Legal Zoom, Rocket Lawyer – We Fear What We Don’t Understand and To Our Detriment

(Please note: the factual information presented is from disparate sources including presentations I’ve attended, personal conversations with employees from branded networks, independent sources, and my own research over the last two years. SPU is not affiliated with any branded network)

Intriguing title, I know. However, I learned a lot recently from the proverbial horses’ mouths.  Most any lawyer I talk to has almost an irrational and visceral reaction when they hear the name LegalZoom or Rocket Lawyer,  companies which fall into the category of branded networks.  What is a branded network?

A branded network is a company that has created a single brand around their products and services which are marketed direct to the consumer (often abbreviated as “D2C”). In the case of legal services, these branded networks are providing legal forms and documents through document automation and assembly programs and various other delivery methods. These branded networks invite lawyers to join them in order to provide consumers with access to a licensed lawyer and to generate content for the company’s website. The branded network receives the benefit of the association with licensed lawyers and the lawyer receives the benefit of having their name and brand extended to a larger pool of potential clients. Because these companies have marketing budgets that far exceed those of most law firms, they are able to build online brand recognition that drives consumers seeking legal services online to their company’s website. Lawyers cannot compete with the online reach and marketing power of a branded network.

~ Excerpt from Stephanie Kimbro’s own excerpt of her new book  Consumer Law Revolution- Lawyer’s Guide to Working With Online Marketing Tools (Due out summer, 2013) I’m looking forward to reading this book when it comes out and learn even more about her take on this important topic!

Since Legal Zoom has a 60% aided brand awareness (put their name in a lineup and 60% of consumers have heard of them versus the biggest law firms with only 2 – 5% brand awareness) we’ll use Legal Zoom as our lead. Those lawyers who claim they aren’t frightened about branded networks such as Legal Zoom are generally flip about it and say that Legal Zoom’s clients would never be clients who would want their services.  And a smaller minority say they love charging these DIY clients to undo the damage they inflicted upon themselves because they didn’t want to pay for a ‘real’ lawyer.  Well, those are very foolish answers and each one shows a certain amount of false bravado and a willful lack of education about branded networks.  Most importantly, failure to understand branded networks and how they could potentially benefit a solo/small firm, can actually be detrimental to your practice going forward.  Or to quote Stephanie Kimbro in our recent conversation on the topic, ‘bad for business.’

Like you, I thought the Legal Zooms of the world were all about forms for DIYers and therefore felt they were no immediate threat to the majority of lawyers.  I imagined in time they would expand to include a network of attorneys to help those who struggled with the forms but I’d not heard too much about this until recently. (I am, actually, most impressed with what Jacoby and Meyers is doing and they are extending their brand into a branded network.)  I’ve also talked to a well established attorney who is becoming a franchise/affiliate of Jacoby and Meyers.  He’s not a stupid lawyer by any stretch.  His business is well established with many lawyers working for him and he wants to take advantage of the marketing might J & M will bring to his market.  He wants to be the first in line.

Here Are The Facts

The legal services sector is a 1/2 Trillion Dollar Industry.  The Legal Industry is one of the world’s largest and most inefficient service economies. There has been a 75% rise in legal costs over the past decade (compared to a 20% rise in non-legal costs) ~ Source: William Blair & Co., National Law Journal, Eversheds/Corporate Executive Board

Sounds like the tuition trajectory of law school, right?

These big branded networks have access to capital because of these statisticsAnd because of these statistics a huge latent market of underserved individuals has been identified.  And just as a heat seeking missile hones in on its target, so flows venture capital:

Legal Zoom – $66 Million 2011

Total Attorneys – $15 Million 2012

Rocket Lawyer – 29.3 Million 2011/2012

Who is their target audience?  Their traditional and most publicized target audience is different than the standard law firm’s target audience.  These consumers/clients are very price sensitive even though they have money.  They are hardcore DIY’ers who feel they have the intelligence to figure things out on their own.  Yes, most of you have a vague idea of their audience but inaccurately define it in a more derogatory way.  To put it bluntly, lawyers say these types of clients are both cheap and stupid.  What many of you may not know, though, is these companies are now broadening their reach into traditionally latent groups, those groups who have too much money to qualify for legal aid yet still have legal needs. They are not traditional DIYers.  What they’ve identified is what’s most important to you: these potential clients are not currently hiring lawyers but would if the right solution presented itselfAnd this market is considered to be huge by those now looking to dominate.

