On-Demand Economy Notes, February 12, 2018

Although Uber and Waymo settled there intellectual property case last week, the status of workers as independent contractors took a new twist in a California court. Worker payment, training, retention, and earnings drove much of this week’s on-demand news. During 2018, worker retention will be a major issue for on-demand companies.

Wirecard, a German payment card vendor, is bringing pre-paid cards for on-demand work to the United States, Payment Source reports. As we noted recently, payment cards are a lever for bringing the unbanked out of the gray economy.  The technology avoids engaging with the payee’s bank account. Direct-deposits add costs to payments while prepaid cards are easily distributed, Wirecard argues. Kate Fitzgerald writes: “Wirecard’s ability to function as both an issuer and acquirer enables customized disbursement programs ranging from reimbursements to rebates and rewards, is a positive, but not entirely unique.”

Waymo-Uber Settlement: After months of tense preparation, an appearance by former Uber CEO Travis Kalanick, and a couple days of courtroom testimony, the Battle of Autonomous Cars Case came to a close. Uber has agreed to transfer slightly more than one-third-of-one-percent of its shares to Alphabet, Waymo’s parent company, and to submit to ongoing reviews by Waymo of its autonomous car developments. That stock, valued at $244 million, based on Uber’s largely fictitous $72 billion valuation, which was deeply diluted by SoftBank’s recent investment, Uber settled for about a quarter of the damages Waymo had been seeking.

We believe the significant move in the case came from new Uber CEO Dara Khosrowshahi, who has made apologizing for, and improvement of, Uber’s behavior the hallmark of his leadership.“While I cannot erase the past, I can commit, on behalf of every Uber employee, that we will learn from it, and it will inform our actions going forward,” Khosrowshahi wrote in a statement. Again, this is Uber growing up.

Women see Uber pay gaps, despite algorithmic work assignments. The wage gap persists in the on-demand economy, partly due to the duration of their Uber driving career. Forbes’ Erik Sherman reports that researchers at Stanford University and the University of Chicago found in separate reports that women consistently earn seven percent less than men. Part of the difference is accounted for in shorter driving engagements by women generally — female drivers churn out of the fleet faster than men, reducing their compensation over their Uber earnings lifetime. However, the culprit appears to be in the cost and time involved in training to become a driver, use the Uber apps, and build a consistent practice of driving.

Grubhub gets Yum-y. The holding company that operates Kentucky Fried Chicken and Taco Bell, Yum Brands, is investing $200 million in Grubhub, by buying the stock on the open market. The company will also sign an agreement with Grubhub to deliver KFC and Taco Bell food from 5,000 locations in the United States. Yum will take a board seat. Grubhub shares shot up 27 percent on the news., and have given back much of the gain in the market correction.

Quartzy says hairstyling is all about relationships. In a piece that details the rise and fall of several on-demand beauty companies, Noël Duan details the travails of hair care in the jet set, suggesting it does not translate to the consumer needs of the average person needing a “blow out” at work or home.  She concludes that customers want to go to salons because it is a special occasion and that the relationsjip with the stylist is central to the perceived value of a beauty experience. That last element, the personal relationship is the deciding factor in most home and on-demand services: People want to know their preferences are understood.

Duan conflates in-salon experience, like the free glass of champagne proferred to guests, with the intimacy of the experience. The edge of the network is made of human relationships, not just the details of the engagements that justify an on-demand hairstyling that is twice the price of a salon. On-demand is poised to deliver the same experience as the salon for the same or a lower price, because there is no overhead for the A-list location of a high-end salong. But Duan is right that if the human connection is missing, the industry will fail.

Grubhub case points to worker classification as independent contractors. The U.S. District Court for Northern California ruled in Lawson v. Grubhub that the company satisfied the state’s Borello common law test when it treated Raef Lawson, a Deliveroo rider in Southern California, an independent contractor. Lawson’s behavior, such as setting his phone to airplane mode during work time, drove the decision. It is not clear this case will build a solid foundation for gig companies to treat all workers as contractors.

Deliveroo faces union showdown. The Independent Workers’ Union of Great Britain has requested a review of a November ruling that denied its riders holiday pay, the national living wage, and the right to bargain as a collective.  The case now revolves around a clause in the Deliveroo contract relating to the rider’s obligation to provide a substitute if they cannot make a delivery, which the union says was misinterpreted by the court last year. The disputed clause makes the rider responsible to vet the replacement’s right to work and conformity with health and safety laws, a role traditionally relegated to the employer. The outcome, along with the results of other British, European, and U.S. cases, continues the debate about the nature of work and employment.

