Under the Radar, Thumbtack Grabs Surprising $100M Series D Round

Thumbtack

Local services marketplace Thumbtack has been around for about six years. It raised its first VC round ($4.5 million) in January 2012. Last week it raised $100 million bringing its total funding to almost $150 million over five rounds.

Most people in the local space don’t talk (or think much) about Thumbtack. But clearly it’s doing something right — at least the VCs think so. They wouldn’t have invested at this level without solid evidence of momentum and a belief in a huge-dollar acquisition or a potential IPO.

A rumor I recently heard is that the site is doing something on the order of $2 billion in annual gross sales (meaning the total value of transactions booked). However I haven’t spoken to anyone there for at least a couple years.

The site has evolved from a directory/local search model to a lead-gen model. It is essentially the second coming of Service Magic (now HomeAdvisor).

Users fill out vertically specific wizards about their projects. Then they typically receive three qualified names of merchants who have “purchased” the right to submit quotes.

Thumbtack wizard

Local businesses must submit Thumbtack Credits in order to convey their quotes to consumers. Each credit costs $1.67; different categories require different numbers of credits to submit a quote. For example, it costs 2 credits (or $3.34) to submit a quote in the Central Air Conditioning Repair or Maintenance category. Concrete Installation requires 5 credits (or $8.35). 

This billing model is somewhat novel, which may be part of its VC appeal. It’s a quasi-CPA model and so far less speculative than “advertising.” But it’s also less concrete than a transaction or percentage fee when an actual job is booked (see, e.g., RedBeacon).

According to Compete the site has just under 2 million monthly uniques. My guess is that is almost entirely SEO traffic. The site was second only to Yelp in several cases that I checked. I would speculate, however, that only a small fraction of Thumbtack’s visitors are from branded or navigational searches.

Thumbtack SEO

Thumbtack may get acquired. However if investors are hoping for an IPO the site will have to develop much more visibility and not be so dependent on SEO for traffic. It now must build a brand.

I’m impressed and frankly surprised that Thumbtack appears to be doing as well as it is — largely under the radar.

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17 Responses to “Under the Radar, Thumbtack Grabs Surprising $100M Series D Round”

  1. Matt Collins says at

    The founder of Thumbtack was interviewed on Mixergy at the start of this year: http://mixergy.com/interviews/marco-zappacosta-thumbtack-interview/

    He mentioned their main traffic sources at that time: “Organic search was the biggest driver of new customers and now more and more [it’s] sort of direct and word-of-mouth.”

    The full interview transcript is interesting to read through if you have time. In case you don’t, here’s a summary of some of the main points I took from it: http://bit.ly/thumbtacknotes

  2. Greg Sterling says at

    Very interesting post Matt: http://www.mattcollins.net/2014/08/how-thumbtack-grew-a-huge-local-services-marketplace-and-raised-150-million-in-funding. I really wonder how sustainable it is over time. ServiceMagic ultimately had to pivot. And I’m really skeptical about the “word of mouth” that Zppacosta says they’re getting.

  3. Sol Orwell says at

    Bah, I just came here to link to Matt’s post!

    I do want to add that I think it’s also a point of sticking to unsexy and focusing on the bottomline (and less on trumpeting every little win of theirs as a major victory).

  4. Australian Builders says at

    For a business that is running under the radar that is a massive vote of confidence for Thumbtack.

    From what we are seeing on the Angel and VC Front, there is a lot of interest in niche sites that are good at dominating a space that used to be owned by Yellow Pages. There is a phenomenal amount of interest in Houzz.com and Thumbtack.com could easily fit into that same category.

  5. Ariane says at

    I first learned about thumbtack.com when I was getting married and I was very skeptical at first because I had never heard of the site before. However, I was getting desperate to find a deal because of course weddings are expensive. I was looking for a wedding officiant that was not going to drain me of funds. The average cost I was seeing was about $400 bucks whereas on Thumbtack, it was half the price or less. I won’t lie though I was super nervous because I thought there was a chance that this place would be shady and I also starting researching reviews of the place and some of the reviews made me think it could potentially be sketchy. Luckily in my case it worked out great and from the user standpoint it connects you to a good number of people in the area instantly.This also has to be great for the small business owner or individuals looking for leads. 

  6. Dave says at

    Keer@p:   $100 million for still ONE MORE RIP OFF web advertising program.  Seriously the VC’s and the investor world should look with a far keener eye on some of these programs.

    I’ve had thumbtack on one of our smb sites for possibly a year or two.  I put a link to thumbtack, per their instructions, on our site.  It was at the bottom of one of our pages.  Not all that visible.  It encouraged “price quotes” from the smb in question.   

