Goodnest was one of the first domestic jobs marketplaces to pop up in this country, launching around four and a half years ago. And things have changed considerably since then, says co-founder James MacAvoy, who, along with his brother, also founded the DVD rental company Fatso that was bought by Sky.
“When we started Goodnest, Uber hadn't even come to New Zealand and we launched off the back of a company I had started called Treat Me, which I started when I was at Trade Me. I subsequently did a management buy out of that and what I saw was that with all these varied deals websites, all of a sudden there were just heaps of people doing voucher offerings for the different trades. You'd get handymen offering two hours of service, cleaners, gardeners. It seemed like time was the currency they were selling and people really gravitated towards that. The first six months, 30 percent of our revenue on Treat Me had come from that area.”
He found that people weren't really going for the discount factor, as it often wasn’t that big. It was really the easiness factor – and the fact that the suppliers had been vetted.
“We thought we could probably do a much better job. It's hard enough calling a tradie to get them to a job, but when you've got 50 people trying to call that tradie after they've put out deal, it’s really bad.”
That’s when they started building a platform that encapsulated the convenience and the selection process but then also allowed future payment and scheduling. Goodnest started out focused on cleaning and did that for two years, and then launched a cleaning service in Australia. There was no problem with demand, but MacAvoy says there was an issue with supply.
“It's quite hard to get good cleaners. They're transient in nature. Then we started to come across all of these differences between cleaning in New Zealand and in Australia. And you think, ‘What could the differences really be?’ In the case of Sydney, you've got toll roads, so you've got to do the navigation around that, otherwise the cleaners aren't going to make any money. Parking is $20 an hour and they're getting paid AU$21, so no one's going to work for a dollar an hour. Less gas, less tolls. So now we need a parking system."
After the difficult Australian experiment, MacAvoy and the board asked whether the company should be trying to dominate just one thing, like cleaning in Australasia, or trying to take what it was building and make it broader. And it went for the latter, basically moving away from the crowded Australian market and into about nine other trades.
“That went really well.”
Overseas, there’s plenty of competition when it comes to gig platforms, with companies like Task Rabbit, Airtasker and others tapping into the growing demand for on-demand services (there's plenty of competition here too, with the likes of Joblist, Kwota, Tradee, Builder's Crack and Spark's new service WeDo). He says the success of these international models definitely gives him a little bit of a compass bearing to know that they are on the right track. As seen with new marketplaces unsuccessfully trying to take on TradeMe, the network effect typically means only the biggest survive, so the race is on to get there first. A couple of months ago, it broke the categories down further into service types, like interior painting, fence painting, outside and exterior house painting. That resulted in about 20 percent growth almost instantly as it allowed suppliers to join and set a price for their specialist skills.
The next big thing for MacAvoy is the launch of in-platform chat between suppliers and customers either in-app or via email, and it’s about to launch an experiment that won't require customers to input their credit card details to get quotes. It has also expanded to 340 different services – and are about to expand again to over 400. And it has also launched in Queenstown, Palmerston North, Taupo, and Napier/Hastings, adding to the six main centres. In the past year, he says it has seen more than 50 percent growth in services.
He says it’s also currently talking to property managers and loss adjusters for insurance companies that deal with trying to book tradies all day to see if they can provide a service for them.
"We see that 10 percent of jobs coming through say in the description, 'Oh, don't contact me, don't call my number, call this number, that's the tenant'. So we built an assistant for property managers, so they can actually just say 'This is the problem, this is the spend limit, make it happen' and then the tenant gets contacted, and they get the buttons that select the times that you want the plumber to arrive.”
Goodnest doesn’t take a percentage of the job as some other services do, or guarantee leads for a set fee like Spark's new service WeDo, and, unlike some other platforms, it’s free to join as a supplier or a customer. So how does it make its money? MacAvoy says it has a few different revenue models.
“In the case of cleaning, you're in the business of selling time. People will say, ‘I've got three bedrooms, two bathrooms.’ We'll recommend an amount of time. You can make it bigger or smaller. And they'll work to that time that you say. With trade jobs, we say ‘I've got this plumbing job, get it sorted.’ We'll fix the hourly rates, and then we get a success fee from the tradies. The customer doesn't pay the success fees, it's the tradesperson getting the job. The next step which is currently underway is testing a model more focused on communication and connection than success fees. So what will happen is tradies will be able to talk to the customers, send quotes, and it's all free. If the customer comes back on the quote, then they'll pay a small fee."
Many other marketplaces rely on public reviews to inspire trust between buyers and sellers. Goodnest hasn’t gone down that path yet. It asks for feedback from users and validates its suppliers. But MacAvoy’s view is that the data should be pretty transparent and it should go both ways, where the supplier can find out about historical issues around payment from a potential customer and customers can see reviews of the work the suppliers do.
