Viva la Online Legal Services Revolution

In 2001 Clement Mok claimed “Five years ago we thought of the internet as a new medium, not a new economy”. This was three years before Google’s IPO, at a time when Marc Zuckerberg was still a High School fencer, and Microsoft was still King of the tech Hill.

The past 10 years make this statement now seem almost obvious. The information economy is growing by the second, and now counts more than 2 billion consumers. What Joseph Schumpeter would undoubtedly call a “creative destruction”, the internet has affected every industry, some at their very core. Newspapers are replaced by a combination of Craigslist and Google News, YouTube has reduced TV to the likes of “Jersey Shore”, and iTunes has shifted the power in the music industry into the hands of Tim Cook. However, not just the media experienced an overhaul. From personal finance to the airline industry, few have remained unaffected.

Without exception, this change has benefited the consumer. The virtual marketplace brings together people from all over the world to exchange ideas, trade, and share cat videos. In what is partly the result, and partly a reflection, of globalism, this increases competition and the information available online. Both force down prices across the board.

PlentyOfVirtualLegalAdvice.com

This change has finally reached the legal profession, an industry notoriously resistant to change.

While LegalZoom.com has been causing distress among lawyers with catchy commercials and a 2011 revenue rumored to have exceeding $100 million, Google Ventures shocked the industry by investing $18.5 million into RocketLawyer.com this August. Both sites offer legal document creation services in categories ranging from wills to pre-nups, and include a directory of lawyers who can review documents.

LegalZoom been in business since 2001, and remains the name to beaten. However, if RocketLawyer can take advantage of Google’s brand penetration and cloud-based services, this can certainly change.

Another model has developed around Q&A sites. Avvo.com, allows users to post legal (or medical) questions publically, which any of the over 12,000 registered lawyers can choose to answer. LawPivot.com offers this service too, but also gives users the option to ask questions privately. The confidential question is then directed 10 lawyers algorithmically based on the key words used. In both cases clients can post and lawyers can register for free. Both are effectively social networking sites, where lawyers aim to “get a foot in the door” with new clients. And this case can be made. 21% of Avvo users claimed they would hire a lawyer who provided a question, and 47% answered maybe.

Alternative Dispute Resolution, i.e. dispute resolution outside litigation, is also increasingly conducted online. While VirtualCourthouse.com or ZipCourt.com provide ‘live’ neutrals who can resolve disputes online, Cybersettle.com achieves this through an automated bidding process. More creative sites include PeopleClaim.com, which lets one party post a complaint, which, if not responded to within four weeks, can be made public on the site - Naming and Shaming in the information economy.

Pooling profits

It is no secret that many legal documents are based on templates, and therefore require more common sense than years of industry experience to be compiled. Indeed, often junior lawyers draft documents,
only to have partners attach the cover email, thereby pushing up the hourly rate.

Ironically, while many lawyers are keen to criticize virtual firms (often citing a lacking “personal connection”), most have not shied away from using technology to their advantage. Documents are stored on case management services as future templates, printing costs are cut, and work is being outsourced to as far as the Philippians.

The internet is increasing competition, in form of both more lawyers and more free information. This is increasingly forcing firms to reflect this cut in expenses in the client’s bill. The virtual market is correcting the offline market.

The bottom line

Darvin famously claimed “It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change.”

With the rise of various different online legal services providers, there was never a greater need for firms to bear this in mind. The internet has created a level playing field in the business of commoditized legal services. Office locations and sharp suits pale in insignificance when compared to clients’ overriding considerations when wanting a will or the registration of a trademark: price and speed.

In the short term this will therefore mainly affect high-street firms. However, as more competitors and free legal expertise sprout up online, more and more legal services may become commoditized upmarket.

To avoid becoming outpriced, firms must therefore embrace this technological change. Berwin Leighton Paisner’s “Lawyers on Demand”, which makes freelance lawyers available for individual projects, and DLA Piper’s range of “online services”, which include a guide to commercial transactions that is not unsimilar to LegalZoom, are two business models that show how adapting can pay off. Alternatively, firms must invest in smaller, nimbler firms who can specialize in the market for online legal services.