How does Thumbtack make money?

Thumbtack makes professionals buy credits, which they then spend on sending quotes to customers

Despite plenty of competition in the local services space, including TaskRabbit, Angie's List, Yelp, eBay, Amazon and GoDaddy, it's also a space that has been relying on the same search and browsing features for a long time.

Thumbtack, though, is attempting to upend the traditional way that people and professionals connect. Rather than having the customer search and browse through listings, they instead tell Thumbtack what they need. The company then takes that information to the professionals, who decide if the job is right for them. 

The way the company makes money is by having professionals pay to contact customers through Thumbtack credits, which are used by professionals to send quotes to customers. They only pay to quote, and Thumbtack does not charge commission on jobs they complete or future jobs that they book with the same customer and their referrals. 

A single credit costs roughly $1.50, but that goes down as low as $1.42 if a professional buys a bulk pack of credits. For example, they can guy a pack of 12 credits for $17.99, a pack of 24 credits for $34.99 or a pack of 60 credits for $84.99.

Each professional starts off with a 10 quote package, at a 30% discount. After those first 10 quotes are sent, professionals can choose the credit package that works best for them.

The number of credits required to send a quote varies depending on the type of service requested. For example, "remodel a room" costs 7 credits, while "resume writing" costs only 2 credits. The amount of credits to send a quote can be as high as 9, for jobs that include "architectural services," "business consulting," and "landscaping."

The reason for the difference in how many credits it costs is how much much each of these services is likely to cost the customer who hires that professional.

"In a nutshell, the overall value/cost of a job is what determines the amount of credits needed. A typical resume writing job might only yield $50 to $100 for the service professional, whereas a room remodel is going to have a bigger payoff, hence the larger fee for introduction," a Thumbtack spokesperson told me.

"We wouldn't expect a resume writer to pay $40 in credits for a $50 job but a wedding photographer would be likely willing to shell out $13 in credits for an intro if the potential job would be $5,000 or so."

While Thumbtack does not release any revenue figures, the company says that it is currently sending $2 billion worth of business to its professionals annually.

Founded in 2009, Thumbtack has over three million projects requested every year in over 700 categories, including house paintings, wedding caterings and even people wanting to learn Spanish. The company operates in all 50 states, and now has over 75,000 unique paying professionals. 

Thumbtack has raised $150 million in venture capital funding, from investors that include Google Capital, Tiger Global Management, Sequoia Capital, and Javelin Venture Partners.

(Note: Thumbtack was the winner of our very first Vator startup competition and event, all the way back in October 2009. We will be holding another Vator Splash event on April 22nd to the 23rd. Speakers will include Thumbtack CEO Marco Zappacosta. Find out more here!)

(Image source: thumbtack.com)