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Contractors Hate This Newly Public Company; Homeowners Should Love It

Millionacres logo Millionacres 3/3/2021 Lena Katz
a person sitting on a bench in front of a window: Contractors Hate This Newly Public Company; Homeowners Should Love It © Provided by The Motley Fool Contractors Hate This Newly Public Company; Homeowners Should Love It

Residential homeowner-focused platform Porch (NASDAQ: PRCH) is essentially like a dating site for home improvement service providers and homeowners -- and just like other matching platforms, the relationship between Porch and its listed businesses is sometimes tense. Some building contractors and other home service companies with a presence on Porch also publicly proclaim their hate for it. Nonetheless, it's a smart, customer-centric business model, in my opinion, and that's what makes it a "buy and hold."

Why is Porch different from product delivery apps or 'gig economy' platforms?

Platforms that connect consumers to small, locally owned retailers and restaurateurs for a cut of profits are seen as predatory -- for good reason. When I read yet another restaurant complaint about delivery apps like DoorDash (NYSE: DASH) and UberEats (NYSE: UBER), I'm unsurprised to learn the restaurant didn't make a profit off of any promotions or had troubles with the battalion of delivery drivers that are the workhorses of "gig economy" apps. It makes sense that home contractors would feel equally exploited by a matching platform.

However, there's a major difference between the service providers Porch aggregates and the ones DoorDash does -- namely, restaurant and alcohol delivery apps match consumers up with venues that have a set menu and public pricing. Contractors, cable companies, moving companies, and others within Porch's purview rely on heavy telemarketing, cost estimates, undisclosed upcharges, and various other price-padding techniques. They also rely on consumers not knowing how to get information on all local service providers. Porch connects consumers with this information, and with a variety of providers. Consumers are given options -- perhaps at the expense of a contractor's profit.

In addition to specialized contractors, Porch also partners with an independent mover site, lists internet/TV service providers, and has a section of home security system providers. Essentially, every privatized local service you could need when moving has a slice of this platform.

And the benefits, should it take off, are impressive: Imagine being able to compare 10 mover quotes after entering one set of parameters, or being able to pull up a short list of security system companies in your area, with transparent pricing and extended service options. The prospect is downright empowering, especially to investors trying to manage a portfolio of properties.

There's a lot of potential for gradual adoption of this platform if Porch can keep up momentum in terms of adding companies to all the categories. And the contractors, moving companies, and telecom providers need an alternative to the phone directory. Grumble as they may, an online directory is a pretty good way to get exposure.

Competitors in the space

As far as home improvement matching platforms go, HomeAdvisor (NASDAQ: ANGI) is the big one. It's been in the space for a long time, and Porch isn't going to outdazzle it in the immediate future. Thumbtack is a trusted source for handymen, small movers, and other quick jobs that may be totally unrelated to home improvement. People have learned to search Thumbtack for makeup artists, dog walkers, and much more -- which adds to its business but dilutes its home improvement focus.

Porch differentiates itself with curation of end-to-end moving service coordination, security comps, and other housing-adjacent capabilities. Everything the company offers is targeted to improve the process of moving to a new home and setting it up.

The downsides of Porch include that its free content is positioned almost behind the customer-matching lead capture and that it's not at all visual. For interior decorating and design inspo, people won't be leaving Houzz for this site.

The bottom line

Homeowners who live on-property, as well as investors looking to renovate, can likely find value in Porch's service. Other platforms offer home improvement connections, but not with a focus on key moving components. The defining feature of Porch is its focus on the first part of the move-in process.

Move-in has always been infamous for service providers that grab people while they're vulnerable and squeeze the money out of them. Porch seems to put some guardrails around things -- which may anger the businesses, but probably not homeowners. This is why the stock is a buy and hold. Businesses won't delete their listing even if angry, but first-time homebuyer clients could easily become repeat clients if they come to trust and rely on Porch information.

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