Thumbtack Business Model – How It Works and Generates Revenue

Last Updated on July 15, 2022

The Thumbtack application, which was introduced in 2009, currently stands at a value of more than $1 trillion and has reported over $100 million in sales, certainly why people call it the Amazon of the online home services market.

Thumbtack is an online marketplace connecting people for their household needs to local specialists. For each of its users, the app offers a user-friendly interface, fast services, and incredible value suggestions.

Not only do users and service providers love apps like Thumbtack for the convenience they offer. The revenue-centered business model of such applications also influences Budding entrepreneurs.

This guide is for you if you are one of those who wish to win the trillion-dollar home service online market with your idea for an app.

We will find out here what it takes to build an iconic Thumbtack-like home services marketplace app and what it’s good to do while we are giving a sneak peek of the present state of the market.

Ergo, let’s get onto it.

What Is Thumbtack? 

Thumbtack is an online marketplace platform, connecting customers according to their needs with local professionals. Today there are over 1000 types of services available on the marketplace in categories such as healthcare, home, events, lessons etc. Thumbtack has done a great job by providing an excellent platform for an individual to best and most effectively search and appoint a nearby service provider.

In building and developing an administration-based business linked to phone directories, online registers, announcement sheets, and many other hazardous processes, the marketplace platform made significant improvements. The main source of revenue on the market platform are charges the company collects when the experts purchase credits. The individual quoted framework is known as compensation; it charges at most around 10 percent.

Thumbtack’s Success Over Years 

Thumbtack, founded as a user-friendly alternative to the classified websites and directories in 2009, was like Yelp and Angie’sList by Jeremy Tunnell, Marco Zappacosta, Sander Daniels, Jonathan Swanson. 

Thumbtack facilitated the recruitment of local professionals as well as the purchase of any other online products for platform users. The head office of the company is in San Francisco and serves customers very effectively in the United States and in many other countries and towns. New York, Dallas, Chicago, Los Angeles, and Atlanta are the five largest markets in which Thumbtack has started operating.

More than 5 million service requests are placed by customers and they have the opportunity to select more than 1,100 unique platform categories as needed. The most popular services of Thumbtack include interior design, singing lessons, training for people, catering, moving, and many more. TaskRabbit, HomeAdvisor and others are major competitors.

Thumbtack raised an angel investment of $1.2 million in 2010. Jason Calacanis, Joshua Schachter and Scott Banister are among the investors. Through a series A round of venture capital financing in 2012, the company raised $4.5 million. Thumbtack raised 12.5 million dollars in 2013 via a Series B funding round.

Thumbtack also raised around $30 million in 2014 through the C Series Round; Tiger Global Management and Sequoia Capital are among the funding providers. In 2014, Google Capital invested a volume of 100 million dollars in a Series D risk capital round. Baillie Gifford, who led venture capital finance in 2015, invested $125 million in Thumbtack. The company secured approximately $120 million in Series H financing in 2019, with the valuation increasing by nearly $1.3 billion.

Why Build An App Like Thumbtack

Since the launch of Amazon, the idea of building a powerful app marketplace was a hit. These platforms offer great convenience to people who want to buy services or products at affordable prices while sitting at their homes. This is why many home services startups are on the rise today.

You can find great deals online with a few clicks to reduce your stress and let your life go smoothly. But more than that, it’s a great idea to build a home service marketplace like Thumbtack. Let’s find out why:

• The worldwide demand for domestic services is soaring

Reports suggest that between 2020-2024, the worldwide demand for home service is projected to grow to $1,574.89 billion at a CAGR of 53 percent. This implies that there are endless possibilities for emerging entrepreneurs to flourish on the market using their on-demand app idea like Thumbtack.

Without a doubt, more and more business people will try to establish themselves in the arena by feeling the potential of the market. But you can gain a market share and earn billions with the right approach.

• Users are increasingly spending on online markets

Reports suggest that in 2020-2024, the worldwide demand for home service is projected to grow to $1.574.89 billion at a CAGR of 53 percent. This implies that there are endless possibilities for emerging entrepreneurs to flourish on the market using their on-demand app idea like Thumbtack.

Without a doubt, more and more business people will try to establish themselves in the arena by feeling the potential of the market. But you can gain a market share and earn billions with the right approach.

• Online home service demand is on the rise

The lifestyles of people are changing dramatically as a result of rapid urbanization in developed as well as developing countries. Due to busy schedules, nobody prefers to do their own homework, nor does they have time to look for local service providers. This means they are turning to apps like Thumbtack for on-demand services.

This brings the on-demand sector revenue from domestic services to 869.95 trillion dollars between 2017 and 2022 and contributes to the total revenue generated by every market sector.

In the opinion of statistics, in this period, demand for washing services and dry cleaning will increase by 3.4%. In contrast, the plumbing market will increase by 12% and the flooring sector will also rise by up to 5% – a sign that the demand for home-service apps will increase.

Thumbtack’s Business Model

This platform matches clients with neighboring service providers for whom they are looking systematically to get their work accomplished. Check out the business model of Thumbtack to launch a fantastic business like it.

1. Segment of Customer

A multi-faceted business model, with two mainly interdependent customer segments, is used for the marketplace platform:

• Consumers: persons seeking local professionals 
• Service Providers: Professionals who seek to make money from their clients

2. Value Offering

The marketplace platform mainly offers three value proposals, including: 

• Accessibility,
• Comfort,
• Brand Status.

