
Houzz raising $400M at $4B valuation - hrshtr
https://techcrunch.com/2017/06/09/houzz-400m-raise-4b-valuation/
======
lobster_johnson
Huh. I just realized I didn't really know what Houzz was. Not even sure if I
still do.

As an interior design enthusiast, I come across Houzz all the time. It's one
of my least favourite sites in that regard, after Pinterest. The problem for
me is that it mostly serves to obscure. It's full of pictures of furniture and
other design objects that are usually impossible to source -- just like
Pinterest, which itself is one step down from design blogs that rampantly
steal each other's photos without credit. It's _so_ hard to source design.
Most of the time, what you come across isn't even a product, it's some concept
work by some designer in Spain who has no plans to manufacture whatever it is,
or it's a custom job. Or some super high end Italian product with a price
that's firmly in the "if you have to ask, you can't afford it" category.

Sure, valuable for inspiration, but annoying if you're looking to buy, say, a
modern coat rack. (Which is surprisingly difficult, by the way. The US has
still, for the most part, not caught up with modernism when it comes to
interior design.)

Houzz does have a shop section, but it's not great. Mostly there's confusion
about what mode Houzz is currently in; when landing on Houzz from Google I'm
usually unsure if I'm looking at a product page, a lookbook or an ad for some
interior decorator.

~~~
jasode
_> It's full of pictures of furniture and other design objects that are
usually impossible to source -- just like Pinterest, [...] It's so hard to
source design._

I get your frustration but keep in mind that you're running up against the
intended ethos of the Houzz website.

\- Pinterest photos are mostly about _" things"_ and a social network of
sharing "collections".

\- Houzz design photos are about _" professionals"_ \-- even though they
usually don't have people in the photos. Notice that the vast majority of
design photos are _uploaded by professionals_ such as architects, interior
designers, and home builders. Those business people are _showcasing their
portfolio_. This is why the individual "things" in the photos are not easy to
source.

Some users do attempt to source the products by submitting a question to the
professional contractor that uploaded the photo such as, _" where did you get
that table and sofa?"_

Sometimes the professionals will reveal the source such as "got it from Crate
& Barrel" but most of the time, they'll respond something like, _" it was
purchased from our design studio"_ \-- which is a roundabout way of way of
telling the prospects to contact them for professional services. _This is the
way Houzz is intended to work._

Another website analogy would be Soundcloud. Imagine if users were frustrated
that after listening to the music clips, it was not easy to "source the brand
of guitars or drums". Well, most soundcloud music is uploaded by _musicians_
and not music gear manufacturers. It's intended to showcase their
_songwriting_ and not whether the guitar used in the song was a Gibson or
Fender.

Yes, Houzz does have some overlap with Pinterest for "things" (e.g. Shop by
Department tab) but the original motivation of it was a _portfolio_ of
professionals' work. Or, to restate it in terms of another website analogy,
it's a photo album version of Angie's List professional remodelers.

 _> Most of the time, what you come across isn't even a product, it's some
concept work by some designer [...] or an ad for some interior decorator._

Yes, that's exactly what the Houzz design photos are about: Professionals not
products. (Again, similar to the glossy monograph books from architects and
interior designers you can buy from Amazon. The books' photos showcase the
"look" but don't itemize the individual products.)

(However, that doesn't stop Houzz from evolving with their AI deep learning
efforts to become more of a "products" buying portal rather than a marketplace
for professionals.)

~~~
skrebbel
> Imagine if users were frustrated that after listening to the music clips, it
> was not easy to "source the brand of guitars or drums". Well, most
> soundcloud music is uploaded by musicians and not music gear manufacturers.

This analogy does not hold because nearly any musician will jump to the
opportunity of sharing their gear and setup. It was pieced together
passionately over a decade, after all; the proud basis of the musician's
success.

~~~
jasode
_> This analogy does not hold because nearly any musician will jump to the
opportunity of sharing their gear and setup._

They'll share info on music gear forums[1] but not on Soundcloud. One could
visit 10 rappers' soundcloud page and leave a comment asking _" what
microphone did you use for your rap vocals?"_ and you usually won't get a
reply. That's normal. A lot of musicians upload their music but don't engage
with the comments left by users. Musicians aren't being secretive on
Soundcloud; they simply don't view it as a Q&A platform.

In any case, what I meant by "items not easy to source" for Soundcloud analogy
is that there is no "add to cart" or url for the _products you hear in the
song_. E.g., there is no button that says _" Buy the Shure SM58 vocal mic
you're hearing"_. In contrast, Pinterest has direct and obvious hotlinks to
retailers' websites.

Therefore, getting frustrated that SoundCloud _" doesn't make it easy to
source the music gear you're listening to"_ is to misunderstand what
SoundCloud is about.

[1] gearpage, harmonycentral, gearslutz, etc:
[https://www.google.com/search?q=music+gear+forum](https://www.google.com/search?q=music+gear+forum)

~~~
hunter2_
This is a decent analogy, but maybe the difference is that someone in the
market for music gear doesn't expect SoundCloud to help them buy it (they know
they need a music shop instead); someone in the market for house stuff does
expect Houzz to help them buy it (it's not obvious what the deal is).

