Online Referrals: Passing Fad or Remodeling’s Future?

Facebook, Google, and Amazon are all jumping into an already crowded field, leaving many to wonder what the future will bring

December 09, 2015
Are online referrals the remodeling industry's future?

For someone drowning in remodeling projects on a 1905 farmhouse for two long, grueling years, the allure for an immediate price quote to hire a professional on our next project was too good to pass up. After a short Facebook message to Pro.com for a bathroom tile bid, I received an immediate message asking for my ZIP code. A cheery response with smiley emoji introduced my home project manager, who offered what she referred to as a “pre-estimate” if I could give her the total square footage and if I would be installing ceramic or porcelain. Simple enough. 

After a three-minute wait, I received a message with my pre-estimate labor cost. I knew my floor was uneven, and when I pulled up the linoleum, I could see the room below through cracks in the rotten boards. How could they possibly give me an accurate estimate? My project manager asked what times work best to get a pro scheduled.

Whoa! After I rattled off several questions, my home project manager explained that pre-estimates are collected from several similar jobs in my area, but the final price is determined by my pro. I wasn’t comfortable having a pro hired for me, or scheduling a job before I had met the pro or signed a bid, so I said my Facebook good byes, inserted smiley emoji, and logged out. 

A Widening Field

Online home-service marketplaces are popping up faster than dandelions in spring, and with a market of around $300 billion annually, it’s no secret why. Angie’s List recognized the need and a way to fulfill it—charging the homeowner a membership fee for quality pro referrals—20 years ago. Today, competitors looking to topple Angie’s List are flooding into the home-services market with their own business models, generating revenue not by charging the consumer, but by charging the home-service pro in the form of membership fees, a fee per online referral, or a commission on the total cost of the job. 

Porch.com and Pro.com came on the scene two years ago and have been upping the ante ever since. Porch, a Seattle-based startup, is now in partnership with Lowe’s, which offers terminals in stores where shoppers can find a local pro for anything from replacing a toilet to building a deck. Porch’s latest move links Better Business Bureau ratings in the results. For the tech and social-media savvy, Pro.com offers “Text-a-Pro” and Facebook Messenger, the main selling point of which is instant, flat-rate estimates and scheduling on home-improvement projects right from your cell phone or Facebook page. 

Google and Amazon have jumped into the fray as well. Amazon shoppers can simply add a pro to their online shopping cart at checkout, and the pro is charged a commission for the lead. Google is testing a beta program, Home Service ads, that returns search results when consumers do a Google search for home improvement projects like “install faucet.” Several options will appear at the top of the page for local plumbers with their contact info and even a picture of a company representative. For now, Google is only testing in the San Francisco area, so time will tell if it can carve out its own share in a crowded national market. 

Other players, Thumbtack, Home Advisor, Contractors.com, Yelp, the list goes on, are all vying for a limited number of professionals to sign up for their referral services. The field is crowded and competition fierce, so what does this mean for remodelers?

“Marketing and lead generation are some of the most difficult challenges for businesses, and some of these services do this very well,” says Kermit Baker, project director of the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. Baker believes that these programs can be a more efficient marketing process that effectively uses technology for targeted referrals. 

Not for Everyone

“The primary disadvantage [of online referrals] is paying a fee for a job that we might have gotten without the assistance of one of these programs,” says Toby Asplin, president of Handyman Joe’s, in Omaha, Neb., and a pro on Angie’s List. Asplin has looked into other programs, including Amazon’s, but fails to see the value, though he believes they could benefit new businesses. 

Some remodelers, especially those working on higher-end projects, look at it in terms of cost per lead. “How much investment am I making for one lead?” asks Robert Criner, owner of Criner Remodeling, in Newport News, Va. “As a higher-end design/build contractor, I’m going to put my marketing dollars toward attracting my target consumer,” Criner says. In Criner’s case, that’s Houzz, where he constantly posts his latest quality images of completed projects.

And while online referral programs may provide some business, the vast majority of remodeling leads, at least for today, still come from more organic sources. “Our reputation brings us 90 percent of our business,” says Tim Janacek of Janacek Remodeling, in Rogers, Ark., a rural market north of Fayetteville. “Our local home show brings in clients serious about remodels, and our company trucks work as mobile billboards, which brings in customers based on local name recognition,” Janacek says.

So, with all these tech plays, where does that leave the consumer? Asplin says he struggles to see the actual value for homeowners. “What do these [services] offer that isn’t already available? There are too many variables to get a real quote from any of the sites,” he points out. And if homeowners want an accurate estimate, it’s up to them to fill out the online forms correctly—something that Asplin says is often a struggle. 

Most remodelers agree that a forward-thinking company with strong digital content and search engine optimization doesn’t need paid online marketplaces, though new businesses with no marketing budget very well might. 

So, is an online marketplace for the home remodeling industry the wave of the future? The jury is still very much out. “I’m waiting for the dust to settle,” Criner says. 

The Players 

Amazon Home Services

How it works: Customers can search for services or bundle products with installation services at online checkout. The professional pays 10 to 20 percent to Amazon, depending on the job. 

Angie’s List

How it works: Homeowners pay a membership fee for “instant access” to online reviews of service professionals. 

Google Home Service Ads

How it works: Google pre-selects a list of home-service pros to display at the top of its search results page. 

Houzz.com

How it works: Homeowners can search the website for different types of professionals or browse project photos and click through to contractor sites. Contractors can pay for placement on local searches.

Porch.com 

How it works: When Lowe’s shoppers ask for installer recommendations at checkout, they are directed to in-store terminals where they can locate a Porch service provider. The Porch website can also be accessed directly. 

Pro.com 

How it works: Provides “immediate estimates,” though these are not firm bids. Professionals who come to your home for a bid may charge a fee, but credit it if they are hired. New Text-a-Pro and Facebook Messenger offer “flat-rate pricing.” 

Thumbtack

How it works: Pros buy “Thumbtack Credits” for the ability to quote projects. 

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Elizabeth Mack is a freelance writer based in Nebraska.

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Comments

Good piece, but you left out the "special sauce" of all these online referral companies: none of them seem to have found a long-term strategy that doesn't involve juicing the results in return for money from the contractors. Payola, construction style.

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