
Why Homejoy Failed and the Future of the On-Demand Economy - Zweihander
http://techcrunch.com/2015/07/31/why-homejoy-failed-and-the-future-of-the-on-demand-economy/?ncid=rss
======
ThomPete
I am happy to see a sense of reality being forced into some of these
companies. Building a business on people rather than tech is a much much
tougher thing to do both execution wise and financially.

And so the real innovation if someone wants to "change the world" without
trying to cheat the system is to find a way to make a profitable business with
a huge part of the business being used to pay salaries.

For many entrepreneurs who are used to thinking about business as something
which is based on software, servers and an internet connection, this is
completely uncharted territory. You don't reap the benefits of scaling your
business as if it's just a matter of adding more servers.

The primary challenges with these kind of business if they are to be built on
a solid foundation is.

1) Patience – It takes a long time to scale an employee based business up to
anything worthwhile and sustainable

2) Selective – You have to be smart about which sectors actually have enough
money and need for your service to make a proper ROI

3) Employee satisfaction. You can't just treat your people as if they are
freelancers without giving them freelance opportunities. Instead you have to
really care about your people and make them want to work for your company and
do a great job.

It's that manual labour thats going to be your brand, not your backend server
or the customers mobile app.

------
pbreit
Finally someone states the obvious that Homejoy's problems had little to do
with employee classification and far more to do with the basic business model
(trying to convert a match-making situation into a transactional business) and
sloppy execution.

~~~
danieltillett
I want to know how all the smart money missed these obvious problems? I don't
blame Adora and co for trying, but where were the adults.

~~~
chakkop
Basically don't overestimate how much the 'adults' understand. There is a huge
amount of hand-waving, FOMO, leaps of faith, etc... by VCs when they make (and
manage) investments. When things work, they are explained ex-post facto in
visionary terms. When they don't... people forget soon anyway.

------
gogopuppygogo
Homejoy also had terrible customer service. I bought a cleaning deal
advertised on facebook, the day of the appointment I tried to cancel and they
charged me an additional $10 to cancel. That's right, I paid more than the
cost of the appointment to cancel. I tried to get my money back from them
through support but they wouldn't budge. I just refuted the charges on my
credit card and got it back that way. It was a nightmare dealing with them.
Good bye, and good riddance.

~~~
capex
Homejoy could'v done a better job, but how were you being fair to them?

~~~
task_queue
Homejoy provides a service. The OP cancelled that service. What service was
rendered that required an additional payment to be fair to Homejoy?

~~~
capex
Homejoy was certainly not fair to try and charge $10 MORE to cancel the order.
But 'forfeiting' your credit card charge just because you could not or did not
cancel in time, that doesn't skirt the boundaries of fairness on any service.

~~~
task_queue
Credit card payment reversals keep merchants honest, they are disincentives to
enact or continue unfair behavior against the consumer.

------
JofArnold
Sorry to hear this happen to Homejoy.

We almost did a startup like this when we were in YC and looking for new
opportunities after we closed our previous startup. However we did some real-
world experiments and ran the calculations and could see no way it could work.
Here in London we have a lot of recent migrants meaning it's a race to the
bottom in terms of hourly rate. You can't make a margin on that... The math
just doesn't work. At the time I felt a bit stupid when, months later, Homejoy
and several other startups entered the scene. However, I'm very glad we stuck
to our guns. The only companies making real money in this market are large
established agencies with cleaners on the payroll. And where's the
fun/disruption in that? ;)

------
bsbechtel
This article does a pretty good job highlighting many of the challenges in
this market. Although I'd like to point out one additional aspect - in the
$400-$800 billion home services market, I would say less than half of that is
actually consumer facing. I don't have an exact number, but I would estimate
that 50-75% of that market is actually B2B. It is commercial property
managers, apartment complexes, general contractors, etc hiring smaller
contractors (cleaners, painters, carpet installers, window washers, etc) for
recurring business, sometimes contracts up to several hundred thousand
dollars/year. At that size of contract, you had better be able to provide
trained, high quality workers who can consistently deliver. What these larger
businesses are paying the smaller contractors for is managing and training of
the labor that actually does the work. Once the contract is set up, all that
is required of the larger contractor is a phone call - not much more work than
tapping a few buttons on an app on your phone, but much less cost to the
smaller contractor who doesn't need to develop software to win business. This
aspect of the industry makes it very difficult for software to have a big
impact, and it probably partially why there are no profitable success stories
in this space (Angie's List, Yelp, all the on-demand startups, all have yet to
achieve consistent profitability).

------
devgutt
I always thought that Homejoy were planning to automate as much as possible,
if not everything, related to cleaning services using robotics and stuff, and
that humans were only a temporary measure while developing technology. Sadly
no, they were optimizing for human cleaning. They could have kept them as
contractors while support them providing free education and resources to
reallocation in the work force. This would be much better to society instead
of organizing the modern slavery.

~~~
brc
Just because you might not like cleaning, it's a stretch to imagine that
casual cleaners don't like their job.

Saying someone on by low wage job is 'modern slavery' is pretty obtuse when
real life actual slavery is happening right now in parts of the world.

~~~
devgutt
yes, maybe I am wrong, but in my opinion, there isn't a SINGLE person in the
world that would like to make a living cleaning the mess of others.

>Saying someone on by low wage job is 'modern slavery' is pretty obtuse when
real life actual slavery is happening right now in parts of the world.

