THE FUTURE OF SEARCH – WITHOUT SEARCH ENGINES?

A great business idea…

Earlier this year, GoButler was founded by three ex-Rocket Internet executives. Backed by the venture capital firm General Catalyst Partners as well Hollywood star Ashton Kutcher, the firm aims to revolutionize the way people “get whatever they are looking for”. On Twitter, GoButler claims to be “your 24/7 concierge, your personal assistant… for FREE!” They promise to get you whatever you want as long as it is legal – you only need to send them a request via SMS. Likewise, Facebook recently beta launched “M.”, a virtual assistant that operates via Facebook’s Messenger. Seems like a cool thing! No need to have millions of different apps anymore, such as one to reserve dinner tables, one to book flights, and one to order cloths. GoButler is your one-stop shop for everything and aims to become THE new way of search.

…that, however, does not seem to work quite perfectly yet

I recently tested the service four times – so far, I’m not very impressed. I asked them to organize a daytrip to the Niagara Falls for me and friend while we were in Toronto a couple of weeks ago. Failed: Despite many messages back and forward explicitly stating the pick-up and drop-off location and times, GoButler was not able to organize a trip that met our stated expectations. We ended up organizing the trip ourselves. I send three more travel and shopping related search requests. Either they were not able to find what I was really looking for or the price was much higher than the one I found myself. These four test runs illustrated that what ought to be simplifying my life in fact made it more complicated. Even if GoButler manages to improve their search results over time, do they really have a chance of being successful in the long run? I see two major challenges: (1) Scalability and (2) profitability.

Is this business scalable?

Currently, all SMS requests are handled by dozens of humans sitting in an office in New York City. Scalability of the business seems rather challenging. I’d argue, either a significant amount of automatization and artificial intelligence is required to handle the search requests, or a tremendous amount of people need to be hired. The former, technology-wise doesn’t seem perfectly feasible nowadays and the latter seems extremely expensive.

Can this business be profitable?

GoButler promises not charging customers any on-top fees for their concierge service. Instead, the firm aims to monetize indirectly through an affiliate model: Once they have established a large enough user base, they aim to approach partners such as delivery restaurants, doctors, airlines, and online shops to negotiate revenue share models for every generated order. I see multiple challenges related to this approach: 

First, it seems questionable whether a revenue share approach will result in the best experience for the customer. The pizza delivery company that pays the highest revenue share to GoButler may not necessarily deliver the most delicious Pizza, too. Yet, GoButler may be inclined to place orders through this very delivery service due to financial incentives.

Second, it is unclear whether GoButler’s customer leads indeed create any additional revenue for their affiliates. Would customers have placed the orders anyway? If there is no proof of incremental revenues, partners are likely to disregard the concierge service.

Third, related to scalability, it seems rather challenging to easily build up partnerships with so many goods and services providers in order to really make money off every type of order placed through GoButler.

Fourth, even if the three aforementioned concerns turn out not to be valid, I’d question whether the unit economics of this business can really work out profitably. Let’s run the numbers: In my test inquiries, the average processing time per request was approximately 10 minutes. Hence, I’d assume one employee can handle six customer requests per hour. Let’s conservatively assume further that he/she manages to convert each of the leads into an actual deal worth on average USD 15 (average price of a food order). Lastly, let’s assume GoButler’s affiliates are willing to share 10% of their revenues. This would result in a total revenue for GoButler of USD 9 per hour. Pretty slim – is this even enough to cover the employee’s salary? Not to mention, the chance that every search requests indeed gets converted seems rather unlikely – just remember that none of my four test runs were even close to be converted.

Time to shift gears

One thing seems to be clear: GoButler will need to burn a lot of the investors’ money to test the viability of its business model. With GoButler’s current monetization approach, it will require significant growth of the customer base before one can even assess whether or not GoButler will indeed be able to establish the necessary partnerships to generate revenues and eventually profits. Following Clayton Christensen’s advice – a management guru from Harvard Business School – who says one should be “patient for growth but impatient for profit”, I would recommend to shift gears a little bit: Instead of offering the service to any and every one free of charge, GoButler may target high value customers who see a clear benefit in this concierge service and are thus willing to pay a premium for it. Alexander Goerlach – visiting Scholar at Harvard who recently visited the NYC office of GoButler in his role as the U.S. representative of the German Federal Association of German Startups – says: “There are so many extremely busy people out there who need to get things done – GoButler seems like the perfect service for them. If they get on board, I can well imagine that Google will consider consolidation options with GoButler.”

I personally believe that the extremely busy people amongst us – who not have a real personal assistant – may rely on a concierge service such as GoButler for most of their searches one day. But nonetheless, I find it hard to imagine that one day search engines will be disregarded completely. Let’s stay tuned and see how GoButler’s and Facebook’s virtual assistants roll out over time.

By: Noshad Irshad

 


1 Comment

  1. Anndrea Moore

    Great post Noshad! I think the sms-based virtual assistant model has a lot of potential if done correctly. What if GoButler implemented a fiverr strategy where other people (not GoButler employees) provided the services. Users who want to provide services could sign up with GoButler and specify an area of expertise or type of work (trip planning, resume review, pizza ordering, etc). An automated system would then direct a request from a "requester" to multiple "service providers" with the expectation that service providers have a limited amount of time to accept the request. This could be similar to uber requests for rides. While this would pose the challenge of creating both demand and supply many businesses have solved this by building supply first.