Why Homejoy Failed and the Future of the On-Demand Economy

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.

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.

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.

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? ;)

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).

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.

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.

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.

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.

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.

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.

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.