This is exactly the reason I used "modern slavery".

~~~
toddh
I've done a lot of cleaning and as a job I generally liked it. You have a set
task, you see the result, and when you are done you are done. It can be quite
rewarding. The pay sucked, but that's far from slavery.

~~~
devgutt
Interesting. Although I could afford it, I never allowed myself to hire
cleaners because I refused to explore a person to clean my own mess. My mess,
my responsibility, I clean it. It's interesting to know that people would
willingly work with cleaning even if they have other options.

------
awjr
I'm guessing, just like in the UK, domestic services are very much cash in
hand driven and homeowners are desperate to "find somebody good" they can
trust and not let go of them. By removing Homejoy after the evaluation period,
the homeowner and service provider get into a stronger relationship, that is
cheaper for the homeowner and more financially rewarding for the service
provider.

------
Animats
Homejoy's competition is Yelp and Google local search. Both of them do roughly
the same job for less money. Homejoy just isn't needed.

As Pando Daily keeps pointing out, the only Uber-like business that works is
Uber. Uber has an incredible valuation, but their revenue and profit numbers
are lousy. Their revenue is about $450m/yr, but they are not profitable. They
are, however, building a fancy new headquarters, always a bad sign.

~~~
kumarski
I don't believe you're accurate.

"Uber's revenues in San Francisco, meanwhile, are running at $500 million per
year.

That's more than three times the size of the taxi market.

And Uber's revenues in San Francisco are still growing at about 200% per
year."

Read more: [http://www.businessinsider.com/uber-revenue-san-
francisco-20...](http://www.businessinsider.com/uber-revenue-san-
francisco-2015-1#ixzz3hYHfk14u)

~~~
lifeisstillgood
Sorry? How can a taxi service (uber) be running at three times the size of the
taxi market?

Is this dodgy accounting, grey market taxi services previously (understating
size of market) or has uber genuinely expanded the market by reducing
friction?

~~~
morgante
> uber genuinely expanded the market by reducing friction?

Absolutely, particularly in places like SF (where getting a cab was a giant
hassle and very unreliable). By making on-demand transportation viable in way
more places, Uber has definitely expanded the market. There are tons of times
and places where I never would have tried to get a cab but happily order an
Uber.

~~~
amorphid
I started using Sidecar, and more recently Uber, because I couldn't get a cab
ride.

There were plenty of times I tried calling for a cab in SF's SOMA district,
only to be disappointed when either no one answered the phone and/or no one
showed up. If you happen to live in an area where one can realistically have a
chance of hailing a cab, and you call for a cab, it's probably more like
ordering a pizza. Place the call, and it'll show up eventually.

------
rtb
25% of the wages? Sounds like they were just greedy as much as anything else.
Of course the customers are going to be looking to cut out the middleman as
soon as possible with that kind of commission.

~~~
chiph
If they'd reduced their cut to say 5% for repeat bookings between the same
client and worker, they could have justified the high initial percentage as a
matchmaking fee. But otherwise, yeah, people were just going to take their
professional relationship offline and cut them out of the loop.

~~~
rtb
Exactly. Or maybe no commission at all on repeat bookings? Then there's no
pressure for the relationship to jump the walled garden and you keep the
customer on the site to come to you first for future searches.

------
andy_ppp
I'm using Handy here in London and it's amazing, cheap (so I tip the cleaner
very well) and they will do a 2h clean (usually here in London most don't
bother, want 3h) really early in the morning.

I imagine homejoy would be the same. I have no idea how the company will make
money however.

------
ryan90
This article is terrible. It cites no real sources to back up it's claims of
reacharounds and churn problems. It's one person's speculation.

------
jarcane
Same as patents. You don't get to just ignore reams of existing regulation
because you tack 'but with a computer' on a business model. Uber is only
succeeding on the basis of having escaped notice for long enough that they
could build coffers to bully their way into markets. The public is more aware
now than it was then.

SV/StartupLand needs to get over this idea that they can magically just make
the world do what it wants and pretend things like legislation and human
rights don't exist when they get in the way of their business model.

You've got to work hard in the system like everybody else.

~~~
pbreit
This is a dumb sentiment and the article is actually one of the few that
ignores the bogus culprit of employee classification in Homejoy's demise.

It really makes very little sense to forbid a person from driving a passenger
for money. The AirBnB situation is actually grayer since zoning does make
sense (who wants a revolving door of random tourists in their apartment
building or even residential neighborhood?).

Uber and AirBnB are succeeding because they are delighting customers in a
rather visceral way.

~~~
onion2k
_It really makes very little sense to forbid a person from driving a passenger
for money_

No one is suggesting people shouldn't be allowed to drive for money, nor that
Uber shouldn't be allowed to run their service, but simply that if Uber
drivers are doing the work of employees they should get the benefits of being
employees.

The only real difference that would make is that Uber would be a little more
expensive to use. It'd still be cheaper that a taxi. I think that's quite
reasonable if it means Uber drivers have a happier, more stable life.

~~~
dylanjermiah
A survey of the drivers found that 70%+ didn't want to be employees. But no,
you should decide for them right?

~~~
danieltillett
Any reason for why 70% said they didn't want to be employees?

~~~
dylanjermiah
I apologise, it was 87%. [http://www.therecorder.com/id=1202731784422/Lawyer-
Uber-Driv...](http://www.therecorder.com/id=1202731784422/Lawyer-Uber-Drivers-
Dont-Want-to-Be-Employees?slreturn=20150701073557)

