Boyar Blog


The World According To Boyar – Episode 14: Brandon Ridenour

The World According To Boyar – Episode 14: Brandon Ridenour

About Brandon Ridenour:

William B. (Brandon) Ridenour is CEO of ANGI Homeservices (ANGI) and also serves on the Board of Directors. Prior to assuming the role of CEO of ANGI Homeservices, Mr. Ridenour served as the Chief Product Officer of ANGI Homeservices and as the Chief Product Officer and Chief Technology Officer of HomeAdvisor for six years leading up to the acquisition of Angie’s List in 2017. In this role, Mr. Ridenour managed web and mobile product strategy, product design and development, as well as the operations of HomeAdvisor’s North American subsidiaries, HomeStars, mHelpDesk and CraftJack.

Earlier in his career, Mr. Ridenour served as the Senior Vice President of eCommerce at Nutrisystem, Inc. where he managed e-commerce organization and supported multiple large scale e-commerce platforms. He also previously served as the Director of eBusiness Solutions at Scholastic.

Mr. Ridenour currently serves on the board of Builder Homesite, Inc., a company whose mission is to bring home building leaders together to develop world-class technology solutions. He is also on the board of Axial, the largest online marketplace connecting private companies to capital.

The interview discusses:

  • Brandon’s views on running a public company (especially during times of stock price volatility).
  • Why ANGI took the rare step for a public company and stopped providing quarterly guidance.
  • How ANGI is trying to transform the way consumers purchase home services and why he believes home services is one of the last major categories without a significant online presence.
  • How ANGI is helping to reduce the lack of price transparency in the home services business.
  • How he believes ANGI will be able to compete against Facebook and Google in the home services category.
  • Brandon’s views on potential anti-competitive behavior by companies like Google and whether the government should be exploring antitrust action.
  • The opportunity ANGI sees in fixed priced services and how they are building a similar model to that of Uber or Doordash.
  • ANGI’s partnerships with both Realogy and Loews.
  • How COVID has impacted ANGI’s business and which categories are doing well and which are struggling.
  • Why millennials are an incredible tailwind for their business.
  • Why he believes ANGI will do well regardless of economic conditions
  • And much more…

 

 

Never miss another podcast click here to subscribe today!

Available wherever you download podcasts

About The Boyar Family Of Companies

Boyar Asset Management
We have been managing money since 1983 utilizing our proprietary in-house value-oriented equity strategies. We manage money for high net worth individuals and institutions via separately managed accounts. To find out how we can help you with your money management needs please click here

Boyar Research
Since 1975 we have been producing independent research on intrinsically undervalued companies across the market capitalization spectrum and in a wide variety of industries using a business person’s approach to stock market investing. To find out how we can help you with your research needs please click here

Transcript Of Interview With Brandon Ridenour:

[00:00:00]

Jonathan Boyar: Welcome to The World According to Boyar, where we bring top investors, bestselling authors and business leaders, to show you the smartest ways to uncover value in the stock market. I’m your host, Jonathan Boyar. Today’s guest is Brandon Ridenour CEO of publicly-traded ANGI Homeservices, the global leader in home improvement. Through their collection of brands, such as Angie’s List, HomeAdvisor, and Handy among many others, they’re creating the world’s largest digital marketplace for home services. Brandon, welcome to the show.

Brandon Ridenour: Jonathan, thanks for having me.

Jonathan: Well, before we start, full disclosure. Both IAC and ANGI have been written extensively about in our research service and clients of Boyar Asset Management own shares in both. Before we get to some of the exciting things that are happening at ANGI, I just wanted to briefly discuss your career path. Prior to ANGI, you worked for both Scholastic and Nutrisystem, two companies obviously not in the home improvement area. How did you end up working for ANGI?

Brandon: I’ve definitely followed an unusual path to where I am today. I started my career at Accenture back when was Andersen Consulting. Really was a technologist and a software engineer. Probably around 2000 I left and went into- this was during the middle of the dotcom boom, I went to a small startup. This is in 2000, so it didn’t last long.

Over the ensuing probably 15 years or so, I really worked in consumer e-commerce. While the businesses might not seem like they have a lot of relevancy to home services specifically, they were all unusual bespoke services to consumers. A lot of them were continuity or subscription-based so I have a lot of experience in dealing with consumers and thinking about things over life cycles and lifetime value.

I came to [00:02:00] what was ServiceMagic in 2011 as chief technology officer and chief product officer, again, a combined role and spent about seven years redefining ServiceMagic or rebranding it to HomeAdvisor and then embarking on this effort to redefine how home services works and how people take care of their homes. A couple of years ago, my friend and former CEO here where I worked with at Nutrisystem retired, and I was fortunate to be able to take over as CEO.

Jonathan: I love asking CEOs of public companies what is it like running a public company? Do you enjoy it? If you had your druthers, would you rather be private?

