TaskRabbit: Your Retinue of Errand Runners
How TaskRabbit overhauled its matching system to better align its operational and business model
TaskRabbit is an online and mobile marketplace that matches users, who have errands and tasks that need doing, and taskers, pre-approved contractors in the area who complete the task. Boasting over two million users, TaskRabbit provides income for over 25,000 people, 10% of whom perform tasks as a full-time job and earn $5,000 – $8,000 per month. (1) In response to deficiencies in the operating model, TaskRabbit revamped the marketplace to bring closer alignment between the operating model and the firm’s value capture.
An Evolving Operating Model
1) TaskRabbit users submit tasks and specify the maximum amount they would be willing to pay to have the task completed. Tasks range from moving help to shopping & delivery. Once a task is submitted, interested taskers enter an auction and bid for tasks. The task submitter then selects the tasker of his choice who participated in the auction. (2)
2) In 2014, TaskRabbit uncovered an alarming trend: despite growth in both users and contractors, the percentage of completed tasks on the site’s marketplace was on the decline (3). Users found themselves unable to choose appropriate price ceilings for tasks, while taskers were spending large amounts of time searching for tasks. (3) In response, TaskRabbit overhauled its matching system, moving from a manual auction system to a fixed-rate services-on-demand system (4). Under the new system, the four most common tasks (handyman, housecleaning, moving, and personal assistance) are given standard hourly rates, and a matching algorithm weighed a tasker’s prior behavior, skillset, and schedule to present the three most appropriate taskers to a user (2). Taskers are expected to be ready on-demand, and the algorithm reassigns the task if it is not committed to within 30 minutes. The aim of this change was to increase the volume of completed tasks, a metric by which TaskRabbit generates revenue.
Business Model
TaskRabbit derives value from the marketplace by charging users a fee for booking a task. The service fee constitutes 30% of the payment from a user. For example, for a $100 task, the tasker receives $70, which TaskRabbit receives $30. (6) To prevent disintermediation, whereby a user directly contacts a tasker to circumvent the service fee, TaskRabbit lowers the fee if a user contacts the same tasker for the same work. (6)
Conclusion
The revamped matching therefore complements the business model in two ways: first, by simplifying the matching system and reducing the time requirement from both the supply and demand side, TaskRabbit can drive a larger volume of completed tasks; and by setting a fixed rate on common services, TaskRabbit creates an effective floor on the dollar value of a given task and avoids a “race-to-the-bottom” result from taskers undercutting each other for tasks and eroding value capture for the company. TaskRabbit’s revamp is an example of a live business instituting dramatic change to more closely align its operating model with its business model.
Sources
(1) “How TaskRabbit Works: Insights into Business & Revenue Model” Juggernaut Powering On Demand Apps. Web. 10 Dec. 2015. <http://nextjuggernaut.com/blog/how-task-rabbit-works-insights-into-business-revenue-model/>.
(2) “Following A Drop In Completed Jobs, Errands Marketplace TaskRabbit Shakes Up Its Business Model.” TechCrunch. Web. 10 Dec. 2015. <http://techcrunch.com/2014/06/17/following-a-drop-in-completed-jobs-errands-marketplace-taskrabbit-shakes-up-its-business-model/>.
(3) “TaskRabbit Is Blowing up Its Business Model and Becoming the Uber for Everything.” The Verge. 17 June 2014. Web. 10 Dec. 2015. <http://www.theverge.com/2014/6/17/5816254/taskrabbit-blows-up-its-auction-house-to-offer-services-on-demand>.
(4) “TaskRabbit Workers Receive a Useful Lesson in Capitalist Exploitation.” Salon.com. Web. 10 Dec. 2015. <http://www.salon.com/2014/07/24/taskrabbit_workers_receive_a_useful_lesson_in_capitalist_exploitation/>.
(5) “What Is the TaskRabbit Service Fee?” TaskRabbit Support. Web. 10 Dec. 2015. <https://support.taskrabbit.com/hc/en-us/articles/204411610-What-is-the-TaskRabbit-Service-Fee->.
Thanks for this post! TaskRabbit is a great example of a company shifting their operating model to more effectively support the value that their business model attempts to create. For me, TaskRabbit’s operating model change also illustrates the benefits of an iterative approach where a company is continuously refined through design thinking (i.e., divergence and convergence). By starting with an unlimited universe of potential tasks (i.e., divergence), TaskRabbit was able to collect data on which tasks were the key value drivers for the business (e.g., highest demand, most profitable, easiest to manage internally, etc.). From there, TaskRabbit could converge on the handful of highest value tasks (in this case: handyman, housecleaning, moving, and personal assistance) and refine their business and operating models accordingly. Going forward, it will be interesting to watch if the company enters another period of divergence in pursuit of additional task lines to drive future growth.
Thomas, great post. Another example of the sharing economy. Very well laid out the business model. However, I wonder if tis business model is sustainable given its decreasing demand for its service and lots of complaints by its costumer’s regarding service quality.
Thomas, I enjoyed this post on TaskRabbit. I think they have a great product in an industry that is pretty hot right now. My only questions on Task Rabbit are about the future.
Because this operating model is so easily replicable, there is currently a land grab between these same kinds of on-demand services. You have everything from direct competitors who attempt to complete a diverse range of tasks like TaskRabbit, to more specialized players who focus on laundry for example. TaskRabbit benefits from density in a market. The more taskers there are in an area, the lower they can pay the taskers and the faster they can get the tasks done. This high level of competition, paired with the positive effect of density makes it really important that TaskRabbit control a market. In order to own a market quickly, you see players like TaskRabbit providing discounts and promotions, and burning venture funding to do so. But, in the long run, once prices rise is the convenience of a TaskRabbit going to be worth the true cost to customers?
It’s really interesting to see a relatively successful startup willing to change key components of its business and operating models. I wonder if the inspiration for change originated from the entrepreneur or from the board/investors putting pressure on company leadership. The new operating model certainly simplifies pricing and improves matching. Although I’ve never used the service, I would imagine finding it much easier to simply choose a TaskRabbit willing to do the task at a set rate. It reminds me of eBay’s shift from focusing on auctions to fixed-priced listings.
Thomas – thanks for posting. A few questions: there are several “tasker” apps/services out there. How does TaskRabbit differentiate itself from these other services? In addition, could you please elaborate on the percentage of completed jobs prior to and after its operating model change? I would hope that the task completion percentage is now near 100%; if I used TaskRabbit (which I never have), and the task was not completed, I don’t think I’d ever use it again. Adoption through trialability and user satisfaction will keep this service going. Just curious if the new model has maximized completion. Thanks.
Nice posting Thomas! I’m wondering couple things however:
1)is the fixed rate only applied to common errands? for example if i want somebody to help me propose to my girlfriend, what would be the price for that? In other words, I’m curious about how do we define the market price for nearly countless tasks and how much customization vs. standardization of the pricing mechanism TaskRabbit should provide.
2)if fixed rate is applied to every errands, would that be a better/convenient approach, at the possible expense of failing to capture the additional value by price discrimination?
3)for the price competition part—am wondering is the price the only criteria users adopt to choose their taskers? is there review / reference mechanism so that quality could also play a role to differentiate the taskers?
4)the disintermediation prevention—i would assume the lower price would still be higher than direct contact as long as the commission fee isn’t zero. How to prevent disintermediation in that situation?
Very intersting. Previous comments asked many of my questions. How was 30% fee recieved by users? Was inefficiency in operating model the most of the issue in decreasing in task/user?