It’s not cheap building a tech company and MacAvoy says it has raised a fair amount of capital so far. Trade Me founder Sam Morgan was on board pretty early on after the sale of Trade Me and he had been looking at trade services while he was there. He provided seed capital and currently has a 18.5 percent stake. Last year, the company raised an additional $1 million through Stephen Tindall's K1W1, Movac's Phil McGraw and other investors and it is currently completing another round at the moment (it's the first time it's taken on external investment groups but it still wants a small but strong register.).
In tech, speed is of the essence, so he says the 17 strong team is constantly looking for the next thing to build and test.
“You just have to just keep trying things and stay focused on your customers. You have to be paranoid. That's the thing for us, we sit around and say, 'we're building this what's working, what's not, and what are people asking for? What are people not liking?' They'll tell us what's broken more than what they want. They don't necessarily know what they want. So you just have to listen ... I haven't been too focused on what the competition is doing. I think often what has happened is that the financial structure often works for the business first and then for the users second and we're trying to really peel that back.”
While most entrepreneurs wouldn’t be classified as lazy, MacAvoy says that an “empirical laziness” can also be a good thing when it comes to designing services like this.
“I think you try and find quicker ways of doing things so that you don't have to spend time on them. If I wanted to find someone to paint my house, what would be the best experience I could give myself? Googling some names with a whole bunch of tabs open and leaving four messages on the phone ain’t it. You should want to make something so effortless that the machine runs it and everything works.”
Just as Uber (and every single airline) uses variable pricing, Goodnest has also tried to “test elasticity” and it turns out that people seem to like it when it is, as the semi-famous marketing campaign from The Economist said, reassuringly expensive.
“When it comes to emergency services, the more you charge the more people trust it. If it’s $50 you're not going to trust it if it's a burst pipe, but if it's $399 something's probably going to happen pretty quickly. It's kind of strange how those things sometimes work. In those cases not giving people choice and putting the job out there with bonuses [for tradies] and having it all connecting up is fantastic. In other cases where consumers actually know what they want in making a decision but they want to feel right about the decision, they want to have conversations, they want to look at reviews, they want to just mull over things a little bit. There are different approaches. We're just looking at every different category and saying, ‘right, how do people for the most part want to use this?’"
So how big does he think the opportunity is in this market? MacAvoy and the team looked at about 11 core categories including moving, plumbing, electrical, handyman jobs around the home, home maintenance, cleaning, and general home services (it excludes business from new builds because that’s a whole different kettle of fish) and he says the online marketplaces are just getting started.
“In some areas we looked at the number of plumbers that were employed in the market, what they were getting paid, and the margin rates of the companies and said ‘that’s effectively the turnover in that space.’ Everyone is just scraping the surface. It wouldn’t even be one percent online and it's a $6 billion market.”
He says the industry is growing but it’s still often quite tribal – “you get a great builder and you don't want anyone to know about them”. Even so, he’s confident that with a platform that works well for both sides it will open things up a bit more and make it transparent.
The promise of technology and the reality of technology is often quite different. While Uber, for example, is undoubtedly a more efficient system than using taxis, there are often unintended consequences and there has been plenty of discussion around low pay rates (in his previous role with Treat Me, MacAvoy actually went to San Francisco and visited Uber HQ and he was asked if he’d like the manage the roll out of Uber in New Zealand, but he'd just bought Treat Me). Mark Zuckerburg thinks more connection is better but, as we’ve seen in recent times, those connections can be used in nefarious ways. But MacAvoy is a believer.
“Putting aside how Uber drivers feel about their pay, you have this thing when you hop into a cab with those Uber drivers. You've got something to talk about and it feels like a different experience to hopping into a taxi. I don't know why that is but it's almost like you're all on this journey together. I tend to think if you do the technology right you can build a better community. You can have transparency and people can feel a part of something, can feel like they're building a profile and all these things that are really important to tradespeople. I think there's opportunity there, it doesn't have to be this cold and heartless thing but it's quite easy to be an engineer and think about the problem too much but not think about the users.”
So does MacAvoy have a deep and burning passion for domestic chores, or has he gone down this path because he loves growing businesses?
“I think if you ask my mother if I was interested in cleaning she'd say no, at least judging by my bedroom when I was a teenager. So it's more about solving problems.”
If only Goodnest existed when he was young.
Idealog has been covering the most interesting people, businesses and issues from the fields of innovation, design, technology and urban development for over 12 years. And we're asking for your support so we can keep telling those stories, inspire more entrepreneurs to start their own businesses and keep pushing New Zealand forward. Give over $5 a month and you will not only be supporting New Zealand innovation, but you’ll also receive a print subscription and a copy of the new book by David Downs and Dr. Michelle Dickinson, No. 8 Recharged (while stocks last).
Idealog is part of ICG. We work with clients like Woolworths New Zealand, All Good, Huffer, Liquorland, Resene, Citta Design, TVNZ, Spark and FCB on their event activations, in-store, in-office or out-of-home signage, content creation and vehicle wraps.