Amazon’s attack on grocery stores ramps up. Building on its Whole Foods acquisition last year, Amazon has tapped the Dallas and Austin, Texas, Virginia Beach, Virginia, and Cincinnati markets for free two-hour delivery of groceries. Bloomberg Technology reports the twist is that the Whole Foods locations will provide the inventory instead of relying on a regional warehouse. Known as Prime Now (apps are available on Apple and Google devices), the service is the first to combine Amazon’s Prime program with grocery delivery. Philadelphia grocers are preparing for the Amazon Prime onslaught with Instacart partnerships, The Inquirer reports.

Shipping By Amazon, for Amazon. The news that Amazon will build its own in-sourced shipping capability shocked the shares of United Parcel Service and FedEx last week. This makes sense from a local perspective, as much of the last-mile delivery traffic is outsourced to the United States Postal Service, FedEx, and UPS today. However, Amazon’s inventory systems will be the ultimate driver of shipping strategy, and most inventory needs to be near big cities. Amazon’s extensive regional warehousing system is in place to support Prime two-day and other shipping. Getting inventory to the warehouses, however, if an inter-modal shipping problem that requires multiple carriers and alternative routes if one mode of shipping is unavailable. This is not the death knell for traditional shipping, but it does place the focus in traditional shipping on the longest hops in the supply chain.

Instacart ramps up its funding, again. On the heels of 150 percent year-over-year revenue growth, Instacart closed a new $200 million round last week. Now valued at $4.2 billion, the company has raised $874.8 million, according to Crunchbase.

Instacart is slashing delivery fees. The Buffalo News reports that Instacart drivers and shoppers in the region are seeing their compensation cut by more than 50 percent. Just six months after launching with a $10 payment for each order delivered, shopper/drivers now average $4.75 a delivery plus $0.40 per item. It would require an order of 13 items to reach the previous $10/delivery level. Instacart offered a rich bonus for early delivery staff, but has failed to explain why its fees to drivers appear to be falling. The company is hoping repeat orders will include more items, and that may be an erroneous assumption.

Facebook doles out $5 million to community leaders. The story of local markets, which Facebook would like to support through improved storytelling and local advertising, will get a big boost from its selection of as many as five people to receive $1-million grants to “bring people closer together.” We recomnmend starting with local news and that Facebook refrain from seven-figure contributions to kick-start community engagement; Instead, find 200 journalists in local markets who will cover those markets closely and with real engagement with the citizens, business, and government issues. Pay them $50,000 a year to launch local Facebook-hosted communities and the results will be better.

Agency workers account for more of the British workforce, the Independent reports. The number of “agency workers,” or temps, has risen by 40 percent over the last decade to 800,000 people now serving permanently as temporary staff, according to a survey by the Resolution Foundation, a non-partisan think tank.

On-Demand Economy Notes: February 4, 2018

Every week sees a new “peak” or “maximally absurd” on-demand economy story, and this was no exception. As I rundown of recent news and data points of interest to on-demand companies, investors, and workers, I keep in mind that this transformation of our economy remains controversial.

It’s a commonplace to argue that “We get the society we’re born into,” but in this era, we can redesign society during our lifetimes. The vast majority of human generations have been stuck in their times because of the slow advance of knowledge and technology. The on-demand economy is only one aspect of a renegotiation of social value, and it can do far better than the first generation of companies if we keep worker retention based on fairness. We need to argue about this passionately and patiently to evolve a more sustainable and equitable economy in the era of technological acceleration.

Send your “Human Uber” instead of going yourself. New York Magazine points to the announcement that Japanese researchers have developed an iPad-based solution to sending someone in your stead. Dubbed a “human Uber” and announced at an MIT form, this may be the most ridiculous and dehumanizing gig economy idea yet, as proved by an Arrested Development running gag based on the idea during its first run on television.

