the hell does that mean?
Barron Caster: Yeah. Well, marketplaces have really been around forever, right? You go to a market, you have buyers and sellers. And today when we talk about marketplaces, we’re talking about technology acting as an intermediary to add value to both buyers and sellers. So the internet is an extremely powerful tool, ability to connect people all over the world. How do you do that in a way that adds value to different industries, different types of goods, all of these things? So, the first type of marketplaces that were out there were very open, unmanaged marketplaces where you can find large postings, like Craigslist, where you can just go post anything, find anyone to do anything. And there was no real responsibility on the marketplace itself to administer trust or anything like that. If there’s something fraudulent, yeah, you may warn them and they’ll take something down, but it was just a way of connecting people in a different way.
Barron Caster: And there has been an evolution from the unmanaged marketplaces of the world, like a Craigslist or another one in the labor industry and services would be Upwork, which is now a public company where you can find everyone from WordPress developers to designers to do work for you to the concept of a managed marketplace, where actually the company takes on the responsibility of delivering the value in the service that you’re ordering. So, Rev is a managed marketplace where you buy audio transcription services or video captioning services from us and we stand by our quality guarantee and then we take care of actually finding someone to fulfill the services for you.
Jason Mlicki: What I find so interesting about that, and Jeff chime in please, is I never put Rev in that bucket of marketplaces. So like the notion of Craigslist or eBay or even Amazon as a marketplace now makes total sense to me because you transparently see that there’s a connection being had between two entities and the platform is connecting the two. And I always thought of Rev as online transcription service, or another example that came to mind on me recently, I think maybe you prompted it there, was like Angie’s List kind of in that same vein. I saw it as a software product that I’m interfacing with. I guess I never thought of Uber as a marketplace per se, because I think about, I’m hiring Uber to drive me somewhere. But to your point, they don’t own the assets of delivery.
Barron Caster: Yeah, exactly. And the idea is you wouldn’t have to think about Uber as a marketplace because you don’t want to go into the Uber app and find the right driver who maybe three minutes away and can meet you downstairs in the right size car. You know you don’t want to have to take on the burden of choosing the person who will drive you. You want to load that trust onto the company itself. So the company has to make the smart decision of how to properly route your ride requests to its network of people, as opposed to you using the marketplace. If it was an open marketplace, you’re trying to go in and find the specific person that could handle that for you.
Jason Mlicki: The marketplace as the concept is both a disruptor and a creator, right? So it’s going to disrupt whole segments of economies. I mean we’ve talked, everyone’s talked at length about how Uber’s disrupted the taxi cab service, right? But then there’s also innovators and creators as marketplaces, right? The marketplace connecting people that could never have been connected in other ways before. eBay comes to mind.
Barron Caster: Yeah. I would also say Uber has created tons of value. Before Uber was around, if you wanted to get a ride as a rider, like me on a Saturday night with my wife trying to go out on a date, we would have to call a cab company and there was no visibility if that cab would actually show up or not, or to walk to a very busy street corner or otherwise I would have to drive myself and worry about parking in the city. All of those kinds of things. So it’s added tons of value for the riders.
Barron Caster: And on the supply side, each city has its own broken way of applying for taxi medallions and it’s really difficult to become a taxi driver and it’s a very tight-knit system because the taxi union has tons of power, right? So it’s actually allowed people to get easy access to decent-paying jobs on the supply side. Otherwise, there wouldn’t be so many drivers or riders using the services. So it’s created tons of value on both sides. Even though it has-
Jason Mlicki: So, it’s a disruptor and a creator simultaneously. It’s not either or. It’s not one or the other.
Barron Caster: Exactly, exactly. When they were first valuing Uber and talking about it, they thought it would just be changing the current taxi system, but today Uber is valued more than all of the taxi systems in the US combined because it’s creating so much more value than was already latent in the system.
Jeff McKay: Barron, you used an interesting word, broken. And, to me, that … No, I mean really. Taxi systems were broken in the way you described them. You didn’t use the word, but corrupt would be a word that you could throw in there. But I mean-
Jason Mlicki: That’s coming from a guy who lives in Chicago clearly.
Jeff McKay: Yeah, yeah. But I mean what do you have? One out of every hundred cab rides you would say, “Yeah, that was a good cab ride. It was safe. It was quiet. The cab was clean.” I mean, it just doesn’t happen. So broken is in the eye of the beholder because if you looked at the cab companies, they wouldn’t have thought that system was broken at all.
Jason Mlicki: It was great.
