HomeDepot Buys RedBeacon

RedBeacon has announced that HomeDepot is acquiring it. The price was not disclosed. Late last year the company announced a new funding round of $7.4 million and launched an iPhone app, which I liked quite a bit.

There’s an obvious logic on both sides here and this is echoed in the expected “everything will be great going forward” statements on the RedBeacon blog:

In our opinion, The Home Depot is the perfect place for Redbeacon to achieve our vision even faster. Redbeacon and The Home Depot share many of the same core values around forward thinking, entrepreneurial spirit, excellent customer service, commitment to quality, and empowering pros and homeowners. We could not be happier to become part of The Home Depot family and to grow our team together. We want to assure all of our current users and service providers that our service will continue and will only get better!

The thing that HomeDepot brings to the table, beyond additional money, is national visibility and distribution. RedBeacon has built a worthy platform but has failed to gain much consumer traction. It recently experimented with AmazonLocal to acquire new consumer-users. RedBeacon debuted in 2009.

My guess is that consumer adoption was proving to be a very tough slog and this makes the consumer side potentially much easier. Now RedBeacon can get immediate national and local visibility in HomeDepot’s more than 2,000 stores across the US.

HomeDepot gets technology and a team. Indeed, this is a little like Wal-Mart buying Kosmix, which then became @Wal-Mart labs.

I was an early skeptic of RedBeacon but was later impressed by how the site evolved and adapted to remedy problems or imperfections in the model (such as the lack of a phone-call capability). It’s not clear to me whether RedBeacon was being shopped or whether HomeDepot approached the company.

One question that arises is: what does HomeDepot want and expect from its new Internet property? And does anyone know how much the deal was worth?

RedBeacon competitor Thumbtack recently announced a $4.5 million funding round.

Update: I just spoke to a HomeDepot spokesperson who alerted me to HomeDepot’s services channel, which connects local contractors with homeowners. I was totally ignorant of this business. She said that RedBeacon would be integrated generally with that effort but that the precise implementation of the RedBeacon assets would be worked out in 2012.

Most of my questions received a very polite, “it’s too early for us to answer that” and “we’re not talking about that.” In the latter category was the question: did you approach them or did they approach you?

Related posts:

You can follow any responses to this entry through the comments feed.

4 Responses to “HomeDepot Buys RedBeacon”

  1. Electrician says at

    This is big news!!! 

    However, it does seem to raise a lot of questions, such as:

    1. Are retailers looking to take over the place of Internet Yellow Pages? Sears already owns http://servicelive.com , and now Home Depot owns RedBeacon.

    2. Why would RedBeacon sell to Home Depot rather than continuing down the partnership path? Wasn’t the partnership path working? Doesn’t being owned by Home Depot stop them from partnering with others such as Target?

    3. What price was paid? Did the investors in last years $7.5m round get their money back? If they did, why was Home Depot prepared to pay so much?

    4. Is this the end of RedBeacon advertising on the internet? Are they going to focus on marketing purely through Home Depot?

    5. What happens to Home Depot’s current preferred service providers? Do they lose out to contractors found through Red Beacon?

  2. Greg says at

    All of these are good questions. It was characterized by the company as a “good exit.” However longer term I would suspect that RedBeacon’s independence goes away. HD may not have made some basic decisions about how to use the asset at this point. 

    The reason RedBeacon sold I suspect is because they didn’t see a clear path to consumer adoption at scale. They would have had to raise more money and devote a substantial amount to brand building and consumer acquisition. I suspect but don’t know that RedBeacon or someone on its behalf approached HomeDepot — and probably others — and that a deal was negotiated. 

  3. Peter Troast says at

    I see this as more of a defensive move. Home Depot makes significant revenue from Contractor Services, but at the expense of the contractor. In the already thin home improvement contracting business, HD takes as much as half the margin. Consequently, HD Contractor Services are a last resort for most, and the pool of contractors in their system generally lower quality. Red Beacon had promise as a more efficient channel from homeowner to contractor, and a less onerous margin structure, which is not in HD’s interest. Congrats to the Red Beacon team, but it’s a sad day for contractors as a promising direct channel gets devoured by the Home Despot. 

  4. Greg says at

    Peter:

    I was totally ignorant of the HD contractor services program. If the margins are as you say then it does argue that this is a service of last-resort for contractors having trouble getting business. If so it’s too bad. The RedBeacon service will ultimately become “captive” to HomeDepot. 

  5. Мобилизация некомпьютерных отраслей | александр.moskalyuk.name says at

    […] уже не то чтобы новехонький – в январе этого года был сделан выход, и владельцем RedBeacon теперь является сеть магазинов […]

Leave a Reply