Handy: an online broker for commoditized home services
Handy, an "Uber for cleaners and handymen," spun out of the Harvard Innovation Lab in 2012 and has raised $46M since then. As a major player in the oft-vilified 1099 economy, the company is a pure broker who takes a 20% fee of every booking amount, while also pushing customers toward its subscription model. This company, like myriad other "Uber for X" companies, is another excellent example that convenience and simplicity can be a huge digital business.
Handy is a digital platform that lets its customers book appointments with cleaners and handymen, with as soon as next-day availability.
The company creates two-sided value: for customers, Handy simplifies the home cleaning process by removing provider vetting and selection from the booking process, as home cleaning is generally a commoditized service. Specifically, Handy customers need only select a date and time and pay, and from there the company’s technology handles the rest: it automatically assigns a cleaner to the customer, puts them in touch, and ensures satisfactory fulfillment of the booking.
Secondly, for its providers, Handy enables them to earn supplemental income by taking on more cleaning jobs. Handy removes their burden of otherwise needing to source those jobs, thus reducing their own customer acquisition costs, while also purporting to give them flexible hours (though this is disputed in an ongoing lawsuit).
Handy takes a 20% fee (value capture) of each overall booking price for the role it plays in brokering the transaction. Handy does not utilize a freemium model. The company charges customers who pay for the services offered through its website. The true extent to which dynamic pricing exists in the company’s pricing model is not readily knowable. For its home cleaning service, pricing is a function of the following: zip code, number of bedrooms, number of bathrooms, number of total cleaning hours, frequency of cleaning (e.g. every week), and date and time. For its handyman service, these variables similarly include zip code, total working hours, and date and time.
Many theoretical combinations exist from among these pricing variables, though one example is the following: a cleaning appointment in zip code 02138 (Cambridge, MA) on March 9 at 10:00am EDT, for 3 total hours, to take place once every 2 weeks, is priced at $81. Looking at this single transaction in isolation, Handy would generate roughly $16 in revenue for brokering that transaction. If the booking was done by a first time Handy customer, then we must account for how much Handy spent on average to acquire that new paying customer. If we assume this acquisition cost to be $8, then Handy has achieved profitable unit economics by a wide margin. Moreover, if this customer is satisfied with her first cleaning experience and opts to retain her “Every 2 Weeks” subscription, then Handy continues to generate $16 for each subsequent cleaning event.
It is reasonable to assume that some extent of supply-demand dynamics drives Handy’s pricing in ways not unlike Uber’s surge pricing. By leveraging dynamic pricing (assuming this is well executed), Handy price discriminates with near-optimal effectiveness at any moment in time. It is unclear whether Handy properly bundles its offerings, though this does not appear to be the case beyond special ad-hoc promotions. Handy does not disclose its financial performance, though it is reasonable to argue that the company’s value capture model is quite effective, given its ease of access to $46M in capital since 2012.