Slapping an iPad over a person’s face to send them to be present for you is stupid and dehumanizing. The joke on Arrested Development revolved around a rich man sending a shlub to attend meetings while he was in prison. Telepresence, on the other hand, makes sense. Scott Hanselman, a former colleague at Microsoft, accomplished a proxy presence without subjecting a human to serving as a meat puppet. Scott worked remotely, sending “Hanselbot,” a rolling platform with a screen, to meetings in Redmond. We don’t need to subject people to this.

Doctors on-demand, that makes sense. Lexology has a good summary of the risks associated with on-demand approaches to healthcare. In addition to the employment risks, such as failing to validate citizenship of workers and changes to healthcare organizational structure, which the articles covers, the rigors of HIPAA compliance, medical privacy, and care standards for non-employee workers are critical to understanding this market. Accenture projected that healthcare investments in on-demand would eclipse $1 billion in 2017.

Josephine announced it will be shutting down in March. Founder Charley Wang, co-founder of the Oakland-based community cooking service, announced the move on the company’s blog Thursday. “We knew that Josephine was an ambitious idea from day one and, as you all know, there have been many highs and lows over the years,” Wang wrote. “At this point, our team has simply run out of the resources to continue to drive the legislative change, business innovation, and broader cultural shift needed to build this business.” Enabling neighbors to cook for one another, Josephine invested in changing California law to allow home-based cooks to sell their food. The site will operate for 60 days, free to the cooks. Wang also said Josephine will transfer cooks’ business information and recommendations for next steps to their members.

Centralized kitchens bets are growing. Kitchen United, a Pasadena kitchen designed to support restaurant delivery and catering services, raised additional funding this month, according to Pasadena Business Now. Combining food preparation with order and delivery infrastructure, the company offers kitchen space by the hour or month to restaurants.

For what it’s worth, the Global Online On-Demand Food Delivery Service Market Overview reports food delivery will grow 32 percent CAGR.

Evernote CEO predicts multi-role software services for on-demand workers. In a short piece on Business News Daily, Chris O’Neill, CEO of Evernote, described an emerging software environment based on users with many work and organizational roles rather than one. He is betting his company on understanding small business’ use of services to establish networks of “products and services.” We wholeheartedly agree with this philosophy at Gig Economy Group. Integration of services will be essential to consumers, as well, because the prospect of managing multiple on-demand services through dedicated apps will be too complicated. “The biggest bid we’re making as a company is to make the product more powerful when you use it with other people, team settings, group settings, nonprofits,” O’Neill said.

African household labor market points to lower marketplace fees. Workclick, a U.S.-Nigerian startup said it will take only 20 percent of worker revenue as a fee for connecting them with customers. Workclick’s app is offered in the U.S., but the workers appear to be only in Nigeria, where it has about 5,000 people on the platform. Low-income countries may be where lower marketplace fees initially take hold in on-demand work. U.S. companies like Uber have taken between 25 percent and 30 percent of revenue. In an age when Amazon and Wal-Mart thrive on sub-10 percent margins, on-demand marketplaces should expect to see their share of revenue under pressure. In low-income countries, labor marketplaces will not support high fees. Workclick’s initial fee structure hasn’t gone that far, but it’s a step in an inevitable direction for on-demand companies.

Careem, the Dubai-based competitor of Uber, Didi Chuxing, and Ola, among others, is profiled by Bloomberg Businessweek. Of note: Careem, currently worth $1.2 billion, is active in 80 cities across 13 countries. Four out of five Saudi Arabian women have used the service, which is training female drivers in the country. The story does a good job of exposing the difficulties of social transformation in the Arab World.

Ford takes Chariot to London. Engadget reports on the expansion of the carmaker’s first on-demand van service to the U.K. Focusing on South London, which is less well served by the Tube, with fares for daily rides between $3.41 and $2.27 after an initial two-week free offer.

Allygator Shuttle, a Berlin on-demand van service, has launched. Smart Cities World describes the service as a partnership between door2door and the Allgemeiner Deutscher Automil-Club, the German auto club and driver services company. The trial will consist of 25 vans running on Fridays and Saturdays only.

Speaking of auto clubs, Jrop wants to obsolete the monthly membership in favor of on-demand tow and roadside repair services. TechStartups.com has a summary. We think

Another flavor of robot. They are already wandering the sidewalk in many cities, and delivery robots are evolving into specialized breeds that will take to the streets. Robomart has a concept design for a fruit-and-vegetable delivery service that brings the produce department to the consumer’s door. Robomart’s concept is a problematic model for two reasons: 1.) It depends on the customer being at home and willing to walk to a van, rain or shine, to select their produce. On-demand services will not monopolize the customer’s time like this. 2.) The produce robot will suffer from the same problem consumers identify at the store, a lack of selection if the van has been picked over by previous customers. Optimizing routes to provide stock refreshment during a day will be challenging.

