Will Freshly Funded Thumbtack Pivot from Leads to Subscriptions?

Thumbtack, one of the more creative plays in the local services sector over the last decade has collected another large round of money. Now valued at $3.2 billion, the company just raised $275 million. This brings its total funding to almost $700 million since it launched over 13 years ago. It’s kind of hard to believe it has already been 13 years. 

At the end of 2020, Thumbtack acquired Setter,  a home management startup that conducts video checkups of homes and turns those videos into improvement and repair plans.

Thumbtack last raised money in 2019, a $150 million infusion from Sequoia. The company says its revenues grew considerably in 2020. It’s is now on track to register some $2 billion in gross revenues. This metric is similar to gross merchandise value, which Shopify and others use to measure the amount of money flowing through their platforms.

As we see it, and as with others in the local space, these days Thumbtack’s future is constrained more by supply than demand. Thumbtack’s model requires a healthy supply of quality local service providers with the capacity to fulfill consumer demand. 

GoSite, Thumbtack Integration Aims to Ease Lead Nurturing for SMBs

Covid-19 has definitely had a positive impact on the company’s growth. With a large portion of the population sequestered in their homes for the better part of nine months, the opportunity to identify things to fix in a home swelled. And as many of us know very well, fixing one thing in a home usually unearths three or four other things needing repair.

This is what drives leads for Thumbtack as well as competitors such as TaskRabbit, Angi, and Thryv. An abundance of competition is great for the local service providers as it keeps their lead costs down. 

A Bigger Vision than Lead Gen

That is all well and good. But when we listen to Thumbtack CEO Marco Zappacosta we see a bigger vision, a more aspirational vision. This is what he said.

“It’s pretty wild that people’s homes their biggest assets, the most complicated thing you’re responsible for, but it doesn’t come with a manual. When you think about your car, you need to do regular service. Otherwise, you may have to pay a big emergency bill [to fix something]. The same concept applies to the home. But there’s never been an easy way to know what you should do, how much to pay for it, and then easily get it done. So that’s what we’re doing.”

It seems like their notion is to help the homeowner be proactive about home maintenance and repair. 

Thumbtack’s Very 2020 Acquisition of Setter

A Subscription-based Future?

We have written about the opportunity for service providers – who want and can use new technologies – to monitor things like heaters, air conditioning units, pool pumps, and large appliances with sensors and alert customers ahead of a component failure.

Think of it like the “engine needs service” warning light on an automobile. We’d expect this move opens the door for Thumbtack to build a double-sided monetization model. This would involve providers paying for leads. And on the other end, consumers paying a subscription fee for some type of monitoring service.  

We think it’s a smart move if Thumbtack can pull it off. As we noted, the leads business is competitive. By adding the subscription maintenance model, Thumbtack could be onto something meaningful. 

The market is certainly very large. According to the TechCrunch piece on the funding round, Zappacosta said the company will remain focused on the U.S. market. This is true even with new international investors. This makes sense given 40% of the estimated $500 billion global home services and repair market is in the U.S. That’s a ton of money.

Even a small shift from project-based to subscription-based spending would have a significant financial impact. We’re eager to see how hard Thumbtack pushes the model in the coming months. 

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