Homejoy post-mortem

Christina at Backchannel wrote a lengthy, well-researched post on the real reasons why Homejoy failed, if you have 15 mins I encourage you to read the whole post but in case you don’t, you can go over my highlights that I’ve copied/pasted here.

Homejoy was grappling with far more immediate problems that might have deterred potential investors equally or more: mounting losses, poor customer retention, a costly international expansion, run-of-the-mill execution problems, technical glitches and the steady leak of its best workers to direct employment arrangements with its own (now former) clients.

One of its biggest problems was the crippling cost of customer acquisition. By mid-2014, thousands of people were scooping up deeply discounted first time Homejoy cleanings for $19.99 on daily deal sites like Groupon. The company offered these aggressively even though its own internal data showed most of these people never used the service again, according to three ex-employees.

A third-party analysis of the company’s financials viewed by Backchannel showed that only about a quarter of its customers continued to use the service after the first month, and less than 10 percent used it after six months.

Homejoy also struggled to create a reliable service. Many first-time customers were not satisfied with the cleaning, or experienced a last minute cancellation. “We didn’t figure out how to deliver a consistently high-quality service,” he said.

Handy’s executive team made the strategic decision to expand to fewer cities and operate with a slower burn rate than Homejoy. Moreover, Handy attracted more than $60 million in funding to Homejoy’s $40 million

Homejoy’s aggressive international push may have hastened its demise.

Homejoy city managers were tasked with buying up and distributing cleaning supplies. But the company did not get around to determining which products were effective and low cost, or in forging deals with suppliers. It also failed to keep track of cleaners in order to retrieve unused supplies Homejoy had purchased on their behalf. “It was a money pit,” said Zietsman.

For months, the person said, the founders failed to resolve a flaw in the algorithm, which set up back-to-back jobs for cleaners without accounting for the transit time. Cleaners traveling from Brooklyn to New Jersey would often be allotted 30 minutes to cross Manhattan, for instance, which New Yorkers know is a near-impossible feat. Despite repeated requests from the client services team, which handled complaints from the cleaners, it took months before the engineering team prioritized updating the algorithm.

If execution was often a problem, effort was not. It wasn’t uncommon for a Homejoy employee to pull a 14-hour shift at the San Francisco office. At 11p.m, Luongo said there were often 20 people still at their desks.

the founders had technical backgrounds (Aaron majored in chemical engineering in college and Adora previously worked as a product manager), but very little experience with customer support or home services.

the founders were looking for ways to cut costs, and opted to scale back the customer service team.

Homejoy did not pay cleaners as much as some of its competitors.

It was a constant struggle for Homejoy to determine which cleaners were up to the task, and to keep the good ones loyal.

Last-minute cancellations were a particularly vexing issue for the customer and client services teams, as Homejoy could typically only find a replacement about 15 to 20 percent of the time.

A bigger question is whether the on-demand economy model, which has experienced some success with rides and odd jobs, even make sense for cleaning.