Its interesting reading about their decision making process with regards to their business model.
Then we tried a subscription model. It was super easy to understand, which enabled us to sign up 10,000 paying pros—great! But in the long run, it meant the cost to the pro stayed the same each month no matter how much new business we brought them—not so great. We needed our revenue to grow in lockstep with the value we create.
Cue the pay-per-introduction model we have today. What matters to pros is flexibility and a profitable return. So we made sure that’s what they got. It was simple. Plus, it let us guarantee our customers high-quality quotes from pros who were serious about providing a great service.
Based on my other comment [1], I wonder what would have happened if they stuck with a subscription model and then augmented it with value added services to their larger customers, something akin to LinkedIn. That seems more fair to how their system currently works.
There are a couple main reasons subscriptions really didn't work.
First, the scale difference between "power" pros and regular pros is pretty large. A "power" pro might spend thousands of dollars per month, whereas the median pro is probably spending a few bucks a month. How do you pick a subscription price that works for both of them? IIRC, when we switched over from subscription to the pay-per-introduction model, something like 80% of pros could have used Thumbtack exactly the same as they did before and pay less. It was just the huge power users would end up paying much more (though presumably still getting good ROI on their spending).
Second, when people had subscriptions fully paid for, they were incentivized to just respond to everything, even if they were not a good fit for the consumer. Any chance of getting hired is better than no chance. This is just a waste of time for both the pro and the consumer.
This process also played out over the course of years and wasn't based on any master plan. I created the subscription model when we were struggling to raise a Series A because the previous model wasn't really working and we needed to start making money or the company was going to go out of business. I had no idea if it was going to work or not, and when the first few people signed up it was incredibly exciting. Then it sort of got out of control where too many people signed up for it and then we realized the problems that came along with it. Though in the meantime we raised a Series A and didn't go out of business so that was pretty good!
Then we tried a subscription model. It was super easy to understand, which enabled us to sign up 10,000 paying pros—great! But in the long run, it meant the cost to the pro stayed the same each month no matter how much new business we brought them—not so great. We needed our revenue to grow in lockstep with the value we create.
Cue the pay-per-introduction model we have today. What matters to pros is flexibility and a profitable return. So we made sure that’s what they got. It was simple. Plus, it let us guarantee our customers high-quality quotes from pros who were serious about providing a great service.
Based on my other comment [1], I wonder what would have happened if they stuck with a subscription model and then augmented it with value added services to their larger customers, something akin to LinkedIn. That seems more fair to how their system currently works.
[1] https://hackernews.hn/item?id=10294811