News & Analysis

HomeAdvisor CEO’s Top 7 Reasons Why You Shouldn’t Get Into the Home Services Market

September 19, 2016September 18, 2016 by The Editors

Share this:

HomeAdvisor CEO Chris Terrill has been helping people find, furnish, decorate, organize and fix their homes since 2011. Before that, he helped people find mates, watch movies at home, and manage their weight. On Oct. 25th in NYC, he’ll take the stage at Street Fight Summit.

Home services is a huge market — “the last marketplace to go digital. Seventy percent of people still say they find help through word of mouth,” he notes — but it’s not for the faint of heart, he says. Here’s why:

It’s expensive. “We’ve invested over $1 billion in this industry and our brand. We spend north of $4 million or $5 million a year on screening and approving alone. If you go to a venture capitalist and say, ‘Give me $25 million, $50 million, or in some cases $100 million’—that’s just not enough. It’s not enough money to get these service providers and not enough to build up liquidity. It’s not enough to tackle the extremely complex technology needed to make this work.”
Your customer base largely prefers word of mouth. “They turn to friends, family and neighbors, even though they know that’s not a great way to get the help they need. They don’t turn to friends and family for movie reviews or restaurant reviews. I think people are nervous about their homes, they don’t really understand how to operate so they rely on an outdated method that they know is not great.”
Your provider base are not always the most reliable. “We reject 10 to 15 percent of all pros who apply. These service providers have to compete in our ecosystem. If you don’t show up on time, do good work, or get good reviews, you’re not going to do well.”
Did we mention the two-sided marketplace? “It’s very complex to balance supply and demand in this marketplace. There’s a long list of people who tried and failed, and failed miserably. A few have been able to hang around.”
Adjacent markets or an existing customer base won’t help us much as you think. “Even when you see larger players trying to come in, I’m not sure they want to invest hundreds of millions of dollars and years of time and effort, versus working on artificial intelligence or self-driving cars or things like that. When people think about their home, they want someone who is just focused on the home. They’re not also trying to find a dentist for them.”
It’s a long path to profitability. “There are no quick fixes or technology that’s suddenly going to turn this thing around. Service providers are maybe three-man shops, very busy, and often out doing the job. It’s hard to get a hold of them and to really participate.”
We’re killing it. “We have the largest database of completed projects down to the zip code level. We’ve been very maniacally focused on the home services space while others have tried to do a lot of categories. We don’t want to be ZocDoc, Rocket Lawyer, or anything else. We just want to be the best at home services. We’ve got 2,000 employees and we’ve been working for 15 plus years building highly sophisticated algorithms to make sure we can deliver good experiences.”