Brandon: That’s a great question. I’ve been doing this since late 2017 and it has been incredibly interesting and very challenging experience and certainly one that propels a lot of personal growth. I think adding a pandemic onto that experience has made it especially both interesting and challenging.

The way I think about this is there’s work I might prefer to do. I love building products. I love focusing on the day-to-day of figuring out how to build great products and obviously I do very little of that now. If you’re trying to do something incredibly ambitious, which is certainly what we’re trying to do, there is no better position or role in which to have an incredible influence over the outcome. I think less about the sort of day-to-day, hour-to-hour view of what I’m doing and how much it’s my preference and more about what we’re trying to accomplish and the incredible leverage I have in trying to propel us forward.

Jonathan: That’s a great answer. One of the things I know that is difficult about running a public company is obviously your mark to market every day. At the Boyar Value Group we’re long-term patient investors, we try not to look at the day to day fluctuations of stocks, easy to say, very difficult to do. Like many stocks, yours has been particularly volatile this year ranging from $4.10 to $17.10, and that’s something that’s completely out of your control. How do you get your employees and yourself from not focusing on too much of the daily moves of the stock price? It’s obviously a significant [00:04:00] part of compensation and your total net worth.

Brandon: Yes, that’s a wonderful question. I don’t love the volatility and I don’t think anybody possibly can. Certainly, we try to follow the precedent I think that was set at Amazon where we one, don’t spend a lot of time talking about it. To the degree we do, when we’re at the lows, we talk about the fact that the external market doesn’t really know what we’re doing and can’t always appreciate it.

When we’re at the highs, we say the same thing, that really it’s relevant to what we’re trying to accomplish and how we measure ourselves and how we mark ourselves against our performance. It’s not a perfect strategy by any stretch of the imagination, but I think one of the benefits we’ve had is we’ve had some serious highs and some serious lows and back and forth, and I think people have to some degree now gotten used to it because it has become a pattern. I hope it’s not one that necessarily persists into the future.

I also talked to our team about the fact that every successful company, the most successful companies, have had that same pattern in their history, whether it’s Amazon, Netflix or anybody with a name. They’ve all had that pattern of volatility. I think that’s a little bit calming to know that that is realistically the path with any incredibly ambitious company follows that goes on to become future successful.

The last thing I’m at is we do benefit I think by having IAC as a control shareholder. IAC and the management there, definitely take a very long-term view of this and a very long-term view of the opportunity. Having their support and that structure definitely puts us in a safe position to swing big and really pursue this with a long-term view and not necessarily get caught up in a quarter-to-quarter grind. If we were traditional public company, that certainly might be more difficult.

Jonathan: The IAC, which owns roughly about 85% of your stock, they recently announced they’re no longer going to be giving quarterly guidance. Is ANGI following suit?

Brandon: We are. I personally think it is a very smart move. I’ve now lived that experience for directly [00:06:00] as a CEO for eight quarters, and then for a few quarters before that in very close proximity. I think with regard to what we’re doing and what we’re trying to accomplish, quarter to quarter variations volatility is frankly pretty irrelevant. It really doesn’t end up being irrelevant to the market, but it is irrelevant to what we’re trying to accomplish and whether or not we’re on the path to doing so.

We’re still going to publish our quarterly results and people are still going to care a great deal, but I think trying to publish a number a year round or whatever the case maybe, and then try to live up to it, which of course, it’s fundamental to issuing guidance is I don’t want to say waste of people’s time, but certainly not the most efficient use of the time and resources of some very important people whose mindshare is better spent elsewhere.

Jonathan: I really wanted to dig in to ANGI. I’m really excited about the company. We have a pretty diverse audience on the world according to Boyar. Can you just briefly explain what ANGI is?

Brandon: Sure. Well, we’re definitely a collection of brands, all whom are focusing on the exact same thing, which is we’re really trying to transform the way people get home services. I think more broadly speaking, we’re trying to reinvent the way people care for their home.

The status quo in how people care for their home is a very subpar experience, I think would be a nice way to put it. It’s pretty antiquated, and the vast majority of that activity happens offline or happens in a very analog way. It’s certainly, I guess odd, that home services is probably the bigger laggard category when you think about all the consumers verticals in terms of moving from offline to online. Nearly every other category has been reinvented or disrupted in some significant way by online services. Now, home services has really lagged.

Our view on that is driven by two different things. One is that just fundamentally, in terms of demographics, home owners skew quite a bit older on average than perhaps most categories. The average age of our customer is around 53 or so. These are folks that just aren’t digital natives. They didn’t grow up [00:08:00] doing everything digitally. The internet mostly came, if you look at that population, came after college or after their education. There’s a behavior aspect of having done things one way for a very long time that is stubborn to change. That’s point one.