Jeff McKay: But if you look at the consumers, it was very broken. And I think that’s the trap that most leadership teams, when they’re setting strategy and get blindsided by someone like an Uber, they don’t have a client-centric perspective and they’re happy with the status quo. And it’s almost trite to even say that, but you have to define what broken is from a buyer’s perspective. You know, whenever I work with clients, I always ask them this question when we’re working on an ideal client, is what is this client not doing that if they could wave a magic wand and have it be that way, what would they do? And most of the clients are like, “Well, I don’t know.” I mean they don’t even take the time to think that way, but I don’t know. I think broken is a keyword here. So you were going to say something. I hope you didn’t lose your thought after my diatribe.
Barron Caster: No worries. No, I agree that you have to approach these problems with first principles thinking not just assuming everything that exists today is the way it should be working. But the point I wanted to add was I actually was forced to take a cab about three months ago from San Francisco, and the experience has actually been significantly improved over the past few years because Uber has forced the taxis’ hands to improve their service.
Barron Caster: So I’ll give you an example. In the car, there was a constant recording both inside and outside of the vehicle so that you can make sure you are safe and it’s constantly being streamed live and it reminded you to wear your seatbelt. And because of that trust, they can then remove that stocky barrier that normally makes you feel like you’re in the back of a police car and you can just be sitting in a regular car. And those are the sorts of things that would have never happened if the industry had never changed or face any fear from the outside. Whereas it was actually a move to massively improve the service vastly. And I actually enjoyed that cab ride from the airport.
Jason Mlicki: First time ever, right?
Barron Caster: It was, it was. It was a significantly better experience for both me and the driver. The driver was talking about how all the improvements of the cars were fantastic. Obviously he didn’t love Uber, but he acknowledged that that was the reason they are making these changes.
Jason Mlicki: Interesting.
Jeff McKay: A rising tide lifts all boats.
Jason Mlicki: So it’s been the marketplace that [crosstalk 00:10:02] the innovation. Yeah, lifts all boats. All right. I want to transition. Before we run out of time, I want to cover two things and the first is I want to talk about Rev specifically because, full disclosure, we use Rev. Rattle and Pedal uses Rev. And how we use it is obviously to transcribe these podcasts so that we can turn audio content into written content. So my first take on Rev was it’s an online transcription service and that’s how it was presented to me and that’s how we used it. But this conversation has me thinking about a totally different. So Barron, take a few minutes. Tell us about Rev and what it does and how you think about Rev in the context of what we’re talking about today.
Barron Caster: Yeah, definitely. Rev is exactly what you said. We’re primarily an online transcription service. We have other services as well. Video captioning, video subtitling. So taking English content, translating the subtitles into a variety of languages, translating documents. And more recently we’ve actually started getting into automatic transcription as well. We’ll talk a little bit about the origin of the company. Our founder and CEO used to work at Upwork, which is a large open marketplace where you could find anyone to do any form of labor. And he thought that if you took one slice and one type of service, you could create a marketplace that added more value to both the buyers and the suppliers. And we started with document translation, but quickly shifted to audio transcription.
Barron Caster: And we found that by focusing on one specific domain, you could build tons of software that makes people’s lives both easier in terms of ordering the services and performing the service itself. And what I mean by that is we have free mobile apps that we’ve built for recording conversations and calls, integrations to a lot of different video content or audio repositories for the customers. And then on the supply side for the freelancers, we have built tons of software that actually helps them transcribe way faster and caption way faster.
Jason Mlicki: What’s interesting to me, real quick, and I’ll tell a backstory, Barron, as I told this to you in the prep call, was so when I first got out of college in the mid ’90s, I go work for an insurance company. At the time we had a service at the company and you’d call a phone line, you’d leave a recording and there was a woman in the basement of this company that would transcribe that recording into a memo or whatever you wanted that content to be used for. And on the surface when we talked about this, I kind of saw like Rev has disrupted that. They’ve taken away the need to have that person on staff that does that. But you just opened my eyes to, yeah, but Rev also created a ton of value in that, you know I know for us, I can go online on Friday night at midnight and drop a recording out there and I can get a transcription back Saturday morning at 5:00 AM. I could never have done that in the old model.
Jason Mlicki: So, the managed marketplace creates value for people that want transcription and it creates value for people that provide transcription because now the woman that was providing transcription doesn’t just work for that company. She can work for anybody she wants whenever she wants.
Barron Caster: Exactly. And we believe a ton in providing economic opportunity to people that work from home or live in a very remote rural area that don’t have access to the wealth of jobs that cities have to offer. So we believe in having this online work being open, accessible, and we don’t force anyone to work. It’s a marketplace where people opt-in and choose whatever work they want to, and we’ve seen that people love that.
