Thursday, June 23, 2005

Straddling Services: Offline is the New Online

Tags: straddling, IYP, business, Internet, eBay, OnlineOffline, local

I’ll pick-up the Internet Yellow Pages (IYP) thread soon, but I had a thought on a related topic and realized that if I didn’t commit it to words, it would be lost forever.

Today I was reading about eBay’s slowing growth (registration req'd), and how they are attempting to target the 95% of transactions that occur offline. They are doing this by acquiring companies, or stakes in companies, that facilitate transactions by straddling the online and offline worlds. I refer to online companies that match buyer and seller for offline transactions as straddling companies. eBay is hot to sink their teeth into the other 95% of the transactions, so they are betting big in straddling companies.

There are plenty of 1:1 and 1:n cases of straddling. For example, radio talk shows promote ProFlowers. You go to ProFlowers and there is a microphone in the upper right corner. You click on it and enter the broadcaster’s name and you receive a discount and the broadcaster gets a commission. This is a 1:n inbound straddle. It is 1:n because it involves one company, ProFlowers, and multiple broadcasters/users. It is inbound because the objective is to bring outside users into the companies website.

Advertising doesn’t qualify as a straddle because it merely promotes a website or a location. Most advertising cannot be tracked to a specific action by the user. This link to a specific action by the user is critical because only with such a causal link can it be monetized using the performance-based model that is becoming the de facto standard model on the Internet.

What is most interesting, in terms of attacking the other 95% of transactions is outbound straddles. Outbound straddles use the Web to drive measurable offline transactions. An example of a 1:n outbound straddle is online coupons, like that offered by FreshChoice. This coupon can be tracked through both clicks and redemptions, to determine how its effectiveness.

Online coupons are a straddle enabling technology, because they enable companies to straddle their online/offline worlds. Another straddle enabling technology is pay-per-call from companies like Voicestar and Ingenio. These enable the virtual world to extend into the real world in a manner that can be tracked and monetized. For example: Bob visits the Joe’s Pizza website and clicks the call button. This connects Bob to Joe’s Pizza via voice-over-IP (VOIP). Through the pay-per-call function, not to be confused with pay-per-click, Joe’s Pizza knows which website that call originated from.

There are also straddle companies. These companies operate websites that facilitate the straddling of the online/offline worlds. Examples of these companies include classified ads, yellow pages, local comparison pricing (e.g. ShopLocal). ShopLocal is an interesting one, because the company name is CrossMedia Services. With a name like CrossMedia, they get it.

eBay is salivating over the other 95% of the transactions, the offline ones, so they are buying straddle companies. They have acquired classified ad sites, a rental matching website and

Now, you might say, hey is strictly online. People compare pricing of online stores, along with product features, reviews, etc. But then you would be missing the fact that most people, I am told by a ratio of 4:1, use to compare features and pricing, but they buy offline! In other words 80% of the value of, while currently untapped, is as a straddle company.

Next we come to straddle services. I believe that the big guys, like eBay, are all chomping at the bit to offer n:n straddle services. Maybe an example would help. Yahoo Local provides the market leading Internet yellow pages. They could go to the vendors and offer them pay-per-call services, coupons, maybe even online scheduling for services companies. This makes Yahoo the single source for straddling services for businesses. This sort of n:n opportunity is huge.

When eBay says they are eyeing the 95% of transactions completed offline, and then they buy various straddling companies, this is what they mean. They want to offer a host of services that enables businesses to straddle the online and offline worlds. Whether your business is selling online or offline, eBay wants it to go through them and they want their cut.

Straddling is obviously big business, and could lead to the next wave of Internet growth. Instead of battling over the 5% of business transacted online, they can battle over the other 95%. Straddling is all about local, since that is where the bulk of the transactions take place. Straddling is shaping-up as the battle royale for Net dominance. It is why Amazon is investing in A9’s local efforts, why every major search engine has a big local effort underway and why the newspapers and phone directory publishers, traditional local barons, are in a battle for their lives…whether they know it or not. So, as Michael Buffer would say, “Let’s get ready to rumble.”

…More on straddling to follow...after I finish my thoughts on the IYP market.