Then point two is you also have to deliver an experience and services as they say, 10 times better than the status quo in order to disrupt and influence that behavior in a new direction. I think both of those, one, the demographic aspect, has been an inhibitor. Then two, I don’t think the service that’s 10x better has existed quite yet.

There’s certainly services. They’re better, and they’ve augmented the classic way of doing things with EPC and consumer reviews and that sort of thing. We haven’t seen the truly innovative types of services that you’ve seen in other categories. That’s obviously what we’re aspiring to and what we believe we’re building, delivering for homeowners.

We have a few brands in the US. I think the HomeAdvisor really has done the growth engine of the company over the last many years. Then Handy is a very innovative service we acquired a couple of years ago that really delivers what we think is the next generation’s style of experience, what we call fixed-price services. You can really think of it as on-demand services, greater than an experience. It’s very similar to those which you get in other categories.

We also have the leaders in several of the Western European countries, but those businesses are earlier staged and quite a bit smaller.

Jonathan: Is the market opportunity– I’ve seen numbers all over the place, somewhat about 400 billion and about 10% right now is online. Is that roughly correct?

Brandon: That’s roughly correct. We redid the numbers recently in terms of the TAM and we have it at about 500 billion, so it’s grown a bit. The 400 billion number was from probably close to a decade ago now. Then in terms of the online penetration, we still have it below 10%, but it’s a little squishy in terms of getting it exactly, but that’s definitely in the ballpark.

Jonathan: This is obviously a huge opportunity. You are well-funded obviously with IAC’s backing after they just

[00:10:00] spun out MATCH, they have a lot of cash. How are you able to compete against giants like Facebook and Google who are also trying to get into this market?

Brandon: I think that is one of the most interesting questions because it’s certainly a question that weighs on most investors’ minds. There are two different ways to look at competition. First, there is competition for advertising dollars among small businesses. As a small business, any small business has a myriad of ways to advertise and small businesses in the home services space have advertised historically on TV and the directories and the yellow pages. Then obviously, with the  the internet, they can have a bunch of additional options, including a paid search in Google and advertisements on Facebook and the like.

I think one on that front, we compete very favorably with any service that exists because I believe we have the best offering for service providers. I can go into some detail on why that is, but we offer a platform that offers a level of targeting and a granularity in terms of control and ROI tracking that’s never existed.

If you think about the way it would work, historically, you put an ad in the yellow pages or maybe on the top of an online directory. It’s very difficult to know what response you’re getting exactly what– You’re typically paying a fixed price every month and you don’t necessarily know which phone calls come from the ad. In our platform, in our ecosystem, you know exactly what you got and you know exactly what your ROI is. You can be very specific about not just that you’re a plumber in Denver, but in fact, you’re only interested in doing tankless water heater installations and you’re only interested in doing them in three zip codes. It’s a level of control and power that has just never really existed.

However, I think that that is really not the long term way to think about competition. The way I think about our ambition is that we’re trying to create a transformational consumer service that reinvents the way people care for their home. When you think about that as an ambition and a mission, very focused on home services, we don’t really feel that we have anybody competing to provide or accomplish that same goal.

In the end, most of this activity is offline. Our challenge is to create that transformational service and [00:12:00] move that activity that’s happening offline to online. When I think about Facebook or Google or any of the large platforms where you can advertise, the odds of them creating a truly transformational deep service that is explicitly focused on the home is pretty unlikely. We have literally thousands of people that get up and come to the office every day with this one because one goal in mind.

Home services is complicated that there’s enough nuance and complexity and specificity to the category that I think trying to be a Jack of all trades across a bunch of different categories and come up with a really great solution is pretty unlikely.

Jonathan: It’s really your level of focus compared to the behemoths is what’s going to make you guys win?

Brandon: That’s right. I’m sure we’ll talk about fixed price a bit, but we are moving from being, I think what was historically a lighter marketplace where we connected people. I would think of that as more of a traditional advertising model to a much deeper vertically integrated fulfillment platform and suffice to say that gets more and more difficult. The deeper you go in, the more ownership you take over delivering actual services, it gets complicated.

I think those types of services, when you look at them in today’s world across categories, whether it’s something like Uber or whether it is a DoorDash or Grubhub or any of the services that really have true vertical integration and manage the fulfillment, you don’t see the big mega platforms competing as much in those areas where I think you see them competing more are in lighter, simpler information discovery areas. Certainly, you’re seeing that in flights and travel and perhaps in hotels, because you’re an aggregator and you’re really just connecting the platforms that are readily available.