And, to get it out of the way, the number one way to get business is word-of-mouth referrals.  That’s the brass ring of a successful practice, where you have so much referral business you have to turn it away.  But you have to get there first and this includes marketing your services effectively.

The Biggest Marketing Playground – The Internet.

As a backdrop, let’s look at some recent statistics on internet usage:

  • 79% of adults use the internet
  • 50% use smartphones

(Is it any wonder Facebook just came out with their own ‘Home Page’ on a smartphone!)

How Clients Find Lawyers On The Internet

chart on how finding lawyers

(American Bar Association Standing Committee on the Delivery of Legal Services February 2011)

These numbers paint the best picture and they are two years old. The top three are:

  • Q & A sites
  • Lawyer Rating Websites
  • Lawyer Website (your own website)

Matching websites are creeping up there, too, after online directories.  If you follow the smart money it explains why Rocket Lawyer just purchased LawPivot (a Q & A site).  Interactivity between lawyers and potential clients is the name of the game and the interactivity is taking place on the internet.  The problem for you, however, is there are so many ‘interactive’ startups in the space that it’s hard to separate what is good and what isn’t  and what, if anything, is the best fit for your practice.  Some of these startups will thrive.  But most will die. The goal of this piece is to get you to think about where you want to be in the ecosystem.

Why You Should Investigate Branded Networks

Branded networks come in all shapes and sizes so let’s focus on the big two – Legal Zoom and Rocket Lawyer.  Yes, Legal Zoom has been around a while and Rocket Lawyer is the biggest ‘new’ kid on the block.  But there’s lava bubbling under the crust and to dismiss them as forms companies with clients you don’t want would be a huge mistake.

In relation to the latent legal market described above, Legal Zoom (the company I’ve the most information on) is rolling out with subscription services such as legal plans.  These subscription style legal plans are in many ways comparable to what a firefighter or another union-type or corporate employee might get as a benefit.  The employee has a set amount of money deducted from his paycheck every pay period for a menu of legal services either free with their subscription plan or discounted.  The difference with these branded networks is now anyone can sign up for a legal plan. You don’t have to be part of a company or union. That means your clients can sign up for these plans. While not aggressively marketed yet they are technically in 41 states offering unlimited 30 minute consults with attorneys – one consult per legal matter. Their attorneys will also do limited document reviews with the attorney offering a 25% discount for the work.  They have about eighty attorneys who work with their primary firms. Additionally, they work with about 100 local attorneys who take on matters outside the parameters of the subscription legal plans.  Again, their attorneys do so with a 25% discount off their regular ‘reasonable’ rates.

Legal Zoom is very built out in California.  California is essentially their testing ground as they address the ethical issues surrounding:

  • Unauthorized Practice of Law – they are multi-jurisdictional and they’re adding a non-lawyer into the practice of law.
  • Establishment of a Relationships via Q & A – some states claim disclaimers are inadequate.
  • Confidentiality
  • Cloud computing – this is becoming less and less of an issue as long as one takes reasonable steps to keep secure
  • Professional Independence of the attorney -  is the process occurring in a way which compromises the lawyer’s independence of the branded network
  • Rules of Attorney Advertising - fifty jurisdictions, fifty different sets of rules
  • Fee Splitting – or the perception of fee splitting (even though asking an attorney to reduce their fees to be part of the network doesn’t appear to be fee splitting to me unless the reduction is conferring a benefit to the network and therefore construed as a ‘fee’ under the rules),
  • Unbundling of Legal Services – or as some see it, aiding a non-lawyer with the practice of law. It is certainly more widely accepted than before and the ABA is actively promoting it as a means to provide Access to Justice (A2J) for those underserved.