    We just got our first thumbtack lead since they converted to a PAID methodology for generating quotes to people interested in the program via thumbtack.

    BS!!!!   I looked back this year.  For the smb in question:  Less than 10 thumbtack leads.  Total leads for the year:   well over 3,000.   Probably similar stats from the last year or two or however we’ve had the link on our site.

    Sometime ago I connected with some of the thumbtack leads.  How did they find us.  Frankly its difficult to find it via search or SEO.  When I finally got some comments on source of finding us on thumbtack…I did hear some used the link on our own site to generate the price quote.

    Ha Ha Ha.  Thumbtack wants us to pay them for leads to our business generated off of a link on our own pages.  SCR#%%Q#%   THAT.   

    So the thumbtack link came down today.  Meanwhile I’m going to generate similar messages on our pages to see if we can generate a few more leads.  (thanks for the education, thumbtack– 😉    

    Of note, years ago when the AOL leak of search engine traffic came out I did extensive item by item research on how often IYP sites were hit for various topical search terms.  Clearly in my research  the IYP sites were generating about 1/2 their traffic via high SERPS rankings….and this was years ago…when they still had better branding and name recognition than now.

    For my little bit of research I don’t see very much thumbtack visibility.

    Its another bogus play in the smb web marketing effort, in my book….and some eager VC’s just plunked $100 million into it.  Good luck VC’s.   Watch that money closely.  😉

  7. Experience with Thumbtack Leads says at

    […] thumbtack recently raised very very big bucks through a VC fund raising effort as of late August: Under the Radar, Thumbtack Grabs Surprising $100M Series D Round If they use that money wisely they may boost their site's visibility considerably. I guess we'll […]

  8. James Woyce says at

    Is Thumbtack operating in Canada yet? It’s a great resource for CPA’s. I recently moved from Sacramento, CA to Victoria, B.C Canada and would like to use Thumbtack here.

    James Woyce

  9. Taras Korytnyuk says at

    I think this business model is not sustainable because providers are reluctant to pay in front for leads, also the site allows 5 bids per project which govis you only 20% of success chance. 

  10. test » Angie’s List Faces Tougher Competition says at

    […] the estimated cost of the project. Analysts estimate that as of last year, Thumbtack had recorded $2 billion in annual gross sales. That puts their revenues anywhere from $100-$200 million […]

  11. Aninda says at

    Similar website is also coming soon. Please visit http://www.advisorhunter.com

  12. Daniel says at

    Thumbtack is great they’ve booked me multiple events and I’m even performing at their SF Headquarters today at noon! Thanks Thumbtack for all the leads and events.
    -Dan Chan
    danchanmagic.com

  13. Cole Lee says at

    For me thumbtack has been a wash. With over 30 leads that came in, I barely got 1 customer, and for no lack of trying. My usual conversion rate is somewhere near 20% for my own self generated leads through adwords and seo, but with thumbtack I made a special effort to call the leads immediately when they came in to “beat out” the other companies that were receiving the leads.

    Thumbtack might be great for the consumer but in highly competitive industries other forms of lead gen are better… IMO.

  14. Greg Sterling says at

    Which online sources are better for you out of curiosity?

  15. Dave says at

    Greg: I happen to be signed into this thread. Of your recent last two commentators one is a magician and one is a moving company. Thumbtack is working for the magician and not for the moving company with the moving company rep referencing “highly competitive industries”.

    I’d guess that one size doesn’t fit all and thumbtack is a one size “solution”.
    Meanwhile it is generating a lot of activity and I certainly see it pop up in search more often for various types of service searches. Well thumbtack might not be working for a lot of industries, but I guess it is working for itself….and its investors.

  16. Greg Sterling says at

    I’ve used it several times and it has been effective for me and the people I’ve hired — I guess 🙂

  17. Dave says at

    Greg:

    Did it help you drive the price down for whatever service you were looking for? To me its an effective tool to give the shopper the lowest price bid. Did it help you winnow through service providers. I’m not saying its bad or good, simply that the structure sets up the businesses to bid on price first and foremost. Might be good for consumers but tougher on providers. What services did you purchase by using thumbtack? You know with the moving company presumably each of those potential buyers hired a mover? I wonder if they got them all through thumbtack. Not something we can know.

  18. Greg Sterling says at

    My interactions with thumbtack really didn’t involve bidding. I merely located merchants who could do the job then I got estimates in the traditional way and made a selection. It’s almost impossible for the service providers to offer accurate pricing based on the information submitted by the consumer alone out seeing a job location or further information.

  19. matt says at

    If the value that Thumbtack provides to the merchants is greater than the amount they pay, then it’s a good model. At the end of the day, it’s just another customer acquisition source for merchants so they have to determine if it makes sense or not.

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