If you want to actually start delivering services, it’s really an entirely different level of complexity. I think the level of focus and the investment required in terms of humans and operations and logistics is pretty difficult to take on. [00:14:00]

Jonathan: Today is July 29th so we’re talking about competition and it’s particularly timely because the leaders of Facebook, Apple, Amazon or I don’t know if they’re on Capitol Hill or they’re doing it via Zoom or whatnot, but they’re talking about competition and  monopolistic behavior. Do you have any views on that? Google is probably one of your biggest sources of traffic, but it’s also in some ways your competition, as we just discussed. Do you have anything you can elaborate on that?

Brandon: Sure. First as just a consumer, a person living in the United States, I look at the last 20-25 years of incredible innovation driven by the internet and all the amazing companies that we as consumers benefit from and that certainly the economy as a whole has benefited from. I think if we want to see that for the next 15 or 20 years, the ability to discover these companies, these businesses, these innovative services is crucially important. Obviously, with the dominance Google has in terms of offering search and discovery services, I think it’s a completely reasonable thing for the government to take a look at. It’s just so important. I do believe if you take a longer view of this, we all certainly want to see innovation flourish and we want to see these amazing new services developed by entrepreneurial folks come into being and be able to thrive. I don’t have enough expertise to know whether there’s a there there, but I do think it’s a reasonable thing for people to take a look at.

When I think about ANGI Homeservices, of course, we think about these platforms, we think about Google in particular, they’re a huge partner for us, an incredibly important source of finding customers and I expect that they always will be. In fact, there’s no question that they’re the best way for us to find customers. That’s where people search. We value the relationship. We value the channel, if you will, from a marketing perspective as an incredibly important part of our business.

When I think about our strategy, and when I think about competition, I honestly believe we are either going to execute and be successful [00:16:00] by developing a truly customized service that goes deep within home services and really attracts a very large audience of homeowners in a sticky fashion and become a direct destination brand, or we won’t because we didn’t execute successfully. I don’t believe that Google– If they’re going to have an advertising business, they’re going to have home services, businesses that advertise there because they have an audience and that’s completely reasonable. I don’t think we’re really competing to accomplish the same thing.

Jonathan: Understood but you have been, I don’t want to say a victim, but when Google changed their algorithm, I don’t know if it was a year or two years ago, your costs went up, I think 30% and it’s no coincidence that they are competing in the same category. It’s something the government probably should take a look at.

Brandon: Google’s a large source of customer acquisition for us, and certainly when they make changes, we are affected. We have been affected positively in the past but I think if you look at the course in the last 10 years, I think it’s reasonably clear that Google’s own proprietary products have incrementally taken up more space on the search result page, which just makes it a little bit more difficult or perhaps a lot more difficult for consumers to find those organic results and those services like ourselves.

This is to each person’s own eye but I do feel like they do occupy most of the most premium real estate on the page. It’s pretty extensive. I feel from a personal standpoint, as a company I feel pretty comfortable with the risk profile and our ability to continue to operate within Google at the level we are currently.

[background music]

Jonathan: I hope you’ve been enjoying the interview with Brandon. Be sure you never miss another World According To Boyar episode. Please follow us on Twitter @BoyarValue. Now back to the show.

One of the ways that I guess you’re planning on combating Google is to have more direct relationship [00:18:00] with the customer. You’re doing this with fixed price services. Can you just describe that opportunity?

Brandon: Absolutely. We’ve been in business for more than 20 years. It’s an incredibly complex problem in terms of solving home services and it’s complex for two reasons. One is almost a math challenge and the other one is really about human behavior.

From a math standpoint, we serve all of America, we serve every single zip code and there’s well more than 500 different types of projects that we do. They’re about 42,000 zip codes in America. If you combine the zip codes and the 500 plus services, you almost have what you can think of as 20 million micro markets where you have to have humans available to deliver services and you have to balance supply and demand. It’s an enormous problem from a scale standpoint.

On the human side of it, unlike, let’s say a service like Uber where you can pretty much go out and find and mint new drivers really easily because almost everybody knows how to drive. In home services, these are oftentimes craftsmen, people that not only have but need to have many years of experience.

For many of these types of projects you think about things like wood floor refinishing, or remodeling or you name it, lots of complicated types of projects. You can’t just go create these businesses so you have to work with the economy as it exists. The combination of those two things makes this, I think in order of magnitude or perhaps a couple of orders of magnitude more difficult than perhaps like the idea of creating a service like Uber.

We have been working to standardize over the last seven or eight years, the experience for consumers and digitized more of the experience. We have offered services like online booking, which enable people to book an appointment directly with the provider. What we have found over time is that it’s very challenging to get hundreds of thousands of small businesses to operate in a consistent manner, I would say of their own accord.

We essentially pivoted three or four years ago [00:20:00] to begin a completely new approach to this problem. We really believe fundamentally that we need to provide a very consistent experience to homeowners that solves several different pain points.

First of all, there’s no price transparency whatsoever in home services. Nobody knows really what anything should cost. If you go out and get estimates, you’re often going to get estimates that are all over the board or they’re not close to each other. First of all, we think solving price transparency and helping people understand the price as fast and easily as we can is important.

