From The Wall Street Journal Online
ATLANTA -- When Billy E. Bryant and his wife wanted to remodel their "really dumpy" kitchen, they first tried to find help the old-fashioned way, by asking friends and visiting stores. Then they hit the Web.
They stumbled onto ImproveNet.com, which put them in touch with a kitchen designer, who took it from there. The result: a new kitchen, on budget, done the way they like it. "It's quirky-enough looking to satisfy our 1950s taste," says Mr. Bryant.
John Flowers had a smaller job in mind when he went online in search of a new porch for his 94-year-old home in Atlanta. He clicked on HomeToDo.com and picked the lower of two bids. He liked the results so much that he later clicked back on -- to have his house painted and tree stumps removed.
"A lot of jobs are won by word of mouth," ImproveNet says in a marketing pitch to contractors. "But pretty soon you'll be depending on word of mouse."
Well, maybe. HomeToDo and ImproveNet, along with competitors such as Handyman Online and ServiceMagic, have moved into the world of online matchmaking between home improvement and repair services and consumers with leaky roofs or problem pipes.
The attraction: quick, online matches of homeowners with prescreened contractors. Most try to screen contractors to make sure that they have the proper licensing and insurance, and that they don't have a history of bankruptcy or legal problems. Some can even tell you whether a job is big enough to attract a bid.
On the downside, the screening isn't foolproof, so homeowners still are advised to check up on the contractor. And because the industry is in its infancy, the service isn't available everywhere. Many matchmakers concentrate on metropolitan areas, where homeowners and contractors are both plentiful.
Despite some success stories, it will be tough to dislodge the age-old practice of finding a good contractor by asking friends and neighbors. So far, Web services have just a tiny piece of what the Census Bureau says is a $157 billion annual market for home repairs and improvements.
Forrester Research Inc., Cambridge, Mass., predicts that in 2005, just 3.5% of home-services industry revenue will come from transactions completed online. But this projection might underestimate the impact of the Internet, because it doesn't count transactions matched through the Web when money changes hands offline.
HomeToDo takes aim at the simple stuff. Average job: $500. At the company's headquarters in Marietta, Ga., Joan Sallach, director of internal operations, scans a computer screen that displays requests from homeowners looking for help on simple repairs. "This one is beautiful," she says, grateful for a request that is clear and understandable. It's for a new copper water line, stretching 70 feet from the street to the home of a customer in Loganville, Ga.
On a lower floor in the same suburban office building, workers at ImproveNet Inc.'s Atlanta regional office concentrate on bigger projects, such as remodeling and additions. ImproveNet's average job: $25,000 to $30,000. On the same morning that Ms. Sallach is checking on customer orders, ImproveNet area trade manager Jeff C. Gies is out talking with contractors about how ImproveNet can hook them up with good customers. It's an uphill fight. First, there's the twin challenge of finding customers and contractors who want to work together online. ImproveNet, which is based in Redwood City, Calif., and went public in March, spent $9.8 million on marketing in the third quarter -- nearly five times its revenue for the period.
A look at the company's third quarter illustrates the challenges. With extras such as a tool to estimate the expense of various home projects, the company's Web site had four million visits in the quarter. But it had just 41,000 submissions from homeowners seeking contractors. Of those, it "matched," or found contractors for, 31,000. The number of matches that resulted in business, or "wins," was just 3,200.
Lining Up the Work
While HomeToDo, with its smaller jobs, tries to furnish quotes from as many as four contractors to homeowners online, ImproveNet notifies customers by e-mail of contractors interested in the job. The contractors then bid after visiting the homes. ImproveNet, which has some 40,000 contractors in its database, charges contractors 2% to 10% of the estimated cost of the job, capping its take at $995. HomeToDo collects 5% to 7% from the contractor. A risk for HomeToDo, ImproveNet and others is that the homeowner and contractor will cut a deal on their own, cheating the matchmaker of its cut.