Suffice it to say, they are aggressively addressing these issues and when they are successful, which I believe they will be, then these branded networks will dominate the legal market in ways most lawyers haven’t prepared for.  I think you should anticipate and decide if your practice would benefit from an association with a branded network.  They all have similar core models, some have more features, some less, but the principle is the same,  In exchange for discounting your fees a percentage, you buy into their aided brand awareness to drive business to your practice.

Is a Branded Network Right For You?

As these volcanos erupt (to keep my theme going), they are going to own internet legal marketing. With millions and millions of dollars behind them and teams of trained people employed to push their brand awareness through the roof driving traffic to their site, these networks (Legal Zoom already has a 60% aided brand awareness whereas the largest law firms have maybe 2 – 5%), are going to knock you back to page 15 in a google search unless the client puts your name or your firm’s name into the search bar. The advertising and marketing might they will unleash is something you will struggle to compete with as a solo. The time and energy and costs will be overwhelming especially to a solo who doesn’t already have a strong presence or a specific niche or a very strong referral base. I’m not trying to frighten you.  I just want you to be aware.

If you want to explore branded networks, here is a checklist of things for you to consider:

  • Does the ‘brand’ of the network fit your image and what you are trying to create?  Does the association help or hurt you?
  • Are you able to assess the quality of the product the branded network is producing?  If it’s a company like Legal Zoom or Rocket Lawyer or SmartLegalForms, do you like the product? Are you able to contribute to the product to improve it to meet your standards?
  • Does the ‘cost’ of the relationship make sense for your bottom line?  All of these branded networks have an associated cost, mostly in some type of reduction to your regular fees as well as time you could be devoting to full fare clients.  Can you justify it as a marketing cost for getting the business or are they asking too much of you and it compromises your finances?
  • Do they actively support your jurisdiction or just ‘say’ they are in your jurisdiction?
  • If you try it and it doesn’t work out as you’d hoped, can you get out?
  • If it’s a huge success can you scale up?
  • Can you work with more than one branded network at the same time?

There is a lot to digest here.  But it’s happening.  The field is still murky.  There are no sure heroes and plenty of zeroes in this space, but it is happening.  Be aware and start investigating. Use the guidelines indicated above.  These companies have not even begun to really build out their network of lawyers yet because of the issues which need to be addressed. That means the playing field is pretty open.

If you decide to investigate would love to know your experiences.

And one last thought, there are those out there who mock the ‘hot’  and sadly overused and misused word ‘disruption’.  Some of them do it knowing what the word is and claiming there’s nothing out there which will cause a disruption.  The majority, however, really don’t know how it applies.  So, I’d like to share an analogy that will illustrate the difference between an invention, an innovation, and a disruption.

When the automobile was first introduced it was an ‘invention’.  It was a shiny new object, too expensive a novelty for anyone but the elite.  The majority traveled by horse, horse and buggy, or walked.  Then Henry Ford introduced the assembly line, brought down production costs and the masses were enjoying affordable motor cars.  The car was the invention.  The assembly line was the innovation and mass production of automobiles providing this invention to the masses changed transportation forever and this was the disruption.  The legal profession is about to experience a major disruption in many areas.  But my guess is the biggest one will be coming from the branded networks.

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7 comments on “Legal Zoom, Rocket Lawyer – We Fear What We Don’t Understand and To Our Detriment

  • Like you, I don’t like to use buzzwords but I am hard pressed to see how these programs are any different from Pre Paid legal services, except that they are marketed online to the end user rather than to an employer or organization. Some lawyers do have good experience with prepaid legal for the reasons you mention (ability to gain access to referral sources) while others find the rates too low to be sustainable. What concerns me about LZ and RL, however, is that it is hard to tell which users want the service because it’s more convenient than a lawyer and which users simply don’t want to pay for a lawyer at all. If the latter, then these networks are potentially worse for participating attorneys than pre paid legal, because the clients don’t really want a lawyer. That was a major problem with Nolo’s network – Nolo’s site drew lots of traffic but it was very hard to convert DIY’rs over to paid services.
    That said, I do see lots of promise in the branded network, or network of solos/smalls concept – though ironically, with current bar rules, these networks may face more hurdles than the non-lawyer administered networks that you describe. I’ll be blogging on those inequities soon.

