The home services market is ready to boom. With a range of estimates in market size from $350 billion to almost $1 trillion, consumers spend a lot of money on services in the home. Platforms have already been a dominant force in this industry for a couple decades, dating back to the now defunct Yellowpages. So, why haven't we seen a winner take all dynamic with one or two clear winners emerge like we have seen in the ride sharing or home rental markets?
Well, simply, the home services market is much, much bigger with a variety of different use cases. The ride sharing market is estimated to be $285 billion by 2030 and the US hotel industry is less than $200 billion.
As technology has improved and consumer expectations have increased dramatically since the 90's, the winning platform for the home services market will look very different from the Yellowpages or even Angie's List, just acquired by IAC. Let's talk platform business models.
Two Types of Marketplaces
Marketplaces can be categorized as providing commoditized or non-commoditized services. The difference on this spectrum revolves around the degree to which the product or service can be standardized.
For example, Uber provides a commoditized service because the passenger doesn't care about much besides getting from point A to B in the car they selected. Therefore, they should be setting the price on behalf of their producers. However, Airbnb provides a non-commoditized service because its renters potentially care about location, number of bedrooms, WiFi, pool, pet policy, etc. The more factors that influence a purchasing decision, the less commoditized the service offering will be, and the more likely producers should set their own prices for their services.
Generally speaking, platforms selling commoditized services should set the prices for their users. Platforms for non-commoditized service providers should allow their producers to set prices. With that said, there's a spectrum of commoditization and the hard part is that it's not always black and white.
With all the investment in and press coverage of these service marketplaces, we decided to take a closer look and map the landscape of platforms.
Platform of Platforms
Modern monopolies like Facebook and Amazon and subscription startups like Hello Alfred try to pull together the whole landscape of home services by going directly to individual producers as well as existing platforms. Amazon partnered with Handy in the early days for home cleaning and so did Hello Alfred with Instacart for grocery delivery. For a recurring monthly fee, these middlemen will help coordinate the universe of home service providers and finally deliver on the promise of making your life simpler. Sounds great, right? The verdict is still out and Hello Alfred was reportedly scraping the barrel of their cash reserves up until its recent $40 million fundraise.
The other advantage that modern monopolies like Amazon and Google have is their ability to bring connected hardware into the home. Amazon's acquisition of Ring for $1 billion enables them to literally control the front door and who gets access to your home. Coupled with Alexa and partnerships with leading home builder Lennar, Amazon is seeking to enter the home and make it as easy as possible to use them as your trusted middleman.
The good news is that when platforms compete, consumers win. And, for the platform startups that do manage to reach breakaway velocity, they will have multiple exit opportunities in such a crowded and large market.