Paul explains how HomeAdvisor fixed its supplier problem: contractors were churning because leads went to multiple businesses and rarely converted. The fix was making leads free, letting contractors pick what they wanted, and charging a 5% transaction fee instead. HomeAdvisor covers roughly 1,100 job types across the U.S.
Chapters
HomeAdvisor operates across the United States and operates across, I think, 1,100 or so different job types. So it's a place you can go to find everything from a roofer to somebody to clean your pool, to someone to build you a custom home. And one of the challenges that HomeAdvisor had was actually a supply constraint, which is really unique, I think, in the marketplace space. Most marketplaces have a demand constraint, and that's been pretty consistent with all the marketplaces that I've worked on, have helped with, et cetera. But they had a supply constraint and we dug into why is that the case. And a lot of suppliers, can't go into specific numbers, but a lot of suppliers were churning out after a short amount of time on the platform. And effectively what we found is that they were, they more or less felt like they weren't getting good ROI on the platform. And they felt like they were trying to get leads and a lot of these leads weren't actually turning into hires and turning into work. And so we went down a path of exploring ways that we could better align incentives. And effectively what we did was we moved the monetization event further down the funnel. So in the kind of traditional marketplace, the way that it would work is a business would pay for a lead and we would kind of sell that lead to 4 businesses. And of course, if you're, let's say, a custom home builder, or you're looking for a custom home builder, you're only going to hire one of those folks if you're going to hire anybody at all. And so oftentimes you have this scenario where people are paying hundreds of dollars for a lead, doesn't manifest to work, kind of creates a bad perception about the quality of the customers coming off the marketplace, and then they churn out. And so what we decided to do was experiment with giving leads out completely for free. Allowing the business to pick and choose the leads that they wanted to interact with based on things like location, availability of their calendar, skill set, etc. And then we would try to monetize when a transaction was actually completed. So we actually had our own payment system and we would more or less take a take rate, started at 5%, just universally across the board of all transactions going through the system.