Jason Mlicki: The other interesting point about your service I think is worth noting, Jeff, and I want to touch on this before we … and I want to transition again. Which is that my assumption going into it was that most of your transcriptionists, the people that are doing the work are overseas. And you’ve made it very clear to me like, no, that’s not the case at all. So talk about that for a second, because I think that’s important to highlight how marketplaces shift work or change work but not necessarily move it elsewhere all the time.
Barron Caster: 100%, I totally agree with that. So we’ve seen that the quality of native English speakers doing English transcription is far and away better than any other non-native English speaker that is trying to learn English. We believe in delivering the best quality service to our customers. So, 80% of our transcriptionists are based in the US and the other 20% are spread around the globe in English native speaking countries so that customers, when they place an order at Friday night before going out for the weekend, can have around the clock service. So we’re always up and running because we have around the world coverage, but only from native English speakers, and not only native English speakers, people that are very proficient in language and we have a very sophisticated quality system of vetting and checking that. But we’ve seen that the best quality comes from people that understand the language itself.
Jason Mlicki: So, Rev’s a managed marketplace that you know, I feel like I’m doing business with Rev-
Barron Caster: Rev is a managed marketplace.
Jason Mlicki: … but it’s really connecting me with other providers all over the world to provide the service that I need, is referring all that trust or it’s provided the trust.
MC: You’re listening to Rattle and Pedal, divergent thoughts on growing your professional services firm. Your hosts are Jason Mlicki, principal of Rattleback, the marketing agency for professional services firms, and Jeff McKay, former CMO and founder of Strategy Consultancy Prudent Pedal. If you find this podcast helpful, please help us by telling a friend and rating us on iTunes. Thank you. Now back to Jason and Jeff.
Jason Mlicki: Now let’s transition again. So, Jeff knows I do this all the time. So now, what I want to ask you and Jeff is okay, transcription’s a fairly straightforward service. My belief system is that whole segments of professional services as we know them, whether it’s engineering service or contextual services, accounting services are ripe for this type of marketplace disruption and value creation. So I want to kind of talk about with both of you, what are the dynamics that make marketplaces happen? What makes them emerge? Where are the risks? Where are the opportunities for all the professional services firms that listen to this all the time? So help us think about that. And you guys are smarter than I am. So I’ll let you guys lead. Lead the way.
Barron Caster: As you look for opportunities where marketplaces can add value, I normally look for systems where there are waste or the processes are a little bit antiquated and offline, because-
Jeff McKay: [inaudible 00:16:12] Say broken?
Barron Caster: … bringing people online … Broken, yeah. But again, these things have been working forever. It’s not like there’s just every industry is broken looking for a solution. Otherwise, the opportunities would become more apparent. It’s instead seeing what’s not working as well as it could be and how can we really improve that by adding technology into the mix. And a lot of times if you just put something online, that doesn’t make it a great marketplace, but if you find ways where that technology can add value to both sides, as we described with Rev and other examples like Uber, then you have something that can be really valuable because it makes the experience better across the board. And there is a very popular framework that I use when evaluating marketplaces, and I do invest in early-stage marketplaces businesses as well, and it is a very popular post by Bill Gurley, a famous venture capitalist, on evaluating the different aspects of digital marketplaces. I highly recommend people read it if they’re interested in this area.
Jason Mlicki: We’ll add it to the show notes. I haven’t had a chance to read it yet, so I’m excited to read it.
Jeff McKay: It’s a great framework to look at.
Barron Caster: I revisit it regularly. Even being in it, I reread it. Yeah.
Jason Mlicki: So what are some other examples of, you know I love the way you described Rev and its relationship to Upwork, Upwork being, I kind of do this picture of a broad umbrella and then Rev being this very narrow slice of that umbrella. What are some other emerging marketplaces that you’ve seen that are picking off pieces of that umbrella in different ways or shapes or forms? Does anything come to mind?
Barron Caster: Yeah, I mean there’s a litany of examples. One that we were talking about just before starting recording is an early-stage company that I invested in called Wardrobe that just recently launched in New York, which is a peer-to-peer marketplace for renting women’s fashion and clothing. And the idea is if you’re a woman, you have a lot of high fashion, expensive clothing that’s just sitting in your closet, you can get some more closet space back by actually giving it to a dry cleaner hub that they work with, and the dry cleaner will host your clothing there and then people can rent it from the dry cleaner. So the clothing actually brings you income and then they return it back. It gets dry cleaned again and is available for any time you want to pick it up.
Jason Mlicki: I think that happened to Jerry Seinfeld, but he didn’t get paid for it.
