Many services are structured as follows: Person A pays Person B for a task or item, and the “finder” or “connector” service takes a cut. It’s a wonderful business model – someone else is doing all the “real” work, and you get a bit off the top.
The problem is that users are wise to this in recurring interactions. Once trust is established through a successful interaction, B will come back to A and cut a deal. Is the service taking a 10% cut when A pays B? Perfect. A will pay B 5% less, but will pay B directly. It’s a win-win for the users, and a big fat “lose” for the service.
Services must, therefore, offer an incentive to continue to use the service for repeated interactions. Consider the case of two very similar websites:
RentACoder
RentACoder, an outsourcing service, suffers from this problem and has been unsuccessful thus far at tackling it. For the first job between a provider and me, the provider has a strong incentive to work through RentACoder. The person doesn’t know me, and has no idea if I’ll pay them; RentACoder offers protection from that. However, once mutual trust has been established, they will, almost without fail, ask me to pay them directly.
Ironically, RentACoder’s attempts at attacking this problem probably worsen it. The service offers conflict resolution / protection — but only if you’ve been using their service for all communications. Their hope is, I believe, that you’ll be less likely to leave the service if you communicate via RentACoder.
However, conflict resolution – eg, will-they-pay-me-or-won’t-they – is primarily a benefit in the early stages of a resolution, not in longer term transactions. Additionally, this feature is only offered if all communication is through their platform. Users much prefer to use their existing mail and messaging tools, especially since RentACoder’s interface looks like craigslist got in a fight with linux – and lost. So, even if a user wanted conflict resolution, it likely wouldn’t be available to them.
And so, RentACoder loses the exact transactions it wants to maintain: the long-term ones.
oDesk
Surprisingly, oDesk does not suffer from this circumventing issue. In the 20 or so oDesk providers I’ve worked with over the last year, not one has asked me to pay them directly. Why? Because oDesk offers an incentive to both me and the provider to continue using them.
Employers prefer to pay through oDesk because they can track the worker’s hours. Even if one trusts a worker, concerns still arise when a task takes unusually long. oDesk providers install software which takes a random screenshot every couple of minutes. If an employer is unsure why a task took so long, the screenshots can relieve their concerns.
Employees prefer to work with oDesk because employers see long and continuous work assignments as implicit reference. Sure, employers could look at the worker’s reviews, but “grade inflation” renders reviews almost useless. However, 100+ hours of work for the same employer says something very strong about the candidate. By continuing to work through oDesk, employees boost their resume and their attractiveness to employers.
Thus, both employers and employees continue to work through oDesk, and oDesk reaps the benefits.
What This Means for Your Company
If you’re offering a service where people have an incentive to “cut you out,” think long and hard about how you can add value in repeated interactions. What are their problems? What can you solve?
In the case of outsourcing websites, employees face the problem of finding new jobs, and employers worry that employees are exaggerating time limits. oDesk has solved these pain points, and so we continue to work with them. RentACoder, however, is cut out of the picture.
Which service do you want to be?