Or simply that many SoundCloud listeners aren't themselves looking to buy gear
/ make music; many Houzz users are indeed looking to DIY.

~~~
jasode
_> ; someone in the market for house stuff does expect Houzz to help them buy
it (it's not obvious what the deal is). [...] ; many Houzz users are indeed
looking to DIY._

Yes, you're right. The user-interface to Houzz website does not make the
"professional marketplace" distinction obvious.

Houzz does get revenue from both product companies like IKEA furniture, and
Viking and LG appliances, etc. They also get revenue from professional
contractors to show up in listings when people search photos for "ideas".

Yes, it's not obvious that 99% of the idea photos that people bookmark into
their ideabooks come from professionals to advertise their "services" and not
product manufacturers to sell "stuff".

------
owenversteeg
Houzz is one of a few bigger unicorns that I actually believe has a chance in
the long run. First of all, it doesn't depend on being sexy or trendy like a
social network, so there's no reason why the business will fail eventually.
People almost certainly won't be using Snapchat in 50 years, but they will be
buying houses.

Additionally, houses are an absolutely massive market. Housing is the largest
expense of most people I know, and there's a ton of price weirdness. A kitchen
remodeling might cost $14k, and that's not something you can buy on Amazon,
and it's not like you can get your kitchen remodel done in China for cheaper
(well, unless your house is in China.) If you were planning on $15k for your
remodel, and a local contractor would offer $14k, but Houzz sends you to a
"Houzz professional" contractor that offers $16k, you'll probably trust Houzz
and accept $16k without questioning too much.

That's two thousand dollars from one kitchen remodel right there. Of course,
that's not how Houzz's business model works right now, but there are lots of
ways they can make money. You're also not going to accept that price
discrepancy from any other consumer-focused things. Say, a laptop: if the new
Macbook was $1600 in Best Buy and $1400 on Amazon, almost everyone would just
buy from Amazon.

Additionally, they have a surprising amount of name recognition among the
wealthy. I know a decent amount of wealthy people, and a few ultra-wealthy
people, and I've heard maybe 25% mention Houzz. If you can get even a tiny
portion of the ultra-wealthy-house-spending market, you're golden. Remember,
the ultrawealthy have most of the world's wealth, and they spend a lot of that
on ridiculously fancy houses with no care about cost.

Finally, there's no "bomb factor". Maybe there'll be a scandal tomorrow about
Facebook selling your photos to some evil actor. Maybe Snapchat will get a
massive lawsuit about its storage of millions of inappropriate pictures of
underaged people. But how are you going to get angry at Houzz?

~~~
smnscu
Holy shit, this. If I could get a contractor or a remodeling project like I
would an Uber, with a reputation and history system, I'd choose it in a
heartbeat, even at a premium. I wonder how they deal with people bypassing the
system to avoid their fees (e.g. AirBnb).

~~~
tcbawo
This is notoriously hard to do, if not impossible. Every home project is
unique, where unknown and unforeseen issues arise all the time. Plus, like
many service companies, they have turnover and a growth arc which makes them a
moving target. I've used Angie's list before, which was valuable, but with
ultimately mixed results. They seem to promote a model of getting good
quality, but where price varies from inflated to egregious.

~~~
shostack
Everything you stated is true, but just points to how much value there would
be to unlock for a company that could crack this nut.

But most of the attempts refuse to take on any liability for themselves, and
half the reason to use such a company would be accountability and reduction of
personal risk.

For the various home projects I've done before, it always feels like such a
gamble with a ridiculous amount of information asymmetry, although thankfully
the internet has made great strides in fixing that part of the equation.

------
jianshen
Shameless plug since I rarely see us mentioned on HN:

We're hiring for a large range of engineering roles including some more
specialized positions in research (writing classifier models and machine
learning operations) and 3d (computer vision, photogrammetry, rendering).
There's a lot more behind the scenes than just pretty pictures.

[http://houzz.com/jobs](http://houzz.com/jobs) and mention HN

~~~
shostack
Can you comment at all on the many frustrated users who wish to file their
Houzz finds away on Pinterest, but are unable to due to all of the ways you
try to prevent that?

While I enjoy content on Houzz, I have zero interest in splitting that
information across platforms as I keep all of that in Pinterest and share
boards with my wife.

Frankly I find it very off-putting how blatantly it is blocked, and it makes
me want to engage with Houzz less because I fear what else you might do in the
future that is anti-user. With a massive round of funding comes massive
investor expectations. For an advertising/affiliate model like Houzz has, that
obviously means the users are the product and not the customer, so I see this
as magnifying those existing concerns.