By connecting them to local service providers, the company provides access for platform users. Its services range from wellness to home services in over 1100 project categories and the platform now serves in more than 50 states. The platform provides access to service providers to customers seeking the same service request. Many professionals working with the Thumbtack platform are small businesses that cannot be present online.

Thumbtack makes it easy for customers to use the platform efficiently. without hassle. Consumers begin the process by providing quick answers to the type of service they would like to hire. They have a quick list that meets their requirements and can examine all of the information concerning service providers such as availability of service times, fees, and more before appointing any service provider. The quotes, profiles, and reviews to hire the best can be compared.

Without a doubt, Thumbtack has established a strong market presence that ensures its success. The company has established its name for professionals as the world’s largest mobile and online market, on-demand. It works with some 500,000 professionals and earns more than $1 billion annually. Roughly 160,000 customer requests are handled every week and over 7.1 million customer plans are requested annually by over 5.2 million customers.

3. Key Channels

Thumbtack’s mobile app and website are the principal channels. It promotes its offering through its Social Media Account and takes part in conferences.

4. Consumer Relationships

The customer relationship of Thumbtack is essentially self-service. The services are used by customers through its website and app while interaction with employees is limited. The site offers numerous self-assistance resources, including estimates of costs for specific services based on a zip code, tips on the right person, moving guidelines, and answers to frequently asked questions.

5. Main Partners

The on-demand market platform does not believe that a formal partnership program is to be maintained. In addition, the platform has strategic partnerships that help it promote its interests. Thumbtack launched a social advice service with WhoDoYou in 2016. The cooperation allowed the company to serve WhoDoYou’s customers as an exclusive advantage.

In 2016 Thumbtack announced its partnership with Monrovia, a food-producing plant vendor. For Thumbtack, landscape, and related services, Monrovia directs its 8 million annual users to Thumbtack websites.

6. Major Resources

Thumbtack’s principal resource is the staff who manage their platform and update it. In the initial stage, the platform depended on funding. It raised funding from external parties and from about 21 investors has raised over $273.2 million.

7. Pricing Structures

The business platform on the marketplace follows a cost-driven structure to reduce costs by automation and low-priced proposals. The marketing expenses and fixed cost mechanisms of Thumbtack are among the main drivers of cost. Product development, customer support, administration, and many others are also important drivers for the platform.

Related Read:

• Best Home Services Business Model
• Taskrabbit Business Model 

Thumbtack’s Revenue Model

Thumbtack mainly depends on the following sources of revenue to make money:

1. Commission Fee

A commission is the main popular business model for a website on a service marketplace. If you enter into an agreement with the service providers and users, you receive the transaction commission. You make a payment and charge a percent or flat fee for a client. If a client pays a provider.

The greatest advantage of Thumbtack’s revenue model is that it does not charge suppliers anything prior to getting a thumbtack clone value. This often makes the app very attractive for service providers. At the same time, this model is usually the most lucrative from a market perspective: you get a bit of everything from the point of view of your website.

2. Subscription Fee

A subscription charge is a revenue model in which a recurring fee is imposed on some or all users of a market to access the service marketplace on the website. This monetization model is also known as membership fees. Depending on the type of service that you quote to take over and deliver, users pay subscriptions regularly or for just one time. Providers can find new customers through this business model and help customers to find unique experiences or save costs.

The advantage for you here is that you work together with long-term customers, which saves you too much in ad campaigns.

3. Advertising 

Featured ads are used to diversify your monetization market strategy as secondary revenue streams. This business model enables advertisers from outside parties to market their products and services. This means they’re paying for advertising on your website. Let buyers or sellers pay a fee to list on your home services app their products and services. Without increasing other costs, it generates more income.

There can be different ways to market goods, typically including graphics and banners, text, and mixed advertisements. Bear in mind, however, that advertising often irritates your visitors. Use this method of monetization wisely. Allow commercial third-party offers to only occupy certain positions on the website for the service market.

Advertising from diverse companies is an opportunity to make a lot of money for the owner of the home services marketplace.

But the standard of third-party advertising cannot always be controlled. The loss of potential customers can be caused by the fact that ads lead users far from the app.

4. Listing Fee

Some markets charge service providers a fee when new listings have been published. This model is used when providers receive the value according to the number of listings. The potential value per list is therefore large. It contributes to adding a large volume of listings on the mobile application of the online service market and guarantees much visibility.

This model presents the challenge of not ensuring value for providers and the cost is therefore not too high. This leads to the platform that only a relatively low part of the value of a thumbtack clone can be collected. A sustainable business model that relies exclusively on listing fees, therefore, requires many listings.

Wrapping Up!

Now that you saw that building an app like Thumbtack really is a good idea, especially if it has such a big potential and people are more prepared to stay home than ever. 

But look at industry leaders, don’t forget to research the needs and challenges of your users in the market you’re trying to overcome. Especially before entering any company and the home service market, it is important to study success and failure stories. It has its own shortcomings and difficulties.

Before starting developing, ensure that you collect some market insights to meet the desires of your target market. While we give you an overview of the whole market and how you can create an app people love, there is still much more to do to succeed.

Frequently Asked Questions For Thumbtack Business Model(FAQs)