Vertical Challenge is Localogy’s series that examines SMB SaaS players that specialize in vertical business categories. See the rest of the series here. 

One longstanding stalwart of the local advertising and commerce scene is the legal vertical. It was a big sales target back in the Yellow Pages heyday, and continues to hold lots of opportunity in more modern forms of localized marketing. And that carries over to our core focus of SMB SaaS (more on that in a bit).

Supporting the growth of the legal category is new data from Report Consultant that forecasts the legal tech market to grow at a compound annual rate of 39 percent from 2019-2027.  This involves technologies to make legal practices more operationally efficient — everything from CRM to billing.

“Legal Tech is the use of technology and innovations to squeeze out the time from legal services,” says the report’s publisher. “Legal Tech organizations provide software and tech-enabled services to the legal vertical (including law firms and internal counsel) as well as tech-enabled services.”

Examples of the biggest players in legal tech are DocuSign, Legal Zoom, Exterro, Atrium, Kira Systems, Wolters Kluwer, Thomson Reuters, and LexisNexis. This positions the legal vertical alongside several other local business categories that are being streamlined by SMB SaaS players with a vertical focus.

This brings up our ongoing dialogue around the virtues of verticalization. It’s a bit of a double-edged sword as verticalization achieves better product focus and specialization. But it naturally diminishes a total addressable market, which could otherwise grow from serving several verticals.

Sometimes that diminishing factor can be counterbalanced if it’s a particularly large or high-spending vertical. The classic example there is home services, as it’s not only large but it includes several sub-categories and specializations. Legal is also on the list, due to its spend levels on operational software.

The answer also comes down to the dynamics of the vertical itself, as some are inherently specialized.  That’s often the case when there is regulatory oversight or a great deal of operational nuance and specific pain points. The legal vertical checks all these boxes, as do finance and healthcare.

For example, we recently examined how Amazon is catering to physicians with specific pain points in voice dictation. Verticalization is also supported by LSA’s Modern Commerce Monitor (MCM) which indicates SMB demand for specialized single-vendor offerings in areas like medicine and home services.

The legal vertical wasn’t called out specifically in MCM but it clearly possesses much of the same need for specialization.  That should continue to play out over the coming months and years as the underlying technology continues to improve in areas like AI and automation. We’ll be watching closely.