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 Similar to their strategy with caregivers, Care.com originally made the service free until they amassed a sufficient number of users.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.
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.