    • Carolyn, I think it’s all in the message and the dollars behind the message. If I remember correctly, Nolo sold DIY books and their main and unrelenting theme was DIY. So, they attracted that crowd. With the economy in its current state, with the venture capital pouring in to companies like LZ, RL, TA, etc. and the change in their marketing message, I do believe it’s going to be different. I also think they are able to sort out the DIYers because with the free consults consumers get one bite at the apple on a free consult for a given legal issue. If they don’t convert it’s easy enough to see if they were hardcore DIYers. Is this any different than someone who takes advantage of a free consult offered by a lawyer now? The major difference is in the potential flow of consults. The value is what a lawyer contemplating a branded network has to assess. It’s all about the heavy lifting associated with getting potential clients in the door. And I still think the majority of people want human contact with a lawyer who can guide them.

  • Susan: Anyone contemplating getting into bed with LegalZoom or Rocket Lawyer should understand that their contract templates appear to be of poor quality. I say that based on my analysis of what I have to assume are representative contracts. Go here for my blog post about a LegalZoom contract; go here for my blog post about a Rocket Lawyer contract.

    Of course, when it comes to contracts, mediocrity is the order of the day at all levels of the profession, and that hasn’t stopped people from making money. So who knows, going with LegalZoom or Rocket Lawyer might offer advantages. But based on what I’ve seen, quality wouldn’t be among them.

    Ken

    • Ken, contracts are an art form and you are a true artist. Here’s the issue I see. One of the criteria I listed as when considering whether these companies are a good fit for association for referrals is whether or not you can preview the product and whether or not they would take advice on improvement. If you are a lawyer affiliating with the network, I’m not sure 1) that the lawyer is obliged to use the documents and 2) if they do provide a template to get started can’t one use it as an outline of areas to cover and then add more as needed and create their own piece of legal art or… simply not use at all?

      As a lay person using their documents if determined to be weak, this presents a whole other issue which then has us circling back to the DIYers who are doing their own work and possibly screwing it up and showing up on a lawyer’s doorstep saying, ‘help me’.

  • There has been discussion regarding whether Legalzoom and Rocketlawyer are sustaining innovation or disruptive innovation. They are disruptive. Disruption requires cheaper prices, lower margins, process changes, and starting at the bottom of the market, such that the incumbents won’t or can’t replicate the service. The technological difference is not the process difference with Legalzoom and Rocketlawyer. The difference lies in the difference of restrictions placed on them because they are not a law firm/lawyers, although lawyers might help in production the actual companies are not restricted in the same ways as lawyers. So they advertise differently than lawyers, receive funding differently than lawyers, and the business structures are different then lawyers. Legalzoom and Rocketlawyer clearly have lower prices and likely lower margins than the average lawyer so I would categorize them as very disruptive rather than just sustaining innovations in providing legal services.

    People tend to just focus on the technology when discussing disruptive innovation, when there are actually many parts and concepts well beyond technology that qualify true disruptions. I would not ask a lawyer about whether their own field is being disrupted, its like asking Kodak if digital photography is the next great thing. One of the primary reasons disruption happens is because the incumbents disregard the entrant as a real competitor until its too late.

  • I think the best and most competitive “brand” an attorney can offer is their own personal service. For some clients this may not matter, and some situations do not require it, but many DO.
    An attorney who knows an area of law well, and can work with a personal style, can surely compete in a market of “brands”.
    I’m fine letting clients decide., and when clients choose ME over “Legal Zoom” or whatever, a better client has already self-selected.
    Early in my career I was on a pre-paid panel, where essentially union members got a “free” (to them) lawyer, and I got referrals and guaranteed, albeit low, payments. All in all, a pretty awful experience. If one had a choice not to do this, I wouldn’t, but all experiences have SOME value.

    Thank you for posting this, the legal world should be talking about these issues.

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