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How Does Thumbtack Make Money? Thumbtack Business Model

Thumbtack is an online platform connecting customers with local professionals such as plumbers, electricians, house cleaners, landscapers, and yoga instructors. Founded in 2008, the platform wanted to make the process of hiring contractors simpler. The company makes money by charging a fee for every lead contractors receive. It also offers Thumbtack Promote, an added service enabling contractors to push their profile higher up in the list of search results. 

AspectDescription
Leads for ProsThumbtack generates a significant portion of its revenue by selling leads to service professionals. Pros pay Thumbtack for access to customer leads that match their specific services and geographic areas. When customers submit a service request on the platform, Thumbtack charges pros a fee to view the details of the request and respond to potential clients. This pay-per-lead model is a primary source of income for Thumbtack.
Subscription Plans for ProsThumbtack offers subscription plans for service professionals, commonly referred to as Thumbtack Pro. These plans provide pros with various benefits, including a discount on lead fees, enhanced visibility in search results, and additional marketing tools. Pro users pay a monthly or annual subscription fee to access these premium features, which contribute to Thumbtack’s recurring revenue.
Transaction FeesThumbtack may charge transaction fees on certain transactions that occur between pros and customers on its platform. For example, when customers book a pro’s services through Thumbtack, the platform may deduct a percentage-based fee from the transaction amount. These fees help generate revenue for Thumbtack while also providing a convenient payment processing solution for users.
Featured Listings and AdvertisingThumbtack offers pros the opportunity to enhance their visibility through featured listings and advertising options. Pros can pay to have their profiles featured at the top of search results or to run targeted advertisements to reach potential customers. Thumbtack earns revenue from pros who choose to invest in these promotional features to increase their exposure on the platform.
Customer Convenience FeesIn some cases, Thumbtack may charge customers convenience fees when they use certain payment methods, such as credit cards, to book services through the platform. These fees can be a source of income for Thumbtack and help offset payment processing costs. Customers are informed about these fees before completing transactions.
Challenges and CompetitionThumbtack faces challenges related to competition in the online service marketplace industry. Competition with other platforms, ensuring a reliable user experience, and maintaining a balance between pro and customer needs are ongoing concerns. Managing user reviews, handling disputes, and addressing privacy and trust issues are also significant challenges.
Future Growth StrategiesThumbtack’s future growth strategies may involve: – Expanding Service Categories: Adding new service categories and expanding its reach into various industries. – Geographic Expansion: Entering new markets and regions to connect more pros and customers. – Enhanced User Experience: Continuously improving the platform’s features and user interface. – Pro Tools: Providing pros with advanced tools to manage and grow their businesses.

Origin Story

Thumbtack is an online platform connecting customers with local professionals such as plumbers, electricians, house cleaners, landscapers, and yoga instructors.

The company was founded in San Francisco in 2008 by Jeremy Tunnell, Jonathan Swanson, Sander Daniels, and current CEO Marco Zappacosta. Each wanted to make the process of hiring contractors more simple.

They noted that customers would typically spend hours researching, comparing, and then calling various contractors to book an appointment. 

That same year, work began on the platform in earnest with $500,000 in angel funding. Working from Zappacosta’s home, the website was coded and services onboarded.

In 2009, Thumbtack was officially launched with 10,000 contractors offering their services.

Each contractor was personally vetted by Thumbtack to ensure a safe and secure interaction with the customer.

Thumbtack secured millions more in funding during the following years, but competition from Google, Facebook, and Amazon increased.

To better differentiate itself, Thumbtack focused on helping service providers write effective sales copy and allowing customers to contribute to their benefits schemes.

Order volume dropped by over 50% because of the pandemic but has since rebounded strongly.

Thumbtack acquired home improvement video platform Setter for an undisclosed amount in late 2020. Today, the company is valued at approximately $1.6 billion.

Thumbtack revenue generation

For every lead they receive, service providers must pay Thumbtack a fee. Note that a lead is defined as a customer contacting a contractor about a job that needs to be done.

For the company to earn money, there is no requirement for the customer to follow through with hiring a contractor.

The exact fee is dependent upon several factors, including:

  • Geographic location or region.
  • Industry.
  • Job size or type. Thumbtack predicts the dollar amount of each job in advance and charges accordingly. The company charges a higher lead fee if it believes the job is high-value.
  • Competition, or the number of similar available professionals for the job. Note that the lead charge is waived if there is zero competition.

Leads are funded by Thumbtack credits and can be purchased in three ways:

  1. 12 credits are available for $17.99, or $1.50 per credit.
  2. 24 credits are available for $34.99, or $1.47 per credit.
  3. 60 credits are available for $84.99, or $1.42 per credit.

Thumbtack Promote

Thumbtack Promote is an added service enabling contractors to push their profile higher up in the list of search results. 

This increases the number of leads a contractor receives and usually results in Thumbtack collecting more lead revenue.

Having said that, contractors who sign up for Thumbtack Promote receive 20% off the purchase of lead credits.

Key takeaways:

  • Thumbtack is a North American online services platform connecting customers with service provides from a plethora of industries. It was founded out of a need to make the process of hiring a contractor more simple for consumers.
  • Thumbtack makes money by charging contractors for every lead they receive on the platform. Leads are funded by credits which can be bought in bulk to save money.
  • Thumbtack Promote gives contractors higher visibility in search results. This is a win-win for the contractor and the company. The contractor receives more leads and potentially more work, while Thumbtack enhances lead revenue generation.

Read Also: How Does Yelp Make Money, How Does Fiverr Work And Make Money, How Does Yahoo Make Money, How Does Craigslist Make Money, How Does Upwork Make Money.

Related Business Model Types

Platform Business Model

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A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.

Marketplace Business Model

marketplace-business-models
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.

Network Effects

network-effects
A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.

Asymmetric Business Models

asymmetric-business-models
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Attention Merchant Business Model

attention-business-models-compared
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Wholesale Business Model

wholesale-business-model
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.

Retail Business Model

retail-business-model
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.

B2B2C

b2b2c
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.

Crowdsourcing Business Model

crowdsourcing
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.

Open-Core Business Model

open-core
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.

Open Source vs. Freemium

open-source-business-model
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.

Freemium Business Model

freemium-business-model
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.

Freeterprise Business Model

freeterprise-business-model
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.

Franchising Business Model

franchained-business-model
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.

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