~~~
ziikutv
Yeah I hate these sort of "protections". Twitter also does it. It's fine, a
simple Tanpermonkey script is enough.

------
jarjoura
Houzz is interesting because all the photos are of homes with limitless
budgets. So you have to set your expectations of your remodel, or just enjoy
dreaming big if that's your cup of tea. They're all gorgeous though and they
do an amazing job of classifying them. A+ Filters!

Still, I find their professional market section to be a extremely frustrating
and they will need to figure out how to scale that down market if they want to
continue growing. None of interior designers or "architect/contractors" listed
on there would get back to me unless I promised to spent at least $50k on a
project with them. Then once I finally found a couple "interested," they were
flakey and never got back to me.

I must have exhausted the list on their platform before I moved over to Yelp.
Right away I found all the help I needed and everyone was so courteous and
followed through. Such a world of difference from the 2 platforms. I do think
Yelp's open review platform keeps businesses way more honest and it shows. Any
project I start now and I'm asked where I learned about the business, I
mention Yelp :).

~~~
dirtyaura
_> Houzz is interesting because all the photos are of homes with limitless
budgets._

I don't think this is true. There are tons of Ikea kitchens in Houzz. We got a
lot of inspiration from Houzz when renovating our apartment. I really like
that it has a mix of high-end and Ikea, because many times those high-end
ideas can be implemented with cheaper alternatives.

~~~
jarjoura
I don't really think IKEA cabinets are that much cheaper if you factor in all
the other costs.

------
guimarin
Pinterest, Houzz, and build.com are all really interesting points on the same
spectrum. Pinterest currently doesn't do a great job of monetizing it's
various communities, but is the leader in terms of customer volume and is
getting better at delivering advertising value to both its customers and
advertisers. build.com started on the opposite side by creating the
relationships with all the direct suppliers/middlemen, and then giving people
a chance to create deal directly with them. Houzz is a great combination of
both. I would call it a specific vertical unbundling of Pinterest with the
supplier relationships of build.com.

It will be interesting to see Pinterest build these direct relationships with
sellers rather than build their own affiliate or else advertising platform.
The big open for me, but probably not investors valuing them at 10B+ is will
they be able to capture all that purchase intent themselves, or will they
ossify like craigslist unable to deliver on any of their vertical specific
values while slowing being cut up by competitors like the Knot, Houzz, and
others. From what I read in their press releases and articles about the
company, the Pinterest team seems miles ahead of craigslist at the same point
in their development.

The interesting dynamic here for me is what happens as purchase intent
advertising shifts from Google and web-search to Pinterest and others. Seems
obvious that pictures are more accessible and valuable than text but I'm sure
there is an army of statisticians at Google who can argue otherwise with me.

Also, it's really validating to see Houzz raise so much money at such a good
valuation. The team there has been working hard in the shadow of the bigger
companies and has created a real competitor in their vertical. They are here
to stay.

------
w3designer
I'm a product seller on Houzz and it's been a great platform for us to reach a
more design-centric clientele.

Though from my perspective, it seems hard to tell what their main focus has
been over the last year or so. I've talked to friends and coworkers and they
all seem to know about the site, though mostly only know it for the great
interior photos. Many seem to miss the fact that many of the products in the
photos are also for sale.

I haven't seen many improvements in the seller tools over the past year, and
their service team seems very manual. Example: It can take days for them to
respond to processing a return request. Something that I can by myself on many
other platforms. I feel bad for my customers who need to deal with a return or
support request from them as a lot of what I can do to help instantly is
simply not available. I hope with the additional resources they can direct
some of it to customer support improvements soon.

That all said, maybe the store on the site is just an afterthought and they
have some other grand scheme at play.

------
theprop
Woah...that's a gigantic valuation...I wouldn't have expected their gross
income to be in the nine figures yet?!

~~~
adventured
I agree, $4 billion is at least 2x-3x more than I would have expected. Housing
and everything connected to it is obviously a wildly lucrative industry if you
can find a way to skim a sliver out of any of the various layers. That's
essentially what Houzz has done, injected themselves as a middle-man referral
engine (no different than a Priceline or Kayak).

Zillow is chasing down $1.x billion in sales for the next four quarters. Seems
remarkable as well.

------
dano
They figured out the pinterest advertising model first. Show lots of good
looking pictures based on the users intent and surround it with lead
generating ads.

~~~
kasey_junk
And they _dont_ require you to login.