Crypto your tip? Finally, WIRED’s Zohar Lazar asks why Kudos, a blockchain-based system created by “Uber for buses” company Skedaddle to replace traditional tipping, makes any sense. With so many newly minted crypto billionaires, the solution to tipping isn’t to create a new currency to solve the problem, because the billionaires have a troubling habit of taking their cut first.

A version of this article also appeared on Notes & Strategy for the Local On-Demand Economy. Mitch Ratcliffe is cofounder of Gig Economy Group Inc. and a veteran of tech and media startups.

Marketplace Fees Under Pressure: Uber Settles With Drivers, Again

Uber headed off a class action lawsuit by 2,000 New York-area drivers this week, with a promise to pay $3 million to end a dispute over the fees it imposes on those drivers. It is evidence that marketplaces will see more pressure to lower fees in order to retain workers.

The ridesharing company has settled many similar suits and appears headed for many more settlements. We think the underlying signals point to a decline in the advantage marketplaces had over workers which allowed fees of up to 30 percent to be deducted from fares.

On-demand companies should be prepared to thrive on margins similar to retailers, such as Amazon and WalMart. Where a 25 percent or greater fee is deducted from a driver’s or a housekeeper’s earnings today, the on-demand market his headed for a sub-10 percent fee structure over the next decade.

Two factors will accelerate this trend:

1.) As purpose-specific marketplaces mature, such as ridesharing, workers will diversify their listings, making themselves available on many systems. This is true of Uber and Lyft drivers, who typically use both apps simultaneously to get work. This means workers will be arbitraging work opportunities across many marketplaces. Purpose-specific markets will respond by consolidating related markets, which presents significant brand challenges. “Uber” has become a verb denoting ridesharing, but not housecleaning; It would have a very difficult time extending its brand into home-services. Price is the manageable factor in consolidating markets.

2.) Information efficiency favors the consumer, not the marketplace. As more data is applied to the problem of anticipating demand, consumers and workers alike will move to low-cost marketplaces in pursuit of better prices and pay rates. These twin demands put the marketplace in a lurch. In order to lower consumer costs while retaining an attractive workforce, the marketplace must lower its fees charged to those workers.

As workers diversify, marketplace providers will compete for labor supply, lowering their fees charged to workers who focus on their service categories. Likewise, consumers will embrace marketplace brands that solve many in-home and on-demand needs, leading to greater optimization within those marketplaces and lower fees charged to workers.

Ford & Postmates tackle local business services

Ford today announced a partnership with Postmates to expand on-demand services for small business at CES. Postmates reports that SMBs joining its network see “4X revenue growth” and claims it has the most extensive on-demand delivery fleet in the U.S. A variety of companies will enter this space in 2018, among them HERE Technologies which announced a competing service that aggregates on-demand mobility options yesterday.

“Expanding access to smaller, local merchants is at the core of our business,” Vivek Patel, Postmate’s vice president of Business Operations, said. “We view self-driving vehicles as another potential tool that can level the playing field for these businesses, and ensure that geography alone does not equal destiny.”

We applaud the focus on small business. It is where the on-demand economy can take root and develop opportunities in every community.

Delivery without people remains problematic, as it is the last few yards or flights of stairs that presents the most significant barrier to automated deliveries. Sure, a car can get to the curb in front of an address, but how to get the package inside with the appropriate brand experience, requires a human. Postmates will likely utilize Ford autonomous vehicles to streamline its workers’ travel. The companies are working together on how to support the last-yard fulfillment, as well as improve consumer discovery of, and purchases, through automated deliveries.

Tax Bill Lowers Taxes For On-Demand Workers, If They Incorporate

Several articles (New York Times, Bloomberg, and Lexology) in recent days have examined the potential for gig workers to cut their taxable income by 20 percent. There is, however, a trade-off. Workers must incorporate to gain the tax cut.

Incorporating voids the argument that giggers are employees. Corporations are not employees; they operate based on mutually agreed upon contracts with another company. On-demand companies fighting regulatory scrutiny around the world are eager to resolve the question of employment status as they grow. Their future margins depend on controlling costs.

