Calling All Babysitters & Nannies
Care.com is a two-sided marketplace that matches caregivers to people seeking care. Think babysitters, nannies and more. They have managed to become the world’s largest online care destination servicing 9.5 million members in 16 countries.
How they scaled
When Care.com started, there was already a dominant player in the space who had amassed a network of care seekers and caregivers. In order to compete they had to scale quickly. Since Care.com experienced cross-side network effects between two types of users, they needed to figure out how to acquire both user types. What made it even more challenging was value was created not only by having more users, but specifically by having more local users. If I live in Boston and there are no babysitters in Boston, then the service offers me no value. To address this, they focused on acquiring caregivers in local markets first through horizontal segmentation.
They also made it free for caregivers to sign up to reduce any risk of joining. Because there are no multi-homing costs for caregivers, they were able to get users that were also using competitor services. Once they had attracted ‘enough’ caregivers, they shifted their focus to the other side of the market—people seeking care. Similar to their strategy with caregivers, Care.com originally made the service free until they amassed a sufficient number of users.
At that point, Care.com wanted to start to capture value for their service. They were providing a platform to not only find babysitters and nannies, but also to seamlessly run background checks and read reviews to ensure quality. In return for this value created for users, Care.com charged a monthly subscription fee in order to monetize their services. They also were able to monetize other aspects of the business, even moving towards a model that allows them to capture value from the caregivers through initiatives such as preferred placement in search results.
Challenges
While Care.com has managed to scale and surpass all other competitors in creating the largest network, they still face two ongoing network effect challenges as they attempt to hold the #1 position. First, they strive to maintain an ‘attractive’ ratio of caregivers to care seekers. They aim to have 5x the number of caregivers on the site to allow for 
babysitter options, since the care seekers are the paying user and having these options is part of the value creation.
Additionally, if the service is successful—meaning users are matched with caregivers and thus no longer need help finding care—the network would lose two users. Care.com needs to constantly replenish its user base to account for the cyclical behavior of finding childcare. We see this concept of cyclicality with other services like TheLadders.com or Match.com. Since this is not a winner take all industry, It will be interesting to see if Care.com can hold its place as market leader or if these challenges will allow for a new entrant to knock them off their childcare matching throne.
Great post, really interesting! I wonder if there are creative ways Care.com can employ to keep replenishing its user base. For instance, to get a large supply of caregivers, perhaps it can advertise at local businesses or schools where graduate students are studying and may need supplemental income, or it can target advertising to graduates of early childhood development programs. In order to continue to generate a large number of paying users, perhaps it can target advertising at preschools, day-care facilities, or even tap into the small business network of home day-care centers or play centers.
I also wonder if their model of charging users will continue to work or if they will be upset by a new, free service, or perhaps a service that only charges a referral fee if you try out the nanny/babysitter and successfully decide to move forward (instead of the subscription model). This might be a more palatable way to charge the consumer. Additionally, in order to continue to achieve success, Care.com might want to look into more ways to transfer some of the operational burden of reviewing, rating, and background checking the caregivers from themselves onto the caregivers (i.e. making caregivers provide necessary documentation, etc instead of doing it all themselves). I’m also curious to know what happens if a nanny/babysitter provides false information and the care seeker is unsatisfied – does Care.com play any role at that point?
Thanks!
DB – this is a great post. It’s amazing to see how successful Care.com has been and I like how you tied in a lot of what we are learning in class to this case study. I am assuming Care.com was not the first organization to try to connect people with nannies, care-givers, etc. If that is correct would you attribute most of Care.com’s success to its ability to harness the power of network effects? Or, is it just a better/differentiated product and network effects allowed them to scale more effectively?
I would also be interested in hearing your thoughts on how Care.com can address the challenges you described above. If you worked there would you be REALLY concerned, or just “a littler weary” of the threat of new entrants?
Really interesting post! Can’t wait to read your next one.
This is a great post! I really liked how you clearly outlined the way Care.com scaled its business. Your post incorporates many concepts from class as well. My initial reaction is that I would be extremely skeptical of using this service despite the background checks. I find that word of mouth would be a more effective way to find someone to take care of my children. Do you think there are any additional measures Care.com could take to make users like me more comfortable with the service beyond background checks? Maybe Care.com could create some kind of proprietary tracking device/camera that would allow parents to know when/where child/babysitter are located 24/7.
But that being said, I understand that others might not feel that way. I am concerned that when the “service” is successful it means that the platform is eroding its base. While you can make the argument that depending on the TAM and the resulting attrition rate, this business model might be similar to other successful marketplaces. I’m also surprised that this service has not been provided before? The barriers to entry seem relatively low and the business model is easy to replicate. Have other similar marketplace platforms like this failed? If so, how is Care.com differentiated from those existing or prior failures?