Everything We Know from Testing and Using Google’s Home Service Ads

For the past three years, Google has been testing a new online advertising product that could have a major impact on the HVAC and home performance sector. The Energy Circle team has followed the development of these Home Service ads closely. We’ve publicly made known our concerns, have worked to get quality whole-house contractors into the beta test and have had regular conference calls with the team at Google driving this product. With the news that the product is now expanding beyond the test geographies in California, we thought it was time to lay out what we’ve learned — both from our discussions with the Google team and in our day-to-day experience working with contractors that are in the test. Short of an excellent piece by fellow HVAC marketer, Dave Squires, not much has been written about the details of Home Service ads for our industry.

Quick Overview of Where Home Service Ads Came From

The Home Service ad saga started with a company called Homejoy that aimed to be a competitor of Yelp, Angie’s List and Thumbtack. Homejoy had amassed $40 million in funding, including investors like Google Ventures. Google then saw the opportunity for more search dominance and hired members of the tech team from Homejoy.

Google’s overall goal for any of their products is to unite a searcher with the desired information as quickly as possible. This is why there are answer boxes, weather forecasts and hotel prices directly on the Google results page. Home Service ads were created so that Google could connect interested buyers with top rated contractors without having to navigate through sites like Yelp, HomeAdvisor or even the contractor's website. It’s a one-stop shop.

Google has been testing these ads since August 2015 in a variety of services, ad styles (mobile and desktop) and locations. The initial beta version started in San Francisco with locksmiths, handymen, house cleaners and plumbers, and has since expanded to a larger audience including HVAC contractors, electricians and roadside assistance companies. Google has announced specific expansion geographies in the east, and a number of sources have reported that they plan nationwide rollout by the end of 2017.

What Sectors and Geographies Do Google Home Service Ads Affect?

As of July 12, 2017, this chart accurately represents the verticals and geographies that Home Service ads are appearing for. San Francisco includes the greater Bay Area including Oakland, Berkeley and the peninsula. From our conversations with Google, we believe that these services will continue to expand and it has been confirmed that the geographies will expand as well.

How Often Do Home Service Ads Appear?

Home Service ads are still in beta, and it’s clear from our day-to-day searches that there is a lot of testing going on. Some days the ads will appear, and on others, you’ll see a traditional AdWords and local pack configuration. The data from our clients who are currently in the program shows meaningful volume, so it’s clear the new product is getting its fair share of the SERP. As of the moment we’re writing this, a search for “heating repair in Oakland” will show a Home Service ad but in the next hour it might show only Adwords and the local pack. Always keep in mind that AdWords represent 96% of Google’s overall revenue, so they’re unlikely to make changes that would hurt revenue.

What Does This Change About The Search Engine Results Page (SERP)?

As we’ve discussed repeatedly in our writings, webinars and PT’s training around the country, Google has made plenty of changes to the SERPs in the past couple of years. The ads on the sidebar have disappeared, the 7 pack has turned into a 3 pack, there are now four ads up top instead of three, etc. We’ve tracked the impact of this ever growing takeover of page one real estate on organic results and, clearly, Home Service ads only continue this trend — now moving the organic and local pack even further down the page.

We have seen a few variations of search pages, but the most common one we’ve been seeing in recent weeks is ordered as:

      1. Home Service Ads (3 in carousel format)
      2. 1 to 3 AdWords Ads
      3. Local Pack
      4. 10 Organic Results
      5. 2 or 3 more Adwords Ads


What We Know About Ranking

When Home Service ads first rolled out, the order in which companies appeared wasn’t a super high priority because the beta contained relatively few companies. Today, for “HVAC Contractor, Los Angeles,” there are 37 companies in the program, all vying for eyeballs and clicks. To make page one, so your listing is in the carousel at the top, would appear to be critical, but we really don’t have enough data to know this for sure, and position is not reported in the Home Service ad analytics. But it’s a safe bet that not many searchers are clicking through to the “More HVAC pros” page.

So what have we learned about how to rank? First of all, it is not (at least yet) a bid system like AdWords, so you cannot buy your way to the top. As of this writing, the price per lead is a fixed number — we’re hearing either $25 or $50 depending on geography and service. Our best conclusion from looking at hundreds of these is that the rankings are driven by:

  • Approved for Google Guarantee

  • Presence of Google My Business (GMB) reviews

  • Proximity to ZIP code of search

The bottom line is that it appears that without Google Guarantee and some reviews, you’re relegated to the lower part of the page regardless of proximity. We never see the “naked” listings at the top.  