Then digitizing the remainder of the experience and taking out a lot of the friction. People don’t want to talk on the phone anymore. Nobody wants to obviously leave a voicemail. People want to effectively– Everybody’s time-starved. People would love to when it comes to home services, generally, once they get the momentum to actually do a home service, they want to get it done as quickly as possible.

We embarked on a new path, which is effectively us pricing and selling the service directly to the consumer. Based on whatever the project is, we’re determining, we show the price up front, and then a homeowner can quickly order that service. You put the credit card in, tell us what date and time they want the service. Then we find the professional to complete the service at the requested price or at the indicator price. We manage that fulfillment digitally, beginning to end and including processing the payment once the service has been completed.

It’s a closed loop system where the entire thing from a consumer or homeowner standpoint is managed through the app from seeing the price upfront all the way to watching the service technician arrive at your home in a digitally via the map and then obviously getting a receipt and seeing the payment process.

Jonathan: Basically, what you’re saying is the traditional–What you’re trying to do now is let’s say I wanted to have my gutters cleaned, I would go online, I would probably tell them how big my house is, whatnot. It would be a fixed price of what it would cost to clean the gutters and you would find a [00:22:00] qualified person to do it. I would not really have to communicate with that person at all. Is that what you’re saying?

Brandon: Well, that’s exactly right. I can simplify the whole thing I’m saying by just saying it’s very similar to the experience in ordering a car service from Uber or ordering food from DoorDash. I think the only difference really is that it’s typically not a same-day service. You’re scheduling oftentimes out a few days, but beyond that, the experience is very, very similar and you can communicate with the provider if you want to or need to. For the most part, no, there’s no reason to. You know the price, you know the date and time the provider’s going to show up and they show up and do the work. Then when it’s completed, we process the payment.

Along with this, of course, we guarantee the work, we guarantee the outcome and we call it our happiness guarantee. If something goes wrong, then we’ll either refund the money or preferably send somebody out to make it right. That’s a level of, I guess, confidence that you don’t typically get with how people have historically gotten home services.

Jonathan: You’ve compared this to some way to Uber, which seems like a pretty good comparison. Uber’s running into issues of these workers being classified either as employees, instead of independent contractors. Is that something you’re worrying about? Does that change the opportunity if all these service providers were classified as employees of ANGI?

Brandon: Well, we certainly watched the evolution in the regulatory environments, but generally speaking, we are in a very different position because the entities that we’re working with on the provider side are small businesses. Sometimes they may be sole proprietors or very small businesses and sometimes they’re much larger businesses, but they are generally speaking standalone businesses. We’re not bringing them into this industry. They are generally running this business and they’re taking consumers or customers from other sources.

I think that is pretty fundamentally different from where Uber sits and some of the challenges they face. [00:24:00] We’ll of course watch it. The home services industry has always been a small business-driven contract-oriented industry. Just the very nature of contractors and the fact that they use subcontractors to do remodeling projects or larger projects, it is the way the industry has always operated. We’re simply providing a digital medium on which you can interact in the same way that the industry has always interacted.

Perhaps the different thing we are doing is obviously we are offering price transparency which is sorely lacking in the industry. I think we’re pretty outside the scope of where the regulatory focuses and gig jobs and gig businesses at the moment.

Jonathan: In terms of the fixed price opportunity, how big can this be? Where is it now, relative to sales and where do you think it could be, 5-10 years from now?

Brandon: Well, that’s an interesting question because we do believe we use the term home services, but it’s incredibly heterogeneous. Obviously fixing a leaky pipe shares very little resemblance to remodeling a kitchen or building an addition to a home. Those are just two examples, but there’s many, many of those.

The question for us is this expression model is we believe fundamentally better value proposition for homeowners, for the reasons I already mentioned. It’s also a great deal for the service providers because rather than paying for advertising, they just receive when they get it, we pay them. They have a job and they don’t- they just receive compensation for it. We love the model and we think that is really strong for both sides of the marketplace, but the whole nature of pre-pricing a project gets more and more complex as you go up the scale in terms of project complexity and project cost.

We started by launching in about 130 different types of projects that are low prices, relatively simple. We did that last year and we have seen a lot of success with that, and that continues to grow quickly. This year, I should say that first segment that we tackled we think is about 50 billion [00:26:00] of the 500 billion total TAM and the home services market.

Relatively small slice from a TAM standpoint because these are low price services, but a very high volume part of that from a service request volume standpoint. We love tackling that first because we think, while it’s relatively small from a revenue standpoint given the whole market size, it makes up a big part of people’s experience.

Most of the projects that people do within a year are relatively low price. We’ve got our cleaning to lawnmowing handyman services and those types of things, that’s the most common thing that people do. We love delivering this experience and making that the core part of how people experience getting home services.

