Online documents are here to stay. Lost in all the hype regarding the Facebook IPO is the fact that LegalZoom filed for an IPO in early May. For those of you who may not have heard of LegalZoom, it is perhaps the largest online legal document preparation services for estate planning, trademarks, corporations and others. Some very impressive statistics were contained in its filing. In the past ten years, LegalZoom has had more than two million customers. Its revenue in 2011 was $156 million.
What does the apparent success of LegalZoom and other online document companies mean for the legal profession as a whole?
According to some legal commentators, it means doom and gloom. Last month, on the eLawyering Blog, in a post entitled, LegalZoom: The ‘Good Enough’ Legal Solution, Richard Granat wrote:
Solos and small law firms will find it will be very difficult to compete against LegalZoom. … [It] is here to stay and will expand its market share as the major provider of the delivery of legal solutions to consumers and small business. … LegalZoom will, inevitably, put many solos and small law firms out of business as it grows and expands its suite of legal services.
Call me crazy, or call me an eternal optimist, but I don’t think the sky is falling. In fact, its success may actually lead to more opportunities for solos and small law firms. Let’s take a closer look at the likely customer profile of the two million people who have used LegalZoom. The doom-and-gloom crowd simply assumes that many of these customers would have gone to solos and small law firms. Certainly some would have done so, but I don’t think the majority would have followed suit. The majority would have likely done nothing. That’s also what LegalZoom thinks, apparently. In its analysis of the legal market as set forth in the filing, LegalZoom believes that demand for its services will grow because “many small
businesses and consumers often are unsure of or dissatisfied with the legal services available
to them, and many elect not to seek or take no action to address their important legal needs.”
Included among those who go without legal assistance is the do-it-yourself crowd. These are
the customers who, in the pre-online world, went to a law library to find what they thought
were the appropriate legal documents. Alternatively, they borrowed a will from a relative
and drafted their own based on that.
In any event, the common characteristic of online document customers is that they either
cannot afford traditional legal services or are too cheap to spend money on such services.
The reality is that these companies have created an entirely new market without replacing an
existing one. It’s the market that believes, “I could probably do this myself with the benefit
of some legal documents, and I can certainly afford the low cost of a product offered by
So where are the opportunities for solos and small firms? The more obvious opportunities
are the problems that will inevitably arise when use of online document forms creates
unintended legal problems that will then require the use of an attorney.
A less obvious benefit from these companies is that they increase the awareness of the need
for legal services in general. One statistic proudly announced in the filing is that 20 percent
of all limited liability companies in California were formed using LegalZoom. I believe that
many of those companies would never have become limited liability companies in the first
place. Furthermore, its marketing efforts likely persuaded some small business owners to
turn to traditional legal services instead.
Do you think your practice has suffered because so many legal documents can now be found
online? Are online documents a “good enough” legal solution?