Barron Caster: Exactly. So it’s an idea that like there’s waste out there in the world or assets that aren’t being fully utilized that can be brought to the forefront and continue to add value to our economy through a marketplace that connects people.
Jeff McKay: You know, as you’re saying that, Barron, it triggers in my head, there are three, in my experience in this space. I’ve done so many brand studies in the professional services space for all different types of companies. But there are three drivers to brand preference. One is expertise, which kind of goes without saying. You’ve got to be smarter at something than I am if I’m going to pay you to do it for me. The second is results. Where have you done this well, brought it in on time and on budget? But the third one I think is most applicable in the marketplace world, and that is to be easy to do business with. And the professional services space has this trusted advisor relationship, which is half of that equation, but the other half of it is being easy to do business with. And to me, that is what puts the space in jeopardy because the thing that’s broken in professional services is hourly time and material pricing. Nickel and diming change orders. I mean those two are just enough. Right?
Jason Mlicki: You can stop right there. You’re good.
Jeff McKay: To say it’s broken. And when you look at this marketplace, you know, brands like McKinsey, Deloitte, Accenture have such brand power and presence and pricing control, supply control that you’re not going to displace those easily because they’re going to fight, and fight really hard. And then on the bottom end, you know that kind of project-driven quick turnaround, low-risk type of engagements are ripe for retirees. You know, Boomers who say, “Hey, I’m going to leave this big firm. I’m going to set up my own shingle, take all that overhead cost out.” You know, that’s relatively straightforward there. To me, it’s the big middle in between where is that ripe in terms of the trade-off of risk to purchase for the result and the ease of doing business. I’m curious to get your thoughts on that.
Jeff McKay: And the other thing that I think is, is I’ll throw in there on top of it in this ramble, is most of professional services’ buying decisions are complex B2B buying decisions where a lot of the marketplaces that you’ve mentioned so far are consumer-based and kind of low risk, low-cost purchases.
Barron Caster: Yeah, it’s interesting. There’s definitely a … Sorry, I’ll step back. You talked about a lot of marketplace examples I’ve spoken about and like dog walking or other things can be very specific tasks that are easy to carve off and create a marketplace around. And then the large professional services firms of the world can do a plethora of different activities, but there are problems with keeping them due to overhead and large fixed costs, those sorts of things. And yeah, I think that when starting a marketplace, you have to focus on one area where you’re going to really get the ball rolling, and then you can build out to do other tasks over time.
Barron Caster: So for example, Upwork now you can find almost anyone online to do any form of activity because it’s a very general open marketplace. Like I can hire a Java developer in Nigeria relatively simply, but when they started off, they focused on one specific type of development and that was it. Like they only focused on one type of software developer. And that’s because if you try to do everything for everyone at first, you’re going to become overwhelmed and not make any progress and you’re going to get stuck in that messy middle that you were talking about.
Barron Caster: So I have heard of firms that are also trying to disrupt the McKinseys of the world and the Deloittes, but they’re not going after their entire book of business at first. They’re going to go after one specific slice. For example, Cardo, which is a financial services company, has also layered on, and this isn’t a marketplace, it’s just an example of people taking off specific pieces, have taken over 409A valuations, which is financial modeling that has traditionally been done by some of these larger firms. And they’re smaller types of consulting where people are going after a specific subset of the overall landscape that Deloitte may be tackling. But you can’t just reinvent Deloitte and say, “We’re going to provide all the same services on a flexible basis,” because you’re going to become overwhelmed and it becomes too operationally complex.
Jason Mlicki: You know, the analogy in my mind is what may play out is very similar to what’s played out in retail over the last 20 years. Right? I mean, all the vast majority of the generalist department stores kind of got wiped out by these category killers. You know, people just selling hats. Or the same things played out in healthcare. Right? I mean, you know, the generalist hospital has given away tons of margin as for-profit entities come in and carve away very specific and narrow highly profitable services, radiology. I just, my sense is that we’re on the cusp of that emerging in a big way for professional services firms.
Jason Mlicki: And I’ll give a quick example, one that just kind of became new to me recently really was, we didn’t spend much time on it, but just the whole idea of programmatic advertising. I mean programmatic advertising, I mean that’s exactly what that is. It’s a marketplace. Barron, correct me if I’m wrong. It’s a marketplace that’s sort of computer-enabled to rip out all the inefficiencies of traditional media buying and is doing it in, you know, it’s creating tons of value along the way, but it’s sort of grabbing that portion of the agency landscape that was something that was highly inefficient and making it exceptionally efficient using AI and other technologies. And so I got a sense that that’s just one example of things you’re going to see all over professional services firms, get carved away by software and marketplaces.
Barron Caster: Yeah, I totally agree. And there’s a very popular post out there. I forget the exact name, but they call it the un-bundling of Craigslist. And it shows how Craigslist is all these hundreds of categories, right? And there are billion-dollar companies that have been built around some small category on Craigslist because they focus there specifically. And people are basically saying that is now starting to happen in the professional world and B2B as well. Like yes, it started with the consumer, but now the same concept is moving to enterprises. And I think there’s a post by Andreessen Horowitz that talks about this in the professional world.
Jason Mlicki: I will try like crazy to dig that up and share it in the show notes.
Jeff McKay: You know, as you were saying that, Barron, when we think of marketplaces, I think we can fall into a traditional interpretation of that, and that we think about replicating electronically or as software, the market that already exists. But actually it might be something, where that marketplace crops up could be totally different. And Jason and I were talking a little bit about this before we started recording. And that’s that a firm like Deloitte could create its own market instead of hiring people, and that’s been a concept that’s been going on for some time with the outsourcing fad that we’ve been through and getting down to your core competency and then outsourcing everything else.
Jeff McKay: But it seems to me if there were going to be a model that pops up in the professional services world, it would be that one. But I think most of these firms take so much pride and have spent so much money talking about their biggest asset, their people, and how they train them and how they recruited them and how they retain and engage them, that it’s a big pivot for them. And I think that could be a vulnerability for them because they’ve invested so much in that kind of brand positioning. But that seems to me to be the opportunity because of the feast and famine of so much of what goes on within these corporations, which are kind of mini marketplaces in themselves already.
Jason Mlicki: Yeah. I have to take us to wrap here shortly. You know, one of the things, you know this Jeff, because you lived inside of it, but I remember when I … Again, I came out of college and my best friend goes and works at Accenture. He’s been there ever since. And you know Accenture of course as you know, has this massive internal network that describes all the expertise of all the practitioners across the entire firm. So whenever you want to go find someone who has a specialized skill, they have a closed marketplace. They had it 20 years ago. I’m sure it’s unbelievable now. They’ll let you go find the person you need with the skill you want wherever they are. Now, I don’t know if they’ve done this, I’m hypothesizing. But the logical next step of that is to make that a semi-open marketplace where they’re inviting in non-Accenture people into this marketplace to make them accessible and available for the firm and the brand and anybody anywhere.
Jason Mlicki: You know, the flip of this might be that the marketplace is a potential disruptor but it could actually be the greatest opportunity that some of the notable big brand firms have, in that their brand is so powerful they can pull along kind of anybody they want and leverage that through a marketplace model. I have to take us to close because we are well past the time that we asked of Barron and probably well past the time we asked of our listeners. This was a really cool topic. I really enjoyed it a lot. Barron, thank you for coming on.
Barron Caster: Yeah, it was my pleasure. Thank you for having me.
Jeff McKay: And I want to give a plug for Barron and Rev. And I’m putting on my CMO hat here. Check out Rev. It’s a great service and when you see their client lineup, it’s impeccable. They actually serve some other marketplaces I noticed, and we didn’t get a chance to talk about that, but I thought that was interesting. But if you want to extend your thought leadership agenda, you have to look at the services that a company like Rev offers because you’re all strapped. You don’t have enough people to do all the work and Rev can help you out on that front. And the other thing, and I think this is an important thing for people to think about from a Rev perspective, Jason, and you alluded to this in your first job out of college. One of the biggest problems in professional services firms is institutional knowledge sharing, particularly around client relationships.
Jeff McKay: Nobody wants to get that stuff into CRM because it hurts our utilization time. Rev could be a great way to share that institutional knowledge through CRM. And it’s, the cost is de minimus and that’s just two easy ways-
Jason Mlicki: The cost is what? The cost is what?
Jeff McKay: … to use that service.
Jason Mlicki: What did you call the cost? De minimus?
Jeff McKay: Yes. So anyway, I’ll have to go offline and explain a word to-
Jason Mlicki: Barron, I’ve been trying to bring Jeff into the 21st century, but I’m struggling.
Jeff McKay: So anyway, I’m not getting paid anything for this. We brought Barron on because he’s a smart guy and marketplaces are important and that’s the only reason. But check out Rev because it’s going to help you do your job.
Jason Mlicki: Great words.
Barron Caster: That was a great plug. Thank you.
Jason Mlicki: Thanks, guys. See you.
MC: Thank you for listening to Rattle and Pedal, divergent thoughts on marketing and growing professional services firms. Find content related to this episode at rattleandpedal.com. Rattle and Pedal is also available on iTunes and Stitcher.