Thumbtack Business Model | How Does Thumbtack Make Money?

Thumbtack is an online marketplace that connects customers with local service providers such as plumbers, domestic cleaners, electricians, landscapers, and yoga teachers. 

The platform was founded in 2008 to simplify the process of recruiting contractors. Thumbtack earns money by charging a fee for each lead received by contractors. 

Thumbtack also offers Thumbtack Promote, a paid service that helps contractors elevate their profile in the list of search results.

Thumbtack is an internet marketplace that connects clients with local experts. A simple mission guided its creation in 2008: simplifying the hiring process for customers and simplifying the finding of work for professionals. 

A total of fifty million projects have been launched since then on this platform. There are over 400 services offered by Thumbtack pros, and thousands of customers use the platform each day to find local service providers.

Thumbtack is recognized by the Better Business Bureau and has an A+ rating. Thumbtack, on the other hand, is not for everyone. 

According to some Trustpilot customer reviews, leads are prohibitively expensive; others argue that you must spend money to make money. 

Some professionals rave about how quickly they could find work with Thumbtack; others were irritated by paying for referrals that did not result in jobs. 

One disadvantage is that Thumbtack does not provide a free trial, which means you may have to pay to determine whether Thumbtack is a good fit for you.

What is Thumbtack?

Thumbtack is a platform that connects customers with professionals in over 1,000 areas, such as plumbing and remodeling of houses.

Thumbtack earns money by charging service providers for each lead it generates for them.

Thumbtack was founded in 2008 and has grown to become one of the main platforms for on-demand jobs. At the moment, the company is valued at $3.2 billion.

Thumbtack significantly simplifies hiring services for customers while also empowering independent professionals to expand their businesses.

The platform has improved transparency, efficiency, and management of the marketplace for both providers and users.

Thumbtack provides individuals with a good administration in that it allows them to find and hire a nearby service provider as efficiently as possible.

Marketplace platforms allowed the establishment and expansion of a company whose operations depend on telephone directories, online registries, announcement sheets, and various other time-consuming tasks. 

The marketplace platform’s principal source of revenue is the fees collected on the purchase of credits from experts. It is referred to as compensation for the individually quoted framework; it costs a maximum of 10%.

Company NameThumbtack
Company TypePrivate
FoundersSander Daniels, Marco Zappacosta, Jeremy Tunnell,  Jonathan Swanson 
ProductOnline Marketplace for Services
Founded Date2008
HeadquarterSan Francisco, California, USA
WebsiteVisit Website

How Does Thumbtack Work?

Thumbtack helps consumers connect with local service providers through its online marketplace.

Customers can find specialists in various fields, from handypersons to cleaning services to massage therapists to yoga instructors.

This platform has a very user-friendly interface. The client begins by entering the required information about their task and ZIP code.

The client then selects from a list of contractors who can meet their needs. You can narrow down the search by date, reviews, price, or the estimated completion time.

Thumbtack provides contractors with their profiles, which include verified user reviews and an overall rating. A buyer may therefore make a more informed purchase decision.

Thumbtack Business Model

Price negotiation will follow between the client and contractor. Negotiations take place outside of the platform if they agree to proceed.

A range of resources is available to Thumbtack clients to assist them in their search. The blog area of the site offers numerous tips on how to get started.

Further, Thumbtack guarantees the best quality of service (through its Thumbtack Guarantee). 

The company guarantees a full refund (up to $1,000) and reimbursement for property damage if anything goes wrong.

You can access Thumbtack via its website or by downloading its Android and iOS apps.

Thumbtack Business Model

Thumbtack is attempting to provide a more traditional method of connecting professionals and experts. 

Customers will no longer receive queries via ads but rather through the Thumbtack platform. 

The company connects the data to professionals who can participate in the activity if it is a good fit.

Thumbtack has changed its focus to automating its marketplace and doubling down on its independence to quickly connect service providers and clients. 

One of the factors that made Thumbtack viable was finding the right business model. You may also use the same business plan to assure the success and growth of your marketplace business.

Thumbtack business model is multifaceted, having two interconnected customer segments that are both necessary for operation:

  • Consumers: The term consumer refers to individuals seeking services from qualified local professionals.
  • Service Providers Professionals and small businesses seeking consumers are called Service providers.

Thumbtack is one of the pioneers who developed an incredible administration for an internet marketplace stage that aided individuals in rapidly procuring local professionals.

Thumbtack was the next significant leap in developing administration-based businesses previously restricted to newspaper advertisements, telephone directories, and internet registrations.

How Does Thumbtack Make Money?

Thumbtack earns money by charging service providers for each lead it generates for the clients.

A lead is a new consumer who contacts a service provider to ask about a project that needs to be completed.

The cost of a lead can vary significantly based on a variety of factors. These factors include the sort of employment sought, the geographic location, and existing competition.

Service providers on Thumbtack can purchase credit in advance, similar to Google AdWords. The budgets are generated each week automatically, and they bid automatically on contracts.

Thumbtack launched its Instant Match technology at the end of 2017, matching prospective clients and service providers algorithmically.

Thumbtack Business Model

Business owners used to bid manually on client jobs, often missing opportunities because they weren’t online.

The technology of automated matching has nevertheless drawn considerable criticism. The providers complain about being matched with leads who have little chance of converting or are physically inaccessible.

Thumbtack’s Opportunity section displays prospects with whom competitors have engaged but have not yet converted.

The service provider booking tool was added in 2021 by Thumbtack, allowing users to choose a service provider and book them instantly. The functionality is primarily intended for simpler tasks.

