Care.com Business Model
Care.com is a service that is used by families to find caregivers. It provides a platform to connect and share caregiving experiences and get advice on needs such as child care, special needs care, tutoring and lessons, senior care, pet care and housekeeping.
The service helps families find, select caregivers based on detailed profiles, background checks and references for hundreds of peer reviews and pre-screened providers.
Founded in 2006, Care.com raised $109 million in total funding, most recently a $50 million round from from Matrix Partners, New Enterprise Associates and Trinity Ventures in August 2012, before going public in January of this year.
Care.com (NYSE:CRCM) is operates a dynamic website that acts as a portal for service providers –like pet sitters and babysitters– to find customers. The company went public on Jan. 25, with shares rising nearly 43% in its first day of trading as a public company on the New York Stock Exchange.
The offering gives Care.com a market capitalization of $740 million at the moment of writing. However, this may be just the beginning for Care.com, which has bigger ambitions. The company’s CEO and Founder, Sheila Marcelo, plans to use some of the new capital raised to invest in marketing and strategic acquisitions, aimed at broadening Care.com’s audience.
How does Care.com makes money ?
Care.com is the world’s largest online marketplace for finding family care, with more than 9.7 million members over 16 countries.
Since the marketplace went online in 2007, the company has patiently built a huge database of 4.5 million caregivers, becoming a trusted brand in the field. In recent years, the company has expanded its marketplace beyond caregivers, by introducing care-related businesses, such as nanny agencies, day care centers, and pet care services. In this way, the company aims in the long run to become the Amazon of all care-related services.
Note that the company has experienced rapid growth, both in terms of revenue and members.
Care.com benefits from scale advantages and network effects due to its more than 9.7 million engaged members, who, on average, posted a new job every 30 seconds, and applied for a new job every two seconds in 2013. It also benefits from inexpensive worth-of-mouth marketing, as since the launch of the marketplace in 2008, over half a million families have found caregivers through Care.com.
Notice that unlike Yelp, which generates the majority of its revenue from advertising, Care.com earns most of its revenue through subscription fees by care-seekers. In this way, the company avoids fierce competition in the market for digital ads.
More importantly, the company wants to go beyond “just matching,” and it now provides online payroll and tax product for families that employ a household worker. Care.com also provides convenient payment products that enable families to make electronic payments to caregivers from a mobile device. In this way, Care.com tries to maintain long-term business relationships with its recurring users.
A great stock to own in an aging society.
Perhaps the most attractive part of Care.com’s story is the company’s market opportunity. Care.com specializes only in the promising market for care, which is large and highly fragmented.
For example, Care.com’s addressable market in the U.S. comprises 42 million households. Moreover, $243 billion was spent in the U.S. on care in 2012, according to IBIS Research. This figure is set to continue increasing in the next decades, as the percentage of peoples ages 65 and over is expected to increase by roughly 30% between 2012 and 2020, according to Business Monitor International.
Care.com revenue comes from two main sources: 1) referrals to senior care providers, and 2) ads.
Income from these sources gives them the ability to offer a wide range of caregiving resources to our users, such as local directories of senior care services, all for free. Read on for more details.
The company has many revenue streams:
Premium consumer subscriptions
Premium members fees comes down to $39 for a single month, $78 for three months and $156 for a full year subscription.
For caregivers who are looking to be hired, a premium members means that their profile will be highlighted in the search results, and they will also be ranked higher. They receive priority email notification of new job listings.
They can also search the “Families Seeking” categories, see which families have viewed theur profile, contact families that have not yet posted a job and gives them a free preliminary background check.
For families who become premium members, they get the facility to contact caregivers as well as other members on Care.com, see caregiver references, get free background checks, see full job posts and full profiles.
Care.com HomePay – household payroll and tax service
Care.com charges $175 per quarter for a single household employee, and another $75 for each additional household employee.
This service offers tax payroll management tools, as well as help with tax filing.
Business Services which enable companies in the care space to recruit staff and/or advertise their services on Care.com
Companies pay either a fixed rate irrespective of the number of referrals they receive, or a variable rate based on the number of referrals they receive, plus any applicable sales or other taxes.