Houzz's torrid growth comes down to the three C's: Content, Commerce, and Community

By Michael Carney , written on March 1, 2013

From The News Desk

In Silicon Valley, tales of startups growing at outrageous rates are a dime a dozen. In too many cases, however, those growth narratives are carefully crafted by PR crack teams to highlight the appropriate vanity metrics, while ignoring the mundane or even unhealthy businesses laying below the surface. For example, a headline-worthy 1,000 percent growth rate is not that meaningful when it’s from 1,000 monthly active users to 11,000, and all of those users are free. That same rate of growth within a larger business or one that monetizes its audience effectively is a far different story.

Occasionally, however, the best companies deliver more substance than sizzle. During a brief conversation with Sequoia partner and former Zappos Chairman, COO, and CFO Alfred Lin, I asked about his favorite ecommerce company within his portfolio. He quickly responded by naming home remodeling and design platform Houzz, where he is a board member, pointing to their torrid growth rate and explaining it in terms of their unusual blend of content, commerce, and community – the “three C’s,” as he called it. Many successful ecommerce companies have two of the three, but very, very few, in Lin’s experience have all three.

Houzz will release its updated growth metrics later today and they back up the story that Lin, and countless other people have been telling me for months. The company grew monthly unique users 250 percent over the last 12 months, and now attracts more than 14 million monthly visitors. The site has become the biggest residential remodeling community online, and has grown to this point entirely through word of mouth. More importantly, this audience is 90 percent homeowners, rather than renters, making it a highly relevant community.

On the other side of Houzz’s community are 168,000 professional in 30 categories ranging from architects to designers to contractors. Amazingly, this group grew at the same 250 percent rate as homeowners, climbing from 49,000 in January 2012. The company built an online community within nearly every major US metro and has a significant percentage of international users, despite not supporting these markets currently.

The powerful third leg of the Houzz stool, community, is measurable through the idea exchange that takes place on the platform each day. Professionals have published more than 7,000 ideabooks to date, around which consumers ask questions, leave comments, borrow inspiration, and ultimately identify products and vendors to execute their own renovations. These books contain 1.2 million retina quality images of professionally designed interiors and exteriors, up 380 percent from the 250,000 total a year prior. Consumers, in turn, have added these images 155 million times to their own look books.

Houzz has not released actual monetization figures, which is a shame because anecdotal evidence suggests they’re likely fairly healthy. The site currently lists more than 550,000 home renovation products, such as faucets, tile, and paint, a number that has grown by 340 percent over the last 12 months. Vendors such as Kohler and Lowes pay the company for various formats of featured listings, including design and page sponsorships, as well as product placement. Additionally, the company launched its Pro+ platform in January of this year, inviting professionals to pay an annual fee to feature their work in select markets. (Traditional listings remain free.) The service, which is live in only four markets currently and should be available nationwide by the end of the quarter, has been met with overwhelming demand.

The Palo Alto startup has raised $48.8 million to date, including a $35 million Series C round in January 2013 led by New Enterprise Associates (NEA) and GGV Capital, with participation from Sequoia Capital, Comcast Ventures, Kleiner Perkins Caufield & Byers, and Yammer founder David Sacks.

Houzz has had an impressive run since launching in 2009 as a personal passion product of its founders, husband and wife Adi Tatarko and Alon Cohen, but there remains plenty left to accomplish. Home renovation is a $300 billion per year market that saw little to no technical innovation prior to Houzz. As its founders – and this journalist – can attest, the process of remodeling a home can be a nightmare. From choosing your style, to finding service providers capable of executing it, it’s a labyrinth of unlimited choice and non-existent guidance.

Houzz has thrived by focusing on the needs of its two constituencies, home owners and professionals, and on fostering a community among them. Thinking about it, the platform may be the first place ever that the two groups have consistently interacted and shared ideas. The impressive growth and resulting monetization have come as a function of this commitment to creating value rather than on creating a big business at the expense of user experience.