Review System

When it first launched, Home Service ads had their own review system, independent of Google My Business reviews (formerly Google+.) They’ve maintained a separate review system for homeowners that have purchased business from a contractor through a Home Service ad, and in Home Service ad land those are added together with GMB reviews. The Home Service ad generated reviews also contain some additional information, a snippet that indicates it came through the program — “Google verified job” and also one that indicates the type of job — “Heating system (Repair furnace/forced air)” for example. But Home Service ad generated reviews are not appearing in the normal places that star averages are seen, like the local pack and Knowledge Panel.

The Impact of Home Service Ads on Organic

Our team has been carefully monitoring the ten organic listings to try to determine if the presence of the Home Service ads impacts the mix of results. We’re especially looking for whether these ads change the balance of directory/aggregators versus contractor listings.

As of this writing, it does not appear that there is a change. In most page one organic listings around the country, we continue to see 50-70% of the results from directories like Yelp, Angie’s List, Home Advisor, etc., with the balance being actual contractor websites. We’ve proven that strong optimization efforts can result in contractors ranking better or at least on par with the major directories, but this remains a big challenge. If you think of Home Service ads as essentially another aggregator — a middleman inserting itself between contractors and their customers — then the totality of page one real estate begins to tilt even more away from actual contractors. For better or worse, it points out the continued importance of being in the AdWords mix, as that is one of the few pieces of real estate on the SERP that we can control.

The Insulation Problem

From the beginning, insulation related search terms trigger Home Service ads but deliver only handyman companies in the results. This is just wrong. We’ve called it out to the Google team, but it hasn’t changed.

Google: once again — this is wrong and it is bad. It is inadvertent probably, but you are directing homeowners to unqualified people for what is probably the most important work related to a home’s energy efficiency — the building envelope. The entirety of California’s Home Upgrade Program — one of the most ambitious efficiency retrofit programs in the country — is aimed at helping homeowners fix their leaky, poorly insulated homes. The Home Service ad program is intercepting searches that should be going to Building Performance Institute certified companies, and directing those inquiries to handymen who most likely don’t want and aren’t qualified to do serious insulation work. The #1 “insulation contractor” result in one Bay Area town this morning is a company that specializes in painting and gutter repair, has one review and no website.

The Price of Admission

To participate in the Home Service ad program, there are a number of required steps, and they are not trivial. Google is guaranteeing the work performed through the program (up to $2,000 lifetime*) and, not surprisingly, are being quite diligent about vetting companies. To get in the mix, contractors are first subject to:

  • Background checks completed at bizprocheck.com, an online site managed by Pinkerton

  • Providing a copy of certificate of insurance

  • Verification by Google of proper licenses depending on services you offer

The background check on every individual has been a significant challenge, especially for companies of any size. Every employee that may come in contact with a homeowner is subject to the check, and one blemish can prevent you from being included in the program. We certainly welcome this level of scrutiny — it’s an excellent way to differentiate quality companies — but it does tend to favor smaller companies. When Home Service ads first came out, many of the contractors in the program were one and two person shops. That has shifted over time, but in total, the balance of contractors in the mix tend to be smaller shops.

Small Company Bias?

In addition to the background checks, the infrastructure of the program tends to favor the smaller shop. Remember that when this program started the first categories were plumber and locksmiths. Leads are managed through the Home Service ads app — and at first, they all came to one cell phone number and the reporting was informal at best. For companies with a number of customer service reps and technicians, this was not an effective system — imagine running even a modest sized HVAC business through one iPhone. Improvements have been made and the program can now be run through an email address on a desktop. Reporting has also become more robust.

*We love the concept of a Google Guarantee. But a lifetime cap of $2,000 is a mismatch with the type of jobs HVAC and home performance companies perform. The contractor in the Bay Area that repeatedly wins PG&E’s award for delivering the highest energy efficiency gains sells a mix of HVAC and insulation/building envelope services for an average price north of $25,000. When Google sets an expectation of $2,000 for these kinds of services, it is either a market distortion or a false sense of security.

Other Details

  • You set your own budget. In recent conversations, Google reps have been recommending $350/week, which is obviously real money for many contractors

  • You can pause your ad at any time and alter your budget

  • Leads come through the Home Service ads app or the desktop version that rolled out a few months ago, or to an email address

  • Contractor license number and amount of general liability insurance coverage is required

  • Google verified job reviews will always show up before regular Google reviews regardless of the date they were completed

  • BBB rating is displayed on the ad

  • No other certifications that indicate advanced training — such as BPI or NABCEP or NATE — are included

  • Plumbers, handyman, contractors, electricians, and HVAC pros need a contractor’s license to perform services costing more than $500. Plumbers, handymen, electricians, and HVAC pros without a contractor’s license may still be featured in Home Service ads, but are prohibited from performing services that cost more than $500.

