The numbers say Houzz has lit a fire under the home remodeling market

By Michael Carney , written on August 27, 2013

From The News Desk

By nearly any measure, Houzz is growing at an incredible rate. The four-year-old online home remodeling and design community has grown to more than 15 million monthly unique users – 90 percent of which are homeowners – and has more than 10 million downloads of its iOS app. On the other side, the platform can boast more than 250,000 designers and contractors across 60 professional categories from architects to carpenters to interior decorators.

But it’s not the sheer number of people using Houzz, be it as a daily obsession or an integral part of their business, that’s so impressive. It’s the level of content that this audience outputs and the rate at which it’s accelerating. Today, Houzz announced that it has surpassed 2 million HD design and remodeling images available on its platform. It took the company more than three years to see the first 1 million images uploaded, and yet it doubled that amount in just the eight months since the beginning of the year.

This growth is significant because it speaks to Houzz’s success in digitizing and organizing the design knowledge that has previously been locked away in the minds of industry professionals, or teased superficially in the pages of glossy magazines. Houzz’s users have flocked to this rapidly growing inspiration library, saving the above images to ideabooks 289 million times, up from just 155 million as of January 2013. All images on Houzz are uploaded by its professionals, who show off their real-world projects, while providing instruction and answering questions from members of the community.

Among the more fun and unusual spaces are 4,479 man caves, 52 indoor climbing walls, 4 indoor slides, 2 mouse houses, and 1 James Bond tree house, according to the company.

To address the obvious signal versus noise problem created by doubling the size of its content library, Houzz has doubled the number of design styles that users can search for on its platform – e.g. Farmhouse, Craftsman, Industrial, Rustic, or Beach. The improved categorization means more effective browsing for homeowners and design enthusiasts, and better differentiation and discoverability for pros.

“Houzz is no longer an interesting experiment for renovation pros,” says Liza Hausman, the company’s VP of community. “It’s a critical tool that all pros need to use to engage with their clients.”

And despite the current breadth and depth of design content on the site, there remains room for growth. “Style and trends alway evolve,” Hausman says. “Some design is timeless, but some is not. And we’re always seeing new types of content added to the site to address shifting demands.”

In the early days of the platform, it was enough to give pros the tools they needed and allow them to find their way, according to Hausman. Now, as the site has moved beyond the tech savvy, early adopters and as the quality bar has been elevated a number of levels the community team spends a significant portion of their time engaging with and educating their professionals, “making sure they feel comfortable using the platform,” she says, “and helping them maximize its effectiveness.”

It’s not just images that pros contribute to the Houzz community. The site publishes 10-20 articles per day on its editorial side, nearly all of which are written by members of its professional community. Pros also respond to consumer questions and comments on their portfolio and project pages. All of this activity helps build their personal brand and inevitably leads to offline bookings.

Houzz has also moved beyond offering inspiration and instruction to begin providing greater transparency in the renovation market – a major pain point for both its consumer and professional constituencies. The company launched its “Real Cost Finder” in July, which relies on data from more 100,000 actual projects completed within its community to deliver accurate and actionable region-specific budget estimates. This information makes consumers feel better prepared to enter negotiations with professionals, Hausman explains, while also alleviating the problem facing pros of consumers having unrealistic expectations of what can be accomplished on limited budgets.

Take one look at HGTV, Bravo TV, and other networks over the last 10 years, and it should be no surprise that Houzz has taken off the way it has. Television viewers have made home remodeling programs staggeringly successful, including hits like “Design on a Dime,” “This Old House,” “Renovation Nation,” and ABC’s “Extreme Makeover: Home Edition.” The trend has taken on a similar aspirational and inspirational quality as have cooking shows, which have led to their own culinary revolution in America.

Houzz investor and former Zappos co-founder Alfred Lin, who is now a partner at Sequoia, called the remodeling and design platform his favorite ecommerce company within his portfolio. In the same conversation, Lin attribute the site’s torrid growth to “the three C’s” of content, commerce, and community. Many successful ecommerce companies have two of the three legs of this stool, Lin says but in his experience, very, very few, have all three.

Whatever the underlying factors driving its growth, Houzz has become a go-to source for consumers approaching home remodeling projects, as well as professionals marketing their services to consumers.

While growing its community and content library at breakneck speeds, Houzz has had to grow its internal team at a similar pace. The company has already doubled its headcount in 2013, going from 60 to 120 employees since the beginning of the new year.

“The biggest obstacle to our growth has been the availability of office space in Palo Alto,” Hausman says. “By the time we move into one space, we need to start planning for the next.”

I witnessed this phenomenon first hand when visiting the company in February in the Bryant Street offices it had occupied for less than a year. The company was rearranging the community kitchen that day to accommodate nearly a dozen workers during non-lunch hours of the day. In May, the company moved into its fourth space in under three years, after spending the first year operating out of the home of husband and wife co-founders Adi Tatarko and Alon Cohen.

Tatarko and Cohen’s rapidly growing startup has raised $48.6 million to date across three rounds of financing from NEA, GGV Capital, Sequoia Capital, Comcast Ventures, and Kleiner Perkins Caufield & Byers, as well as several prominent individual investors.

The few metrics that Houzz has not shared are those around revenue and profitability. The company's monetization to date has been limited to premium subscriptions for professionals seeking to raise their profile on the platform, with an emphasis on local markets. The company is also beginning to test various “PPC” (pay-per-click) advertising programs.

Given the level of engagement with Houzz, and the level of intent implicit in its user community, pro subscriptions and impression-based advertising may be a sufficiently attractive monetization mechanism. But there would seem to be a larger opportunity to claim a piece of the $284.8 billion 2013 home renovation market through collecting a percentage of the sales of product and services driven through its site.

As the company explores opportunities to this effect, it will need to be cautious to preserve the helpful and welcoming environment that exists within its platform today. But Tatarko, Cohen, and Hausman have shown no sign of compromising or sacrificing this quality at the expense of revenue.

Houzz has come a remarkably long way in a very short period of time. It’s only by virtue of the magnitude of the opportunity that the company still has a long, long road ahead. The company appears to have won the land grab in the design inspiration and instruction category. But there remains the challenge of turning that foundation into a massive, and massively profitable long-term business.

Real estate has historically been one of the industries most devoid of technological innovation. Houzz and a number of other companies are rapidly turning this staid old category inside out, bringing much needed modern toolsets, connectivity, and transparency to an audience of demonstrably eager consumers and professionals.

[Image courtesy of Houzz]