With QuickBooks recent testing of an integrated bookkeeping service many accountants & bookkeepers have raised valid concerns about whether the platform they promote is about to compete with them.
For me this is a case of history repeating. In 2015 I joined GoDaddy as Director of Product working to help our web developer and designer community successful. We faced all of these same issues as we tried to balance the needs of our professional services community, with the needs of the customer, and the insatiable appetite of the public markets.
In 2015 GoDaddy had 13m SMB customers and their research showed that roughly 60% of all SMBs got help to get their business online — 40% of the total were paid professionals with the other 20% being friends, family & fools willing to help out for free.
Meanwhile GoDaddy had 1m “Web Pros” — our name for designers & developers — using our products, ranging from Moonlighters (part-timers) to Freelancers (full-time independents) & Agencies.
The strategy that was developed by then CEO Blake Irving and GM of Hosting Jeff King was simple: the more we can connect Web Pros to our customers, the more successful we can make them; the more we can drive our Web Pros leads, the more leads they can drive to us.
We can do this by creating the ultimate marketplace for the best Web Pros and match them to our customers at their time of need based on their usage of our product.
Our reward for this service will be increased retention, upsells to new products, and a 10% rake on all services.
It was brilliant in its simplicity.
This is where I came in. At the time I was building Elto (FKA Tweaky) and my cofounder and I joined to leverage our technology + learnings to help put this plan in action.
Before I get to the challenges we had to overcome, what we built and why it ultimately flamed out it’s worth understanding how we broke down the market.
There are three categories of services we provided to our customers who were trying to get online.
Do It Yourself (DIY).
This is our website builder product. You can sign up and build your website yourself, much like Squarespace or Wix. In Intuit’s case it’s QuickBooks Online.
Do It With Me (DIWM).
At GoDaddy we had an internal services department, called Professional Web Services (PWS) who would work with you to help you use our website builder or WordPress to build a site for you in a somewhat collaborative approach. The work was performed via a complicated project management suite which allowed us to employ low cost labor to make semi-custom websites out of cookie cutter templates. With Intuit this would be their new bookkeeping product they’re launching.
Do It For Me (DIFM).
This refers to getting a creative professional, a freelancer or an agency, to build your website for you. They do everything from start to finish. At GoDaddy this was our ill-fated marketplace. At Intuit this is their directory of accounting professionals.
The main challenges we faced were:
- How to differentiate these offerings in the eye of the customer
- How to generate revenue from a DIFM approach
- How to balance our need to generate revenue with the customers desire to use an approach that may generate less revenue
How do you differentiate an Intuit service from an independent service?
When someone comes to GoDaddy we needed to be able to show them how we can help their business get online and grow. It’s relatively easy to show them a product catalog, and even to highlight the differences between doing it themselves (cheaper! relatively easy!) vs getting someone else to do it for you (more expensive! much less work!).
The problem comes in how you differentiate between our internal professional web services team, and a freelancer or agency partner.
Both may have similar prices. They may even be able to deliver similar quality. One will be performed through our platform by GoDaddy and its contractors, the other by a professional who might even be around the corner from you.
How do we make it easy for you to pick between GoDaddy and one of our web pros, based on your personal preferences? It’s a challenging user experience problem that we never truly resolved…
We had research that showed that SMBs preferred to work with people local to them, although the majority never met with their web pro face to face. Do we use this as a marketing tool to drive more leads to web pros?
How do you generate revenue from an independent service?
GoDaddy is a public company, and the markets are hungry. We had to show consistent growth every quarter or risk getting mauled in the markets.
To make the DIFM approach work we had to be able to show an increase in revenue. A relatively simple way would be to take a percentage of revenue for projects. The reality was this was not so simple. For one it required a fair bit of product to be built to not only handle payments, but also contracts, messaging, customer support etc. We had built a lot of this at Elto but not to the scale required by a company as large as GoDaddy.
