How Does Houzz Make Money + Everything Else You Need To Know

JM Ornedo - March 17, 2021

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Houzz is an online platform dedicated to home improvement and interior design. You can think of it as the Zillow of the interior design industry. It attempts to bring together consumers, designers, artists, and providers all in one place. Houzz’s business comes mostly from the production side on the backend and from consumers on the retail side. So just how does Houzz make money? Read on to find out.

How Does Houzz Make Money?

How does Houzz make money?

The Houzz business model generates revenue through several different outlets. Houzz makes money through things like advertising products, premium listings curated and bought by professionals, and a marketplace commission of 15%. The company has multiple revenue streams, something that provides a good forecast for future success.

Houzz is able to bring together designers, idea seekers, and e-commerce, thus streamlining the entire home renovation process.

How Much Money Does Houzz Make?

According to IncFact, in 2020 Houzz generated over $500 million in revenue.

Houzz has several competitors in its field, although none of them truly specialize in the interior design marketplace as much as Houzz does. Relevant names that come up are Pinterest, HGTV, Porch, HomeAdvisor, and the like. However, none of these companies specialize in the niche industry of interior design like Houzz does.

Houzz History

Houzz began in Palo Alto California by Adi Tatarko and Alon Cohen.  The two creators came up with the idea during a remodeling project of their own. They saw a need for a platform that would offer a better solution when it comes to home renovations. Houzz began as somewhat of a Pinterest board design, offering a way of gaining inspiration for your home in a more formal way. 

Home remodeling and design can be an outlandish and long process for many people.Houz z sets out to solve that. Houzz gives viewers interior design concepts and ideas to check out and compare with what their vision is. Designers and architects supply these images, allowing consumers and simple do-it-yourselfers to view high-quality ideas they might be of interest to them.

Who Owns Houzz?

Who owns Houzz?

Houzz is from the minds of Adi Tatarko and her husband Alon Cohen, who still own the business today. It is unclear as to the exact ownership structure and legalities within the ownership framework, but it appears that they own the company jointly.

It’s unknown what the plans are for the future of the product/service combination. This is because ownership structures oftentimes undergo restructuring once a business secures extensive funding or goes public on the open marketplace.

What Is Houzz Worth?

Nailing down a valuation for a business this large is never a simple thing to do. It involves taking many differing metrics, variables, threats, opportunities, and revenue forecasting into consideration. It is almost always an approximation, and also somewhat a matter of opinion as well. Therefore, the value of businesses like Houzz are always subjective, to an extent anyway.

Houzz presently has a valuation of about $4 billion USD. This is a number that includes not only the business and its assets. It also includes future projections and recent rounds of funding being raised.

Houzz saw success with a $400 million dollar round of funding in 2017. The company appears to also be looking to go public sometime within the next couple of years. Whether this process occurs through a traditional route or via the new fascination with SPAC (Special Purpose Acquisition Company) mergers, it’s likely that Houzz is on many investors’ IPO wishlist for 2021.

How Can Houzz Make Money In The Future?

How can Houzz make money in the future?

Houzz’s present business model looks profitable if they decrease growth spending over time. Also, if they continue to acquire users at the rate they presently have, things are looking good. Their core revenue earners are through the premium membership they offer as well as through ad revenue.

The premium membership allows members to be visible in Houzz’s search rankings over other competitors. The cost differs depending upon who the client is, but the intake can amount to hundreds of dollars a month for some memberships.

The advertising aspect of the business speaks for itself. This is no surprise as advertising is typically incorporated into every free online platform’s business model in some way or another. For Houzz, it’s just one of the ways the company keeps multiple revenue streams open.

It’s often said that if a platform is free, that you are the product. Though there are some concerns over privacy and sustainability, there are other sides to look at. Houzz allows advertisers to show ads to relevant consumers. It also allows consumers to see ads relevant to their interests.

Many ads seen on the platform are highly-targeted, and relevant to the niche Houzz operates in. This is contextual advertising and a mutually beneficial means of communicating with consumers.

How Does Houzz Make Money: Final Thoughts

Ultimately, Houzz is a staple in the present period of the internet. It’s the epitome of convenience. The platform seeks to cut out the middle man and directly connect consumers and producers on an open marketplace.

Houzz is a viable business model for the time being, and should remain so for the foreseeable future. There are of course threats on the horizon, namely and most importantly perhaps in the advertising/consumer privacy side of the business. Therefore, this is something that will likely be up for legislative debate at some point over the next decade.

The core of the business model itself is strong and shows a good chance of future success. It shouldn’t be surprising if we begin to see more Houzz competitors crop up within the next few years as the entrepreneurship/tech bubble continues to grow.