Houzz: A Bright Future

5 May

Houzz Logo

One of my favorite services that I’ve recently started playing with is Houzz, a home remodeling/building platform.  The product quality is exceptional, and as a result the service is growing quickly on all fronts with 12 million unique users and 160k home professionals on the platforms as of January .

I think there are a number reasons why Houzz’s platform works so well:

  1. A highly fragmented market.  From interior designers to landscape architects to lighting specialists, there are hundreds of thousands of home professionals spread across the US.  In addition to specialization by skill, they tend to be focused on serving particular geographies.  All of this means that consumers have lots of choice and that home professionals have to compete for new business.  Traditionally, consumers and home professionals would connect via word-of-mouth.  Houzz is taking this fragmented, referral driven market and making it searchable from one place, reviewable, etc.  
  2. Highly visual.  For lack of a better word, Houzz really is “house porn.”  If you enjoy architecture, design, etc. then you can literally spend hours on their platform browsing and collecting photos even if you’re not “in market” for a home renovation/build.  Perviously, you would have had to cut out pictures from paper magazines like Architectural Digest to create “idea books.”  Houzz simplifies and supercharges this by centralizing a huge number of photos in one place and making it easy to create these idea books.
  3. High picture quality.  Houzz benefits from the fact that most home professionals already have some type of portfolio of their work, which would contain professional or semi-professional photos of previous client work.  These portfolios would have been in printed books that professionals would show their client and/or would have been on the professional’s own website.  Houzz centralizes this content on their platform.  Flipping through amateur photos (poor lighting, badly staged, etc.) would take out the visual appeal.  I wouldn’t underestimate how important this is to the product’s quality.
  4. Big and unique enough of a market that it requires its own platform.  Generic review platforms like Yelp don’t really work for this market.  Yelp works well for local service providers where the transaction size is pretty small – restaurants, dry cleaners, dog walkers, etc.  But the “home market” really requires its own unique platform.  The number of providers, specialization by type, organization of photos by type, home focused message boards, etc. can’t happen on Yelp.  Similarly, Pinterest doesn’t work well for this market either.  Pinterest has lots of great “home porn,” but it’s not organized by category, project, etc. in the same way Houzz is because Pinterest lacks the deep vertical specialization.  It’s more for casual “picture collectors” than for people serious about planning a remodel/build and finding professionals.
  5. High ticket size.  Building a house or undertaking a renovation is costly and time consuming.  It’s also a big emotional investment by the consumer.  These aren’t projects that you undertake casually.  Hours and hours of thought and preparation are required, which means consumers will be highly engaged on any platform that’s delivering them value in the planning process.  I’m not privy to the company’s internal user metrics, but I would be they have a very high average time spent on site per visit.  In particular, for people actively planning a project, I would be Houzz’s engagement metrics are off the charts.  On the other side of the equation, since the amount consumers spend on home renovations/builds is so high, home professionals have a big incentive to interact with Houzz’s platform and to upgrade to paid tools in order to drive new leads and ultimately conversion.  For many types of home professionals, even one new customer will more than offset the time and dollar investment on Houzz.  

Houzz reminds me a bit of two other sets of companies that have helped to organize highly fragmented markets.  One is real estate and services like Trulia and Zillow.  Trulia and Zillow are both successful public companies.  They also monetize through a set of premium tools for real estate agents and an AdWords style model agent search.  This is clearly the route Houzz is headed down in terms of monetization.

The other is creative talent and the startup Behance, which was acquired by Adobe for $150m last year.  Like Houzz, Behance is highly visual and centralizes creative types’ portfolios in a single, easily searchable database.

If the success of these services is any indication, Houzz has a very bright future.

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One Response to “Houzz: A Bright Future”

  1. model agent July 5, 2013 at 1:56 am #

    I constantly spent my half an hour to read this weblogs posts everyday along with a mug of coffee.

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