In stark contrast it was relatively easy for the DIWM approach to generate revenue. They sold pre-built packages of websites, had a workflow figured out to get 3rd party contractors to complete the work — including quality assurance — and because they charged for the entire project up front they could recognize all of that revenue. At the time the business operated on 80%+ margins which is insane.
Revenue recognition here was key. The DIFM approach we could only recognize the take we took from successful projects. Given market pressures this was likely to be around 10–15% of the total project value. As an example if we ran a project worth $1000 the amount of revenue GoDaddy could recognize for a DIFM would be about $100 vs the full $1000 — a huge difference when releasing top line revenue numbers to Wall Street.
This brings to the third challenge for us…
How do you balance need for revenue with a customers need for a specific service?
At the end of the day GoDaddy had to balance what a customer wanted — a custom website, built by a Pro, ideally in their local area — with the need for the company to generate revenue. This was most acutely felt in meetings where we had to decide if a particular channel (like the main banner at GoDaddy.com, or a promotional email) would promote the Web Pro marketplace or the professional web services product.
The decision sometimes came to what was in the interests of the customer, but more often than not it was down to which channel was likely to generate the most revenue.
The Outcome at GoDaddy
I wish I could tell you that there was a positive outcome for the web professionals at GoDaddy. The company continues to invest into providing better tooling and support for designers and developers on the platform — especially those using WordPress.
But there has been almost no investment into the marketplace product, or helping the web pros find new customers since at least 2015.
The professional web services business meanwhile continues to grow at a rapid pace with no signs of slowing down.
What this means for Intuit:
Intuit has a tough challenge on their hands. They need to continue to grow so they need to find new ways to generate revenue. That gets difficult to do in a significant way when you’re in a mature market and already the significant market leader.
They see a market need for more bookkeepers but a) it’s complicated to deliver the work consistently through independent bookkeepers, b) the economics are such that they can’t pay a great amount for the bookkeeping work and c) it’s not easy to promote their own bookkeeping service alongside third party bookkeepers in a balanced way.
They need to keep the bookkeepers and accountants who have supported them to date on their side — and I genuinely believe they care about this constituency — but this butts up against their existential need for growth.
My guess is that if you’re running a fairly standard bookkeeping service you’re going to see downward pressure on your prices by Intuit’s new offering. Any leads you’re currently getting via QBO are going to vanish, and your customers will receive targeted messaging to encourage them to switch to Intuit’s service at their price point.
However if you’re running an accounting service, especially those operating more as a business advisory within a niche, I suspect this is going to have little impact on your business. You’re already sourcing clients from outside the ecosystem, they’re coming to you for your incredibly specialized offering and you’re going to be just fine.
This problem of differentiation, and how a small company competes against a large one is something I’m very familiar with.
My company, Spritz, helps companies manage their corporate spending. We do this by issuing corporate cards (physical or virtual) to everyone on your team and letting you set fine-grained controls over what is spent, by whom and where. We then give you real-time data on exactly what your current cash position is piped immediately into your Xero or QuickBooks Online account.
Where many expense management software companies reactively manage spending, relying on employees to submit receipts and claim a reimbursement, we proactively set your expense policy and enforce it through our cards.
We’re bootstrapped to date with a relatively small team and going up against some of the largest companies in the world, from SAP/Concur all the way up to American Express.
We will win by building the best product, by engaging with & supporting our community to solve their problems, and by finding our niche.
Check us out at Spritz.works or drop me a line if you’re interested to find out how we can help you and your employees better manage corporate spending.
The reality is there are a lot of businesses in the world who need websites, just as there are a lot who need bookkeeping services, with new ones coming into existence at a rate of 400k per year in the US alone.
The risk of large companies — including those you work with and support — competing with you isn’t new. And it isn’t unexpected. Those who will survive will focus on finding their niche, cultivating a community around them and continuing to deliver bespoke service: delivering their offering in a way that no large company is capable of doing.