Thumbtack Promote

Thumbtack Promote allows contractors to improve their ranking in search results.

Thumbtack typically generates more revenue from leads as a result of a contractor receiving more leads. Contractors who join Thumbtack Promote benefit from 20% off lead credits.

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Who is the Owner of Thumbtack?

Thumbtack’s ownership structure is not publicly known because it is a private company.

It is reasonable to assume the founding crew retains a significant stake in the company. A large share of the company is probably owned by its CEO, who remains actively involved in its day-to-day operations.

The majority of the company’s shares would most likely be held by both Javelin Venture Partners and Sequoia Capital institutionally. 

The two firms were both involved in the funding rounds of their respective rounds and later participated in subsequent rounds.

What is the Funding and Valuation of Thumbtack?

Crunchbase reports that Thumbtack has raised $698.2 million in venture capital funding over eight rounds.

CapitalG, Baillie Gifford, Sinoe Capital, Jaguar Venture Partners, and Tiger Global Management are notable investors in Thumbtack.

Thumbtack is presently valued at $3.2 billion, according to the firm’s most recent round of fundraising (Series I announced in June 2021).

What is the Revenue of Thumbtack?

Thumbtack is not required to reveal income figures to the public as a private corporation. These will be made public if the company ever decides to go public.

Success Story of Thumbtack

Marco Zappacosta (CEO), Jeremy Tunnell, Jonathan Swanson, and Sander Daniels founded Thumbtack in 2008 in San Francisco, California.

Zappacosta is almost certainly born to be an entrepreneur. He was the son of co-founders of Logitech, a Swiss-American company that makes electronic devices.

Zappacosta began experimenting with entrepreneurial endeavors at a young age as a result. 

When he was a Columbia University undergraduate, Michael founded a pension reform firm while studying there.

Regrettably, that business did not escalate. The next thing he thought of was creating a financial account aggregator. A similar service was already provided by Mint.com.

Zappacosta, Tunnell, Swanson, and Daniels eventually expressed open surprise during their weekly brainstorming sessions that hiring a plumber remained so difficult. 

The method entailed making numerous calls, compiling quotes, and then crossing fingers that the service was good quality.

There have been attempts to digitalize the service industry since the 1990s, such as through Citysearch. 

The emergence of companies such as Angie’s List and Yelp convinced the founders that more could be done.

A team of developers began working on the platform in 2008. Some of the company’s founders left high-profile careers to achieve it (Swanson was at the National Economic Council during the George W. Bush administration). Zappacosta was a recent college graduate.

They survived by raising a tiny angel round of money ($500,000). At the time, the crew worked primarily out of Zappacosta’s childhood home in San Francisco due to financial constraints. 

Thumbtack Business Model

They spent the first year coding the website and onboarding service providers onto the platform.

Thumbtack began formally in late 2009 and currently has over 10,000 service providers on its site. 

The team that founded the company was careful to verify all its suppliers, to set it apart from competitors like Craigslist. They also conducted background checks on individuals to ensure their safety.

As an online marketplace, Thumbtack’s early efforts were primarily focused on getting as many service providers as possible. 

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One of the worst experiences for a user is not receiving a result for their search query, thus not returning.

It was also difficult for the team to formulate an economic strategy in those early days. The website was initially offered for free before they switched to subscriptions, commissions, and a few other revenue streams until they came up with a winning model (more on that later).

Thumbtack almost went bankrupt before venture capitalists ventured into the company. 

Jason Calacanis, Mark Goines, Joshua Schachter, and a few more super angels contributed to the company’s first ‘official’ round, a $1.2 million seed round, in June 2010.

Thumbtack operated in the background despite the investment announcement. When the firm announced a Series B round led by Sequoia in June 2013, the network numbered over 250,000 service workers.

Thumbtack raised two further rounds of funding totaling $30 million (Series C) and $100 million (Series D) in 2014. Google Capital led the Series D round.

Google themselves introduced a comparable product after the financing announcement a few months later. 

Facebook and Amazon (with its Home Services product) quickly followed suit with similar products.

Thumbtack’s team remained unfazed despite the increase in competition. They just focused on building a supplier network while expanding the platform’s capabilities. 

When it comes to service providers, Thumbtack stands out from other on-demand platforms such as Uber or DoorDash.

For example, the company invited several providers into their own offices to help them improve their profile photographs and sales content. 

Thumbtack established a partnership with Alia, a portable benefits platform, in February 2019 to enable Thumbtack clients to contribute to the benefits of their house cleaner.

However, the company suffered a significant setback at the start of 2020. The lockdown measures associated with COVID-19 reduced orders by more than 50% across different categories and cities. Thumbtack was forced to lay off 250 employees.

Fortunately, order volumes finally increased. Thumbtack made its second important acquisition in this manner when it bought Setter, an online service that links individuals with home improvement experts, for an undisclosed sum.

Thumbtack secured the company’s largest round of funding to date, totaling $275 million.

Thumbtack now employs over 1,000 employees across the United States, Canada, and the Philippines.

Key Takeaways From Thumbtack Business Model

Thumbtack is an online services network based in North America that links client requests with various services providers across many industries. Consumers can use it to simplify the process of hiring a contractor.

Thumbtack generates revenue by charging contractors for each lead they generate on its platform. Credits are used to fund leads and can be purchased in bulk to save money.

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Thumbtack Promote boosts the visibility of contractors in search results. This is a win-win situation for both the contractor and the business. 

Contractors receive additional leads and, perhaps, additional work, while Thumbtack generates revenue through lead generation.

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