What we’ve done over the course of this year is we’ve moved into higher value and higher price services, which is where we’ve had some question mark about our ability to price it and about perhaps more importantly, whether homeowners would buy much more expensive services.

I would say in the first quarter of this year, we saw pretty quickly that when we offered services and these are typically call the average price is around $5,000, we saw very quickly that homeowners would engage. There was very high engagement, very high conversion rates to purchase these services. That was, I think the fundamental piece of information we needed to know there was a market there and something worth going after.

Obviously, if homeowners are just too reticent to buy those types of high-priced high-ticket types of projects, then it would have been difficult to overcome. We were able to prove out pretty quickly that there was interest and a willingness to buy those services.

What we spent the last few months doing or tackling is optimizing our sophistication around how to price those projects because they are much more complicated. Just to give an example, installing a wood privacy fence or installing a deck, these are the kinds of projects that cost a few thousand dollars and which each one of them requires a different approach to pricing it properly.

We almost have to go project by project and really figure out how to price that project, such that obviously we make a reasonable [00:28:00] margin and we can find providers to understand the clearing price in any locality that it requires to find providers to do the work that’s the price we offer.

We’re in the process of getting good at that. I think we’ll be in the process of getting good at that for the next, at least a year and a half because it’s effectively a project-by-project groundwork to figure that out, but we’re seeing it grow quickly. We know enough now to have confidence that this model is going to scale to probably a greater extent of projects than we might’ve originally believed. That’s where we’re at today.

Jonathan: Can you just out of curiosity, something like the wood privacy fence, like how do you use technology to price something like this? It seems something that would be very difficult to do because I might not be able to tell someone how big square foot of my property is, et cetera. How does that work?

Brandon: That’s a great question. There are really two components to knowing how to price a project. One is understanding the specifics of the project given its nature and what are the factors that determine pricing. With a wood fence, it’s going to be what’s the length of the fence, what material are we talking about, that sort of thing. Then the second aspect of that you need to know is really about the local market dynamics and what the going rate is to get a provider to do that kind of work.

On the ladder because of our scale, we’re building up expertise and sophistication quickly in terms of understanding local market dynamics. I think that’s a competitive advantage in a durable asset that we will possess that puts us in a strong position to do this effectively, where it will be difficult for others.

On the former, privacy wood fence installation is a great example of where we’re using technology to really accurately price these projects instantly. For privacy wood fencing we use satellite imagery to quickly allow the homeowner to identify the length of fence, the segment of fence that they want to install or replace. With that information along with a couple of questions around materials and that sort of thing, we can quite quickly and accurately price that project.

Obviously, not every project is [00:30:00] outside. You can’t use satellite imagery for everything, but that gives you a sense of how the actual solution might be a bit different for each and every individual project. I should have mentioned that the TAM, if the first 130 or so projects were around $50 billion in total TAM, this next segment we’re tackling is around $200 billion. By virtue of the success we’ve had, I think early this year, we believe that we’re going to unlock maybe not all of that TAM but certainly a significant portion of it via fixed price.

Jonathan: Right now, you went from a few hundred-dollar project to a $5,000 project, which I think you said about 150, $200 million of the Total Addressable Market. Do you ever see that going up? Is a remodel of the kitchen or some of these really high margin items ever– Do you ever see that being in a fixed price or quasi fixed-price model?

Brandon: Our fundamental goal is to make owning and caring for your home a really different experience and a much easier experience. The vast majority of what people do fall into these lower price projects. Most projects are several thousand dollars and then occasionally you might have one that is a little more expensive. That probably makes up nine out of 10 projects people do, maybe even more. What we want to do is build the brand that’s synonymous with this type of innovative and transformational experience and develop really loyal customers. I think fixed-price as applied to these most common projects are what will generate that loyalty.

To take it a step further, obviously, we ultimately believe that not only can we develop or deliver fixed-price projects, but we can begin to take ownership of all those repetitive projects that you do. If you have to clean your gutters twice a year, but we can offer that on a recurring basis and we can offer in a way that you really don’t have to think about it again. We just show up twice a year and let you know we’re coming and do the job and let you know it’s been done.

As you can imagine, there’s a pretty long list of these kinds of recurring [00:32:00] known projects that people have to do. Well, we think we can actually just take the load and the labor off people’s minds and deliver that in a more automated way.

It’s through this experience if you can imagine not only having a fixed-price experience, but having it via the app, and then perhaps engaging with these recurring services. It’s a pretty deep experience, we’ve got your credit card on file, it’s really seamless to order additional services. I think the general idea is every once in a while, when you decide to remodel your kitchen every 10 years, or when you have to replace your roof once every 10 or 20 years, or your furnace, we have the relationship at that point.