The U.S. approach, to dangle a 20 percent tax break, is attractive to on-demand companies, but will it be enough for an Uber driver or TaskRabbit tasker, among many examples, to forego the employment relationship?

A quick back of the napkin calculation suggests that a typical Uber driver, who earns $2,126 a month (Glassdoor reported average), or $25,512 a year, would retain as much as $5,102.40 a year. That is $425.20 more in earnings per month. It sounds pretty good.

Employment has other advantages, though, that offset tax savings. Losing employer health care subsidies, for instance, can increase raise the cost of health insurance by 20 percent or much more for an individual, even an incorporated individual. A contractor who paid $1,200 for health insurance for a family of four could pay $700 more monthly.

The tax break is not a guarantee of better pay for contractors who operate as an LLC or other “pass-through” entities. It makes contracting more attractive but is no silver bullet.

There’s more action afoot on this front. The Department of Labor announced last week that it is considering rules to allow individuals and small business join associations to get lower insurance prices. The catch here is that the participants must be incorporated. This is a path to lowering insurance prices, not a panacea.

Chris Opfer and Ben Penn of Bloomberg’s Labor and Employment Blog report that on-demand worker groups are skeptical of the Labor rulemaking:

“We believe it can be a good solution for our 75,000 drivers, but it’s unclear how these plans will be regulated and whether such plans could be distributed in a way that would allow members to qualify for credits under Obamacare,” [Independent Drivers Guild founder James] Conigliaro said. “An association plan couldn’t compete with a highly subsidized plan. On the other hand, drivers have special needs, and an association plan could be tailored to meet those needs and be very powerful. Either way, we’re considering a range of options.”

Giggers have many decisions about their business structure ahead.

Didi diversifies with Bluegogo

Here’s the problem with building a purpose-specific marketplace, such as a consumer mobility platform like Uber, Lyft, or Didi Chuxing: Once the platform is saturated, it’s necessary to diversify. In the case of China’s Didi Chuxing, the ridesharing company is adding management of a bike-sharing service, moving into an adjacent, though painful, market with its platform.

Didi customers will get access to Bluegogo bikes in Chinese markets. Didi is taking a chance with Bluegogo since the company has already failed. In fact, all Didi is doing is acquiring Bluegogo’s abandoned bike inventory, hoping to earn back the cost by increasing revenues from existing customers.

As on-demand evolves, the apparently explicit delineation (rides on demand versus, for example, housecleaning) between one consumer market and another will become a barrier to expansion. Markets are more efficient when they include many products and services than in any dedicated marketplace. Early leaders in transportation may find that adding any non-mobility service proves difficult.

Didi customers may consider taking a bike instead of a ride. But not all those customers will be interested in bike options, so expansion into bike-sharing could produce little incremental additional spending by Didi customers.

Google Assistant announces new hardware partners

In-home on-demand services will turn on voice, phone, smart TV, and PC interfaces. As reported yesterday, Google trails Amazon and Apple in installed branded hardware base. Today, Google announced new hardware partners in automotive, home appliances, cameras, and other industries. JBL, Lenovo, Sony, LG, Altec Lansing, iHome, and others joined the ranks of Google Assistant-compatible devices.

Google claims Assistant is now available on 400 million devices. Availability is different, of course, than actual usage.

In-Home Smart Speakers: A War of the Big Three

Smart speakers represent a new interface in the customer relationship. Holiday shopping in 2017 established clear battle lines in the home AI market. Amazon, with its Alexa service, Google Home speakers, and Apple’s Siri-enabled services and delayed HomePod speaker are way out in front of the rest of the pack in terms of installed base. Indeed, one columnist says this year’s Consumer Electronics Show is the Microsoft Cortana assistant’s funeral.

Analyst firm Canalys projects 42.8 million or more smart speakers will be sold in 2018 in the U.S. and China.

Voice UX is usually portrayed as a silver bullet for customer engagement, and it may become so over time. For now, however, accuracy and contextual understanding of speakers’ words is lacking. Fixed command phrases that must be memorized and delivered in specific sequences are problematic for people.