Lead Math: Feedback From Contractors Using The Program

Our clients who are in the program report that they pay a set price of $25 to $50 per lead. Keep in mind that these are not necessarily exclusive leads. If a customer calls the phone number on the ad, then you are charged the set fee and if a customer fills out the online form they have the option to send the request to up to three contractors, and you are still charged the set fee. Our clients report that these leads tend to be for service calls (lower job value) and not for installs (higher job value.)

Quick math:

  • $50 for a non-exclusive lead that went to two of your competitors

  • 33% chance the customer contacts you instead of your competitors

  • This drives the price up to $150/lead

  • Close rate 33%

  • The final price actually ends up being about $450/lead

Depending on the job, paying $450 for a lead is a good way to put yourself out of business — just check out Peter’s blog about buying leads. If the trend continues that Home Service ads disproportionately generate service leads, these numbers just don’t work.

Even if we get the price per lead down to $25, and get close rates up because service jobs convert better, the same math gets us a final cost-per-lead (CPL) of $229.56 — still way too high for a service call. And our clients agree: the economics will eventually crash. This, more than anything, is a crucial note for the Google Home Service ad team. Clearly, any program that dominates a market vertical at this level becomes “non-optional” for companies trying to compete. Having no choice but to accept fundamentally broken economics ultimately isn’t good for anyone.

As of this week, one of our clients has decided to drop out of the Home Service ad program based on:

      1. Low value service-only leads
      2. Low quality leads generally
      3. Unacceptable customer acquisition cost economics

Process for Disputing Bad Leads

The internet is filled with bots, click farms and all kinds of annoying spam. So what is stopping one of these bots from calling the number on your ad and getting you charged for the lead? Or even worse, one of your competitors or ex-employees calling just to raise your bill?

If you start seeing some spam or unrelated calls through this number the only way to dispute the cost is to call Google. We have heard that the Google reps have been excellent about refunding these calls, but it is easy to see how this could be a time consuming process with having to track down and listen to each call and then still take the time to call Google. Calling Google about spam calls definitely won’t be top of mind during a hot August when service calls are coming in left and right.

Home Service Ads in Context: The ODLS Killer?

When looking at this program from 30,000 feet, it is important to keep in mind the broader context. On the coattails of Uber, many companies are attempting to become the trusted middleman that disrupts home contracting in the same way the car hailing service disrupted taxis. Home services have had Angie’s List and HomeAdvisor for a long time.

In recent years, a new crop of so-called On Demand Local Services (ODLS) wannabes has appeared: Porch, Serviz, Thumbtack, PRO.com, RedBeacon. None of these have proven to be very meaningful in the HVAC, insulation or home performance sectors, but it appears that they are succeeding as businesses, at least in the way Silicon Valley defines success. All of these business models are based on the premise that:

      1. Contractors suck generally
      2. Contractors especially suck at customer acquisition
      3. Homeowners live in fear of the process of finding a contractor
      4. That some special sauce can make them the preferred way to find a contractor. (This boils my blood, but that’s for another day.)

Google Home Service ads enter this environment with a huge advantage, of course, in that search is a significant source of all these ODLS company’s leads. We’ve been duking it out with these guys for years in AdWords and organic, getting contractors to win the click first, so you don’t have to buy leads from a third party. Clearly, the placement of Home Service ads at the top of the page will put a world of hurt into the other middlemen, and divert much of this lead flow through Google.

Implications for Whole-House Integrated Contractors

What is inherent with Home Service ads is that they are aimed at very specialized services — the “single measure” lead challenge that the entire home performance industry faces. A homeowner calls in the middle of a summer heatwave because they’ve self-diagnosed that their air conditioning system is too small. Successful whole-home performance contractors are skilled at getting that homeowner to see that the problem might actually be more systemic, performs a professional audit and then recommends the correct solution. Home Service ads require the homeowner to select their service first and, in that sense, further feed the single measure problem.

This might sound small, but it is dangerous. It is bad for the homeowner because they are not getting the service they really need, and it is also bad for the contractor because they’re railroaded into a particular fix even when they know that a larger AC unit won’t keep the house cool. When the fundamental way that homeowners search for contractors takes them down a single measure path to contractors willing to take single measure jobs (due to lack of fundamental building science or professional skill) that house will continue to waste energy, not deliver comfort and potentially be unhealthy. What is absolutely clear is that this is not a path toward the broad retrofitting of the built environment that is so critical to combatting climate change.

Google being evil? No, we’re not ready to say that. But given the search giant’s clout, and their fundamental control of a huge channel to contractors, the Home Service ad product is not looking good for homeowners, for contractors or for the planet.

Special thanks to the full Energy Circle Marketing team for support on this post, particularly Dan Paradee.

Watch the webinar on Google Home Service Ads below.


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