I don’t know that fixed-price, as stated will ever apply to something like a kitchen remodel. I think there may be some sort of simpler versions of it that possibly could but a $40,000 or $50,000 or $60,000 kitchen remodel’s probably always going to be handled differently. I think the point for us though, is we can win on the high-frequency projects, create this really deep and established relationship with the homeowner, and then we’re automatically top of mind when those higher-margin, higher-value projects come up.

Jonathan: One of the ways you’re creating this deeper relationship is you have partnerships, you have one with Realogy and one with Lowe’s. Lowe’s was announced earlier this week. Can you briefly touch on that?

Brandon: Sure. We started partnering with Realogy, I think it was middle of last year. The nature of that relationship is one that I really love because it’s good for us, it’s good for Realogy and it’s good for the homeowners that are selling their houses. Effectively, Realogy offers a program where a homeowner can improve their house, which improves their odds in price, they’re selling the home and the price at which they can sell it. Realogy essentially provides funding for that work and we provide the execution and management of the services.

This is simply put, a fixed-price service model and it is more in the middle-tier pricing; it’s more in the single-digit thousands of dollars type of area from a price standpoint and it tends to be heterogeneous. [00:34:00] It’s not usually just one project, but it’s a combination project; maybe I’m painting and reinstalling the floors or refinishing wood floors and so on.

One out of the programs because I think it’s the best of all worlds when it’s in everybody’s interest, everybody has a strong value proposition. It’s been a real proof point for us to essentially prove that we could manage and market these types of more complex services, particularly a heterogenous basket of services, and do so at really high levels of satisfaction.

We’ve been very happy with the program, I believe Realogy has been very happy with the program, and it’s been growing pretty consistently. Obviously, COVID threw a temporary curveball within the housing market but as we’ve all seen, demand has picked up very robustly and we’re pretty closely tied in terms of that partnership to transaction volume in the housing market.

That feeds in really nicely, which is what we’re trying to do overall, the learnings we’re getting and working with Realogy and working in the market on these types of complex projects feeds directly into serving our own customers directly on home advisor for the same kinds of projects on a fixed price basis so it’s been very synergistic in that sense.

The Lowe’s partnership, we couldn’t be more excited about. Obviously, it’s brand new. Lowe’s is a leader and selling products and materials related to the home, is somebody we’re extremely happy to partner with. We obviously bring a lot to the table in terms of enormous service demand from homeowners. I think there’s a natural synergy to partner with someone who is looking at this from a product and materials or leading with product and materials.

As they continue to strengthen their relationship with home pros, our ability to work within a partnership to deliver their pros, service demands, I think it’s naturally in our interest, in the natural and their interest. I’m excited about it. Obviously, we just kicked it off, but I think it’s pretty obvious that our position and scale, and being able to deliver service to their pros, and that then feeding potentially directly to product and material sales makes a ton of sense, conceptually,

Jonathan: In terms of how you’re running the business now, from March until [00:36:00] July, obviously, you’ve been dealing with COVID, how has that impacted your business in terms of what people are looking for? Is it now highly non-discretionary types of services people are looking at, or people are actually letting people in their homes for other types of discretionary work?

Brandon: Well, I think we’re obviously very thankful for the resiliency our business has shown throughout this. There were certainly a few weeks there in the early going that looked pretty grim, but the industry really bounced back with a vengeance and has performed really well I think given the context. That said, we are in the business of putting people inside of other people’s homes to deliver services, at least in some part. That is not going to go without some impact when you have a pandemic and the fear that is reasonably pervasive. What we’re seeing, I think in terms of the major impacts are on the demand side.

There are certain project types that are not growing or are flat to down maybe a little bit or are growing much more slowly than we would’ve expected. These are typically indoor discretionary projects and remodeling projects are a great example. They haven’t collapsed and I think they’ve been pretty resilient, all things considered. They’re definitely dragging growth a bit relative to where we thought we would be because they’re really important. Remodeling, while the frequency is low, the value of those jobs is enormous and it’s an important contributor to us financially. Those are growing more slowly and/or are flattish year over year. The reason is people are scared. There’s a level of fear.

I think maid service, cleaning services is another one where we’ve seen actually really soft demand. That’s one where people, they can do it themselves. They’re choosing to do that, to reduce exposure. Luckily for us, I think we said 65% or so of our business is non-discretionary. It’s just work that people have to get done, whether it’s inside or outside. Your AC breaks, you’re going to [00:38:00] get it fixed. It’s just the reality. Then beyond the 65%, that’s non-discretionary, a lot of work is also outside, even if it’s discretionary. As you can imagine people aren’t as worried about that.