Bots, being the shiniest of the new tech playthings, get plenty of praise, but the expectations for voice interaction are over-hyped right now. Until speech interaction approaches human conversational speed and efficiency, which requires more semantic understanding than bots currently provide, intimacy will be hard to achieve.  Voice UX may be good for instigating repeat orders, e.g., “Alexa, order another box of Tide,” are practical, but complex selling will have to wait for further evolution. It is likely that AI bots will support human connections, bringing humans onto a call with a user when the bot’s responses are insufficiently engaging, for many years to come.

Humans, we believe, are essential to trust relationships. Speakers can help make connections, but will not be able to handle simple objections for years to come. Think of the smart speaker like the new switchboard for consumers to connect with companies rather than as an unstaffed sales interface.

Where do the voice service leaders rank in units sold during 2017?

Google used heavy discounting during the holidays to sell 6.8 million Google Home speakers between October and Christmas. Consumer Intelligence Research Partners, a research firm, reported that Google had sold seven million Google Home units before the fourth quarter. Hence, Google Home sold approximately 13.8 million units through December 31st.

By contrast, Apple did not have its $349 HomePod speaker ready for the holidays, and we can count only Siri-enabled phones and Macs sold, for a total of 211.88 million iPhones and 19.25 million Mac computers, or 231.05 million Siri-capable devices in 2017. This is a considerable number, but currently has no speaker complement to these devices, nor the tens of millions of Apple TV devices its sold.

Apple’s ability to meld voice interfaces to a wide range of services through HomePod, iPhone, Apple TV, Macintosh and in-car systems is the company’s residual opportunity. The Siri strategy remains too fragmented, as it is missing an ambient listening post in most homes. The HomePod story and user experience is a critical test for Apple in 2018.

Amazon is the leader with real-world tools and services in consumer homes. By the end of Q3, 2017, 20.5 million Alexa devices had been sold, according to voicebot.ai. Jeff Bezos, Amazon CEO, founder, and richest person in the world said Amazon sold “tens of millions” of Alexa devices over the holidays. Assuming Bezos is using the phrase accurately, there are at least 45 million Alexa devices boasting the largest variety of “skills” of any platform.

Is Cortana out of the picture for good? Microsoft has continued its increasingly open approach to partnering, announcing it will integrate Cortana and Alexa for Windows users. While the PC market is slowly declining compared to mobile devices, it still accounts for more than 200 million units shipped annually. That’s a beachhead of a different kind; one Microsoft must leverage to compete in its cognitive services business. Cortana may not be the voice speaking from PCs, but Microsoft could become the master integrator of voice services.

Ultimately, smart speakers will extend the voice and P2P aspects of on-demand services in the home. People in local markets will deliver the personalization promised by intelligent speaker hype by tying into and using voice UX to connect with customers when appropriate.

 

The On-Demand News Riff, Jan. 5, 2018

Experiential marketing will reach the home

AdWeek’s Sarah Priestman offers this assessment of experiential marketing:

The experience economy is booming, brands are seeking real-world impact, the creative industries are putting dollars behind new capabilities—really, what more do we need to do but let the good times roll?

Priestman goes on to emphasize the experimental and artistic qualities of experiential marketing, urging marketers not to think of this new style as a channel. “For lack of a better definition,” she writes, “experiential is the art of ‘expressing a brand’s purpose and proposition through a form of real-world consumer interaction.'”

Several trends are converging that raise the experiential challenge to the level of a revolution: Mass marketing is dying, turning to highly segmented experience that increases interaction and data gathering that produce better product design, improved inventory management, and a “pull” relationship with customers; On-demand business is driving experience down to Main Street and the consumer’s home; Communication technology is fragmenting as new channels open, each supporting a different experiential engagement.

Priestman rightly focuses on the roles of the brand strategist and producers in current experiential work, but this is a prelude to the delivery of experience in the home. Where experiential marketing today tends to happen at parties and events, such as a Bonnaroo or extreme sports event and brand events presented in urban cores, the future of marketing is personal and in-home. We need an interface at the local level to support this potential form of customer intimacy, and it is made of people. ###

Talking Cures: Home speakers, audio ads, and the contest for engagement

Amazon will reportedly monetize its site and Alexa channels in 2018 using advertising. Global Web Index, a London-based research company, reports that grocery shoppers seem to love voice speakers. Of 78,000 respondents to a survey, 56 percent are using or plan to buy a speaker in the next six months. But will those consumers love advertising? That’s the important question for marketers considering how to deploy budget effectively.

Advertising isn’t the only customer interface in local. Human relationships, storefronts, out-of-home media, and many other investments are necessary. Adding advertising to an Alexa skill may backfire. As The Economist points out,  there is an uncanny valley problem with voice. When a smart speaker acts too human, the user can become uncomfortable. In short, consumer expectations are tightly linked to what they will tolerate when dealing with bots.

Adding advertising experience in a bot may violate the consumer’s expectations. Like streaming users, who feel they have paid for media out of their own pocket and, consequently, do not welcome advertising, Alexa users are likely to object to the insertion of advertising. IBM Cloud Video found that 72.3 percent of streaming users “felt any type of ad reduced the viewing experience.” Alexa buyers have paid for a channel that promises to do tasks. Advertising remains an interruption to the consumer, it may be a mistake to impose in the smart speaker environment.

Marketers have seen an explosion of channels, in addition to myriad new sales tools to use to distribute experience to the edge of the network. Why revert to advertising, except to create more revenue for the smart speaker vendor? It does not necessarily add to the customer experience. In the local market, in particular, voice ads fail to replace the human connection consumers expect from a device/service they purchased. Perhaps the better move is to augment local salespeople using AI, instead.

The smartest speaker will know when to connect a potential customer to the human who can close the deal and build trust. ###

GrubHub court signals drivers could be considered employees

JDSupra, the legal news service, points to a filing in Lawson v. GrubHub that bodes ill for labor marketplaces, such as GrubHub, Uber, Lyft, TaskRabbit and, well, the rest of the on-demand economy.

Last week, the plaintiff’s attorney, Shannon Liss-Riordan, submitted a Notice of Supplemental Authority that points to a pending decision by a New Jersey court to apply a restrictive standard to the categorization of workers. If that standard is applied in the GrubHub case, GrubHub will have to treat drivers as employees, as well as confine on-demand markets to specific industries. A disaster for the current model in on-demand economies.

The case, which is in the hands of the US District Court for the Northern District of California, could set the standard for the entire industry. In that case, a new organizing point for the engagement with customers, workers, and government. ###

GrubHub court signals drivers could be considered employees

JDSupra, the legal news service, points to a filing in Lawson v. GrubHub that bodes ill for labor marketplaces, such as GrubHub, Uber, Lyft, TaskRabbit and, well, the rest of the on-demand economy.

Last week, the plaintiff’s attorney, Shannon Liss-Riordan, submitted a Notice of Supplemental Authority that points to a pending decision by a New Jersey court to apply a restrictive standard to the categorization of workers. If that standard is applied in the GrubHub case, GrubHub will have to treat drivers as employees, as well as confine on-demand markets to specific industries. A disaster for the current model in on-demand economies.

The case, which is in the hands of the US District Court for the Northern District in California, could set the standard for the entire industry. In that case, a new organizing point for the engagement with customers, workers, and government. ###

Four guys recreate Amazon Go in one and a half work days

We live in astonishing times. Amazon Go offers customers the ability to walk into a store, select products, and leave without interacting with a cashier. Now, four coders at the University of Waterloo recreated the Amazon Go experience using off the shelf (Raspberry Pi) hardware and publicly accessible APIs in just 36 hours. It took Amazon years to achieve the same capabilities.

Offered as a reminder that no company has a monopoly on a technical advantage. ###

This Week’s On-Demand Business Activity Rundown

Didi Chuxing, purchased Brazil’s 99 for $600 million, in addition to its previous investment in the target company.

Splend, an Australian fleet management company that provides cars to Uber, Lyft, and other transportation network company drivers, raised $220 million in new debt financing this week to support inventory expansion. Between equity and debt financing, Splend has $232.2 million on hand to spend now.

Search and content doesn’t always go together. In fact, they may work at cross-purposes, raising barriers to search access to competitive content sources and reducing trust in the search engine’s objectivity. Google seeks to sell restaurant guide Zagat after purchasing it for $151 million in 2011.

GrubHub’s annual Year In Delivery list is out. Lettuce Chicken Wraps were the biggest gainer among orders last year and is expected to be popular in 2018. Avacado toast peaked earlier in 2017 but earned the biggest gain in orders overall.

Transportation network companies are changing wealthy New Yorkers’ home buying preferences, sais a leading realtor.  “Today, in our Uber-tech world — I [can be] in the back of a car with my iPhone, and I’m not losing out on anything. That has changed [commutes] dramatically. Your commute time is not lost productivity,” realtor Leonard Steinberg told Business Insider. Consequently, the wealthy are willing to buy homes further from work than in past years.

Consumers experience of media will inform their retail expectations. Now that the majority of audio consumption is fulfilled through streaming services, with video close behind, consumers have come to expect immediate gratification in most transactions.  Watch for media to set consumer’s patience levels with on-demand delivery and service experience.

Beauty products companies are shifting to chatbot-based and interactive customer interfaces.  The idea is that beauty-related tasks are immediate and susceptible to machine analysis. Wondering if you have too much eye shadow on, let a camera-equipped bot check it out? What if a human being was also able to provide advice? That’s a one-two punch that will convert. ###

The On-Demand News Riff, Jan. 3, 2018

Replacement parts made where they are needed
A van containing a 3D printer arrives at your front curb, the plumber knocks and, granted entrance, checks your sink downspout, which is leaking. Problem identified, she calls up the broken part on her computer and prints it in the van, installs the new downspout, and finishes the job. No inventory to carry around, just a focus on service. Amazon received a patent this week that supports this scenario. The human is the critical factor here, as they translate the customer’s issue into a plan, identify the broken or missing parts, print them (though this is a machine’s job), then installs it.

Amazon is big in online sales, but still only four percent of retail in U.S.
It was a very good holiday season for Amazon, with growing sales and the massive adoption of Alexa-enabled devices. However, keep in mind that after all this success and 20 years of investment to get to 44 percent of online commerce, Amazon still accounts for only 4 percent of U.S. retail sales in 2017. This suggests there is lots of room for growth at Amazon, as well as plenty of inroads for challengers to pursue. We think the brand service experience will be a keystone of expansion as Amazon enters the neighborhood. Target isn’t the solution for Amazon’s local challenge, but Target’s salespeople may be useful to the project. How to get those Target people out of the store and into the market, that is the question.

Teens and Commitment: It’s an Exclusive Thing
Piper Jaffray surveyed 1,100 teens about their spending habits and the results reinforce the importance of relationships with young buyers, according to MediaPost. As noted yesterday, Gen Z is more deliberative, less prone to impulse buying, and already saving for their future. The Piper Jaffray study also found that young consumers look for exclusive offers, which are based on an exchange of information that creates loyalty:

Teen shoppers are savvier shoppers than you might think. Budget conscious, they look for low prices. They want to protect their investments by buying quality products, but if you want to gain their loyalty, they are looking for exclusives and membership benefits. The older the teen, the more important this value exchange becomes.

The exclusive offer/price as basis for commitment is important to understand and use when establishing customer relationships.

Gannett sees the relationship as central: Memberships, not subscription
Gannet recognizes the growing importance of relationships, too. CMO Andy Yost explained to Publishers Daily: “‘Subscription’ sounds transactional, ‘membership’ sounds like a two-way relationship that gives you access to things you can’t get elsewhere.” Consequently, the newspaper giant is offering $2.99/mo. memberships on its USA Today properties and utilizing its content archives and production capabilities to package new personalized or demographically targeted news experiences. The company also offers an Insider Loyalty Program that bundles subscriptions with special offers and discounts.

Here’s the key: Believing they are getting value back, members share information that helps to personalize and target content (the Gen Z teen who is loyal in exchange for exclusives, above, is engaging in the same behavior.

BloomThat acquired by FTD, “Uber for Flowers” sold cheap
Scale doesn’t come easy, as flower delivery startup BloomThat has found. The company, which reportedly has lowered its burn rate to just $15,000 a month after raising $7.5 million nine months ago, was purchased by FTD. TechCrunch said the company was purchased for “a small amount of money.”

BloomThat has struggled to acheive scale, or even to beat existing flower delivery services to the consumer’s door. BloomThat promises next-day delivery. Not really an “Uber for Flowers” as much as a delivery play that didn’t find its value proposition. On-demand companies must be faster than traditional alternatives — if successful, they can command a premium — and BloomThat didn’t overcome that first hurdle. Inside FTD, however, the BloomThat team will find delivery resources in existing FTD florist shops looking for an edge that they can use to jump ahead.