To cut down on the expense of getting those jobs, ImproveNet is adding partners in businesses such as real estate, building products, media and retailing. ImproveNet also gets customers from links with Web sites of its equity investors: General Electric Co., Owens Corning, Cendant Corp., Dow Chemical Co. (Its many alliances include one with homes.wsj.com, The Wall Street Journal's Web site on buying, selling and maintaining a home.)
At HomeToDo, founders David Gendell and Scott Inman started in business together at Duke University, where they sold pizza to hungry students. After working together on other ventures after college, they decided to start a business to help solve a recurring problem: finding workers to do jobs around the house. They got out their checkbooks and figured they each spent $4,000 to $5,000 a year keeping their homes in shape.
Mr. Inman's biggest headache: a small yard at his three-bedroom home in Atlanta. "Every single year, about November, I decided it's time to take care of it," he says. Every year, it took more time and effort than he wanted, and the result was the same: a lousy lawn.
In taking aim at the smaller end of the home-improvement market, HomeToDo wanted to get repeat business: window cleaning and painting, for example. To that end, it offers an online record that homeowners can fill in with information that can help on the next job, such as room dimensions and model numbers of appliances.
After introducing its service to Atlanta in late February, the company added other metropolitan areas: Charlotte, Raleigh-Durham, Winston-Salem and Greensboro, N.C.; Orlando and Tampa, Fla.; Washington, D.C.; Boston; Seattle; and Houston. Customers fill out a description of their home and project, and HomeToDo sends it to contractors it has signed up for the area.
HomeToDo won't break out its revenue, but it devotes a big chunk of its resources to recruiting contractors. Five of its 23 employees are assigned to the job. They work by phone, typically starting with lists of contractors from industry associations, and seeking to screen out those with legal or debt problems.
Across the room from Ms. Sallach, Mike Hanes holds a pair of pruning shears and paces back and forth, tethered to his desk by the cord to his headphones. When he lands a contractor willing to work with HomeToDo, he rings a bell to celebrate.
Too Many Carpet Cleaners
More bell ringing is needed. To make sure it has enough contractors for each job, HomeToDo's recruiting crew has to make lots of phone calls to contractors in the various markets. Sometimes, it winds up with too many contractors. After HomeToDo's launch in Atlanta, it realized that 20 carpet cleaners were about twice as many as it needed for the market. While HomeToDo doesn't charge contractors to join its service, they sometimes drop out for lack of business. Others decide they don't want someone else coming between them and their customers.
Like ImproveNet, HomeToDo is signing agreements with companies such as heating and air-conditioning contractors and home-inspection firms, which it hopes will refer customers to HomeToDo's site.
Some jobs are too small. If a homeowner asks for someone to hang a towel rack, HomeToDo suggests that the homeowner add enough jobs to keep a handyman busy for at least four hours, or about $250 of work.
Keeping homeowners and contractors happy isn't always easy. Landscaping sometimes suffers from diverging expectations, says Mr. Gendell, HomeToDo's co-founder and chief operating officer. "Landscapers are interested in $10,000-plus jobs. People are interested in planting a few bushes."
Clicking the way to a contractor shouldn't lead consumers to let down their guard. "It's better than the Yellow Pages, but you still need to do some legwork," says Carrie A. Johnson, an analyst with the online-retail group of Forrester Research. While some of the sites try to rate the contractors bidding on the jobs, many don't have enough experience with the contractors to make the ratings useful, she notes.
Another caveat: Customers can't assume that the services represent the consumer. While many try to iron out disputes, they also have an interest in keeping contractors happy.
HomeToDo requires its contractors to guarantee their work for at least 30 days, and pledges to pay as much as $1,000 to have another contractor fix the job if any problems are unresolved. Still, in the fine print of its terms and conditions, HomeToDo says it "has no control over the quality, safety or legality of the Services provided, the truth or accuracy of the Quotes or the ability of the Service Providers to provide the Services."
Nora DePalma, vice president for communications at ImproveNet, says the company is like a marriage counselor. ImproveNet's marriages have three partners: the consumer, the contractor and suppliers. "We try to make it work for all three," she says, "but never advocate one over the other."
Mr. Rose is chief of The Wall Street Journal's Atlanta bureau.