Overall, I think we saw a huge bounce back in growth. We posted the highest service request growth rate in June in two years on a year-over-year basis. It was really a very strong recovery, but uneven. What I mean by uneven is some categories are up to 50 to 90%. In-ground swimming pool installation was up 90% year over year while other really important categories are flat to maybe a little bit down. When you have the type of supply and demand challenge that we do, trying to keep up with category growth that might be 50% or 60% or 70% out of the blue is definitely challenging. That’s a little bit of what we’re working through now.

On the provider side, providers are affected in a few different ways. A lot of them pulled back on employment and hiring during the early stages and perhaps, or either having difficulty hiring or have been cautious to do so. There are supply chain issues that are affecting a lot of categories. We’re seeing, I think it’s more than 50% of providers are reporting that they continue to be impacted by the pandemic and are effectively operating at a reduced capacity. Those two things are, I believe transient quite clearly but are definitely affects we’re seeing as the pandemic continues in its current form.

Jonathan: You had people on your platform trying to get in-ground swimming pools. That’s a major project. That’s a $50,000 plus project during the pandemic.

Brandon: Absolutely. One thing, we haven’t seen any consumer weakness. I think the consumer appears very strong. At least to this point, obviously, that was a concern and continues to be, I guess, a future concern as to whether that maintains but to this point, consumers have been, I think, very strong in terms of their willingness to do discretionary projects where there isn’t the risk of contagion.

[00:40:00] The impact is very specifically around concerns about having people in the home and having exposure.

Jonathan: Jamie Dimon, the CEO of JP Morgan said, savings are up, incomes are up, home prices are up. You’ll see the fact of this recession, you’re just not going to see it right away because of all the stimulus. Is ANGI preparing for future pain to come? Who knows what’s going to happen with the stimulus checks now that they’re running out and how there’ll be renewed? Is ANGI preparing for a deeper recession or how are you structuring your business?

Brandon: We really aren’t. We operate the company in a very lean fashion in any case, which is why when COVID originally hit and demand dropped so precipitously, we took a look at our operations and how we approach things. We certainly made some changes, but we were able to keep our workforce completely employed and quite frankly, focused on our longer-term goals.

We didn’t really miss a beat and I think more importantly, perhaps than that, just in terms of operating efficiently, we have an extremely resilient business model. That was on display during the initial we’ll call demand crash because we saw demand crash 40% plus and just a matter of days.

The way our business works is that if homeowner demand drops, first of all, we had a surplus of homeowner demand in the first place as we talked about, but if homeowner demand does drop, a couple of things happen, one is that service providers in general need our service much more. That’s broadly speaking to service providers who pay us. We generally see a much higher engagement level from service providers and those types of situations.

Secondly, the way our ecosystem works is that if providers allocate a budget and if consumer requests levels drop, then you just tend to see a higher revenue per request that gets processed. Perhaps this is at least partially driven by the fact that we do have such a big imbalance, that if we do see some drop in consumer demand, we’re just able to better match those SPs against the remaining consumer demand.

In the end, if you look at our performance, which we released, I think in April was our low point and our global revenue dropped by [00:42:00] 2% year over year. That was in the heart of a really an unimaginable collapse in demand, unlike anything we’ve seen, including the housing crisis in 2008.

We feel really confident that whichever way this turns out, we can stay focused that the business will perform well. Of course it can have some impact, some moderate impact on our growth rate and financials, but we’re going to be in a really strong position either way and in a position most importantly, to stay focused on what we’re trying to accomplish and then we think about a three or five-year horizon.

Jonathan: One of the effects people are predicting of COVID is mass shift of people to the suburbs. Whether that happens or not is certainly offered a debate. I would imagine that’d be pretty good for your business, correct?

Brandon: We believe so. I was looking at some data that just came out where home ownership amongst millennials just spiked in a pretty unprecedented way. That’s certainly incredibly positive for us. We believe millennials are going to be incredible tailwind to driving that behavioral change around moving this activity to online. These are digital natives. These are folks that already order most products and services digitally across every other category we have long anticipated and are certainly excited by what we think is probably a 10-year demographically driven wave, where a lot of this activity does come online.

Then just beyond that, home ownership is incredibly good for us. Home transactions, there’s a ton of work that happens before, during and after home transactions. That generally on a macro level creates more demand. It certainly some of the side effects of COVID with a focus on the home and people perhaps migrating out of dense urban cities and into less dense areas where they can own larger homes are positive for us. Obviously not worth the trade off in the world, but those are side effects that are currently tailwinds for our business.

Jonathan: Brandon, thank you so much for joining us on The World According To Boyar and sharing your vision for ANGI. I look forward to following your progress on this exciting story. [00:44:00]

Brandon: Thanks, Jonathan. I really appreciate the opportunity to be here. Thanks again.

Jonathan: Be sure to never miss another episode of The World According To Boyar. Please follow us on Twitter @BoyarValue. Until next time.

[00:44:24] [END OF AUDIO]

 

Share to: