Why ServiceMagic Stinks

by Owen Sechrist

    Firstly, this article is about "online lead generation services" in a general sense, not just ServiceMagic.com.  SM just happens to be the largest and most visible of the bunch.  Not to mention the title "Why Service Magic Stinks"  sounds much more concise than "Why online lead generation services perform poorly for contractors, drive up lead costs and ultimately do disservice to homeowners".      Have you looked for a contractor on the net lately?  If you have then you know it is swimming in services that entice you to enter your project information with the promise of providing you with "prescreened" home improvement contractors.  Ever wonder how these services work?  To truly understand them you need to see them from the contractor side of the fence... we'll get back to that in a minute. If you type "home remodeling" as a Google search 3(debatebly 4) of the top 5 organic ranks are held directly or indirectly by lead service companies.  Here is a quick rundown: 1. HGTV.com - recently started a lead service though I don't see it on their site yet 2. doityourself.com - linked to RenovationExperts.com who is also Leads.com as well as hundreds of other lead generation sources 3. LetsRenovate.com - ServiceMagic.com 4. ThisOldHouse.com - couldn't find a lead generation affiliated 5. Remodeling Online - ServiceMagic.com     Also worth noting:  ServiceMagic.com occupied the top "sponsored link" position at the top of the page on every search.  The following lead generation companies showed up on the right column of sponsored links: ServiceMagic.com; BidClerk.com; ReliableRemodeler.com; MyConstructionLeads.com; HomeContractors.biz; RenovationExperts.com and the list goes on and on... "So what?" you say?  Let's hear what some reputable* contractors have to say about lead generation services:
"These Internet lead services all pretty much come down to cruddy leads and big bucks down the drain. And the Homeowners are really just chasing the low bidder anyhow."
--Matt Coop, Cupan Custom Tile & Paint www.cupantileandpaint.com
Originally Posted by tin man
We have used service magic for 8 years,they are better then most.As the economy has gone south all lead companies have had problems.When times were very good 7 -8 years ago homeowners could not get someone to give them a quote now they get swamped with calls when they request a quote. __________________________________________________ ______________ Alside windows Boston
" I'll bet the reps from SM would all love to use your explanation as their excuse, only problem it isn't accurate.  Being swamped with calls from a request on SM (or any lead service) started long before the economy has had it's problems. --Mike Finley bathroom remodeling - Denver, Lakewood, Littleton, Arvada, Westminster, Centennial, Highlands Ranch, Lone Tree, Englewood.
"I tried RR[ReliableRemodeler.com], bought one lead for $40. The lead is a deadbeat and now I can't get them to cancel my account. I sensed trouble immediately, so I filed a dispute with my CC and told RR that they could either give me back my $29.99 willingly (because I never authorized it--I was on a trial basis) or the credit card company can intervene. Either way I get my money back. One way, they get publicly bashed on the Internet...hmmm...."
"They[EveryContractor.com] lied to me. Wouldn't touch them with a ten foot pole."
"SM[ServiceMagic.com] employee,
If what you say is true, why do the majority of users (self included) seem to have so many leads that can't or won't be contacted? We do as you suggest, call them right away, email them right away, follow up with the same later that evening and again a day later, then a few days latter. So why are 80% of my leads no contacts? Another thing, if a contractor doesn't use your exact match system. How do you feel you have the right to use our companies names to market and redirect to your site, then charge us for it? The last thing I'd like to say is, I noticed your pro forum is closed down. Is seeing the contractors view on things starting to bother you guys? Or is it that you really don't care about our needs/wants? There have been on going threads there about how you could change thing to better our experience with Service Magic. By closing those forums you (SM) have proven that it's all about your wallet and you don't care about anything else. By the way SM employee, my suggestion to you, sharpen up your resume'. I see "down size" in SM's future if not a total shut down. I've been emailed 3 times in the last 4 months from lawyers pursuing a class action law suit."
Jason, New Venture, LLC  http://www.vtrenovations.com/
*These statements are a sampling of comments made by contractors on www.ContractorTalk.com
we included only statements made by contractors we have come to know through hundreds of hours of posting and in some cases personally emailing.
    When a contractor signs up with RenovationExperts.com (and presumably other Online Lead Gereation Services) they are supposedly "prescreened".  It is our belief that this screening consists of nothing more than doing an online search of the Better Business Bureau to look for negative complaints.  That is assuming they do ANY type of background check at all, considering you start receiving leads within seconds of setting up your account. 
    There is no serious investigation into the nature of the contractors.  You don't have to have an Federal Employer Identification Number.  Nor do you have to have a fax number, or even a dedicated business line or a website.  You are not required to submit references from legitimate past customers, photos of past work, tax returns or any other documentation of having done any contracting work.  Only one company required us to actually submit proof of general liability insurance and none asked for a worker's compensation certificate(this is important because an injured employee can sue a homeowner if their employer doesn not have WC).  These companies are desperate to sign up contractors because it's the contractors who are paying the dollars, and they're not terribly discrimatory about who they'll take money from.
    There are slight differences in the way these companies operate.  Some, like ServiceMagic, sell you leads for "$10 to $50" a lead.  For us, the leads were always $50 (nationwide the pricing ranges as high as $120 per lead).  Go figure.  Other companies send you the lead information sans any contact info so that you can preview the lead before you accept it.  RenovationExperts.com charges you a monthly fee for a preset number of leads per month.  Many companies then either sell the leads to another company or send them off to an affiliated company who sells the leads over again at a lower price.  Companies obtain their leads from many sources.  Obviously they are trying to entice you, remodeling/construction consumer to enter your project information so they can obtain the lead directly.  They also purchase leads from other companies, including some contractors who resell leads they have obtained from their own websites.
    We have called leads that we purchased from these companies and in addition to getting a large number of zero callbacks, we have also gotten irate responses akin to "stop calling me", presumably because the customer endured an endless number of phone calls.
    The end result of this is the following: the cost of advertising and adwords in particular is driven upward, thereby increasing the cost of advertising which drives up prices. High quality remodeling and contracting companies won't put up with the high costs, problem leads and generaly low quality of consumer leads they are provided with by lead companies.
    The solution is simple.  When searching for contractors online, select 3 to 4 companies directly from their own website.  Call them and make a judgement from talking to them if you would like to schedule an appointment.  Keep an eye out here for our future article on "how to choose a contractor"...   

Written by Owen Sechrist

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