The Harvard Journal of Law & Technology prominently features USLegal in a Jan 26, 2010 article by Chris Johnson, Leveraging Technology to Deliver Legal Services. Johnson, a graduate of Harvard Law School, also holds a degree in economics from Yale University. USLegal CEO, attorney Frank D. Edens, was extensively interviewed by the author.
The article examines the evolution of online legal service technology, studies the different business models employed by several participants in the field including USLegal, considers the obstacles and changing environment hampering successful operations (consistently overcome by USLegal), and discusses the industry’s future, arguing that both consumers and legal professionals will benefit by embracing expanding online legal services.
Johnson concludes that the field’s terrain is shifting to favor an “online pure-play, multi-sided, quasi-open platform” able to adapt to a wider range of consumer needs - and observes that USLegal, incorporating these three elements in its Build USLegal platform, is uniquely positioned among its competitors to successfully serve the public and the legal profession going forward.
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The article begins with a review of the origins of the online legal service industry in the mid-to-late 1990’s, the surge of revenue growth and entry of competitors, and the consequential drop in forms prices and the explosion in variety of types of forms offered. “As a result, it became possible for low- and moderate-income households to avoid costly attorney consultations for everything from bills of sale to landlord-tenant agreements to living wills.” (p.261)
Three distinct business models were adopted by competitors in the field. The article discusses the choices of three leading companies: LegalDocs.com, We The People (”WTP”), and USLegal.
LegalDocs.com provides basic document preparation services at low costs. Alternatively, USLegal offers a comprehensive set of services to its customers with prices varying according to the complexity of the service: basic legal information is provided for free, basic forms and document assistance are provided at low costs, and more complex consultation and advising services are available at correspondingly greater costs. WTP uses a hybrid system for document preparation - it operates not only an interactive website, but also a number of brick-and-mortar retail stores. The website allows users to find the nearest retail location, schedule an appointment, and provide basic information about their legal needs in advance to facilitate the in-person visit. (p.262)
As part of its pyramid of escalating services, USLegal has diligently developed an attorney directory/referral system. The author discusses the incorporation of this feature in detail:
Perhaps the most innovative service offered by USLegal is its attorney referral system. USLegal refers its customers to full-service lawyers; however, it allows these customers to control their interactions with the lawyers in a number of ways. At the lowest level of interaction, customers have the option of simply submitting a question to USLegal’s network of lawyers for $15.95. … The notion is that simpler and less expensive legal issues can be handled without the assistance of the lawyer. The lawyer’s services will only be required for more complex and sophisticated issues. This is a distinct form of unbundling, whereby a given legal matter is broken into discrete tasks that are handled by different people at different stages: USLegal provides forms and basic information, the customer handles factual matters, and the lawyer is only employed for matters requiring particular expertise or advocacy. Simple or highly replicable tasks are handled by commoditized or highly systematized procedures; attorneys handle more complex tasks in a bespoke manner. (p.265)
In considering the obstacles encountered by the leading online legal services companies, the article documents how the hybrid business model of We The People has resulted in numerous “unauthorized practice of law” prosecutions (an issue neutralized by USLegal’s online-only model), and concludes:
It is therefore unsurprising that WTP operates fewer retail locations each year. The number of locations dropped from 175 in 2005 to 110 in 2007. By September 2009, only 49 retail locations existed. This contraction during both strong and weak economic times signals that the hybrid model is losing ground. (p.273)
In wrapping up the business model comparisons the author compares LegalDocs.com’s basic “vendor” model with the “multi-sided platform” (”MSP”) approach represented by USLegal’s Build USLegal program, concluding that “the vendor-only model is unlikely to endure” (p.275) and highlighting the benefits of MSPs:
MSPs are incredibly attractive because they benefit from indirect network effects and increasing returns to scale. Indirect network effects occur when an increase in the size of one user base makes the system more valuable to users in a different category. In the case of legal service MSPs, as more attorneys join the referral network, the platform becomes more valuable to consumers because of the greater range of legal expertise and broader geographic coverage available. Similarly, when more developers join the system, consumers benefit from the new legal service technologies they introduce. As these effects draw in more consumers, the platform becomes more attractive to attorneys and software developers who benefit from their business. The implication is that the three user bases are self-perpetuating. … Because the additional cost per user is negligible, there will be strong increasing returns to scale as the original fixed costs are distributed over a larger user base. The result of self-perpetuating user bases and increasing returns to scale is that such markets tend to “tip,” resulting in a winner-takes-all scenario. The first player to gain momentum experiences the greatest returns. (p.274)
The article concludes with a look at the impact of the current recession on the online legal services industry (more demand for affordable legal services) and observing that the impact on consumers and attorneys will increase significantly and for the better as online legal service providers continue to evolve.