Just did a big remodel, spent tons of time on haozz and none on Pinterest due
to that one fact.

Don't know that I bought anything I saw there but certainly _saw_ more ads
there than Pinterest

------
thriftwy
Didn't know they're so big. Still considering posting my apartment's
renovation photos there. Nice job feeling small and local.

------
bazillion
I've always thought of Houzz as the perfect example of a site that would be
ten times better with my startup's technology -- as an example, here's a
comparison of Houzz's UX vs. my UX on the same image:
[https://youtu.be/6kOCIkJ-5vY](https://youtu.be/6kOCIkJ-5vY)

As a text description of what it does, PLEENQ[1] allows individual objects
within images to highlight when you hover them, and directly link to the
object (in this case, kithen products). Here's a much better demo version of
PLEENQ's technology:
[https://youtu.be/tf4pE0xtYTo](https://youtu.be/tf4pE0xtYTo)

Before these white rectangles over the images, they used to have "price tags"
that you could hover over, but the UX was all wonky, since the price tag
triggered a popup which prevented you from seeing/hovering over other price
tags.

I'll probably add a feature for my users like the product options they have
below the images, though -- I like that a lot!

[1] [http://pleenq.com](http://pleenq.com)

~~~
1024core
Client-side image maps have been around since HMTL 3.2 (~20 years). What's
special about your tech?

------
bogomipz
From the article:

>"The newest funding round, which Recode reported is being led by Iconiq,
comes on top of more than $200 million that Houzz had raised from investors
that include Sequoia, New Enterprise Associates, GGV Capital and others."

Does anyone know what the valuation was on the previous $200 million round?

------
LordHumungous
Huhwah? I've never even heard of them. Am I that out of the loop?

~~~
Rebelgecko
I've never heard of them either.

They must be pretty big though. I just went to their website, and they say
that I can search through over 240,000 "professionals" in my city. That's
great market penetration for a town with a population of fewer than 40,000
people.

------
tarikozket
They have enough traffic to earn around 150 million dollars a year just from
Adsense. Their valuation make a lot of sense.

------
home_boi
Interesting to see the professionals part of the website. I wonder how well it
competes with Thumbtack

------
dkarapetyan
Why are they raising money? Looks like a pretty simple site. What are they
burning the money on?

~~~
bkanber
> Looks like a pretty simple site

If you ignore the fact that it's actually a full e-commerce platform, and
ignore the machine vision categorization ("AI") and augmented reality aspects
to their product, you also have to realize it's not a site, it's an ad
platform that does probably just shy of $1B in annual revenue. Not so simple!

It's also not just some "site" that has a dev team of maintainers. Houzz is a
full-on sales and marketing corporation. They'll likely be 2,000 employees
soon. Only a small fraction would be software engineers (my guess, probably 70
growing to 100). There are likely a few hundred employees in the sales
organization. A sizable marketing team. Maybe 500 account managers. A design
team. An operations team. An editorial team. A non-trivial HR and recruiting
team. An administrative support team.

At a guess, $400M is probably one year's payroll expenses for them.

I have no affiliation with Houzz and am actually ambivalent about them, FWIW.
Just wanted to demonstrate that these things aren't so simple.

------
bhhaskin
Never heard of them before. Interesting.

~~~
dutchbrit
Same here... :/

------
prklmn
The bubble is all too real

~~~
askafriend
Are you saying this with knowledge of Houzz's financials and growth numbers or
are you just randomly saying things to say them?

Would love to hear why you think the bubble is all to real.

~~~
prklmn
Here's why the bubble is all too real. Let's compare Houzz to another company
in the housing space with a $4 billion valuation that's not swept up in the
tech bubble, US Gypsum. Last year USG, a company that has survived for 116
years, made about $400 million in profit. That's not make believe non-GAAP BS,
that's actually profit. I'm not privy to the intimate details about Houzz's
financials, however I'd be surprised if they made a tenth of that. The
question I ask myself is if Houzz will ever be this profitable, and when. I'd
guess no, but I could of course be very wrong.

When the market turns, which it will, profitability is what counts in
determining who survives and who doesn't. When we start measuring performance
using metrics other than profit, which is quite common now i.e. revenue, non-
GAAP profit, users, and so on, we are ignoring what really matters and this
allows for situations like the dot com bubble and the current bubble to arise.

These companies are raising cash with ease now, and burning it just as easily.
There will be a day, I think sooner than later, when it's not so easy to raise
such enormous sums of money. When I see something like Uber losing $3 billion
last year, and funds still lining up to invest, I can't help but think that
we're in the middle of a bubble. These tech firms are selling hope more than
anything else to investors.

~~~
cm2012
Houzz probably has 100s of millions in profit per year right now.

