Small Business

What It Takes to Build Credibility

How renovator-review website HomeStars stuck to the conviction that only homeowner trust could bring in the contractor dollars

Written by Kim Hart Macneill

Nancy Peterson had climbed way out on a limb. She had quit a well-paying job in marketing and invested her savings, plus money from friends and family, to launch a website for homeowner reviews of renovators. But it helps if a review site has reviews. And HomeStars had just 300—far too few to get contractors to pay for premium listings, the site’s sole revenue source.

So, while exhibiting at the 2006 Metro Home Show in Toronto, Peterson used a primitive method to attract the comments she needed to drive traffic and sell ads: “I stood in a booth getting homeowners to write reviews on paper,” she says, “because an Internet hookup at the show was too expensive for me back then.”

One potential investor said he’d invest only if HomeStars dropped negative reviews. “I had to laugh,’ says Peterson. “I said, €˜Well, what’s the point, then?’ We had to stick to our guns and grind it out.”

From that shaky start, Peterson, as her firm’s CEO, built HomeStars into the go-to reno-review site for Canadians, with more reviews and contractor listings than any other reno-review portal in the country. Today, HomeStars lists almost two million home-improvement companies across North America and features reviews from 72 Canadian and 241 U.S. cities. The firm’s five-year revenue growth of 902% ranks it No. 28 among Toronto’s Fastest-Growing Companies. In the process, Peterson has learned how to attract the critical mass of users essential for online success, build credibility and serve one group while getting all her revenue from another.

View the full list of Toronto’s Fastest-Growing Companies

Peterson got the idea for HomeStars when she had her own home renovated and struggled to figure out which tradespeople would do a good job. People she knew could recommend contractors, but couldn’t speak to their consistency. Few contractors had websites, and Yellow Pages ads were uninformative. Peterson liked reading travellers’ reviews on TripAdvisor, and looked for a home-reno equivalent. But the leading site, Angie’s List, was U.S.-focused, required homeowners to become paid members to read reviews and didn’t included detailed listings of the reviewed contractors’ services. Peterson saw an opening for a Canadian site that would be free for homeowners and generate all its sales from contractors’ premium listings.

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But first, she needed some reviews. At the Metro Home Show, she won over visitors with a promise that HomeStars would scrupulously ensure that its reviews of contractors were honest and legitimate. And she tapped into the trait that has driven the phenomenal growth of social media: people love to share their experiences. By the end of the trade show, Peterson had hundreds of new reviews. “We had such a positive response,” she says. “That kick-started everything.”

Through other home shows and “tell a friend” online drives, Peterson soon landed thousands of reviews. Contractors began paying to post enhanced listings on the site—initially, at a tryout rate of $350 per year, and now for $1,800—featuring photos, detailed information and appearances in multiple categories. In 2007, with sales surging in the GTA, Peterson decided to expand into a second market. She chose Boston because it was a hotbed of venture-capital activity at a time when that financing source was moribund in Canada.

It wasn’t a smooth venture. One VC Peterson talked to insisted she find a co-investor, then left the deal in limbo for six months. Another said he’d invest only if HomeStars dropped negative reviews, which he contended turned off advertisers. “I had to laugh,” says Peterson. “I said, €˜Well, what’s the point, then?’ We had to stick to our guns and grind it out.”

As well, Peterson soon realized that she’d need a local sales team in Boston, because most contractors are wary of buying from non-locals. She’d also need to do an expensive recoding of her site, after it turned out that the original architecture wasn’t scalable. Without new investors, she couldn’t afford either, so she made a tough call.

Although she worried that abandoning Boston might hurt HomeStars’ credibility with potential investors, she was more concerned about what she would say to her existing investors if refusing to retreat bankrupted the business: “I didn’t want to look anybody in the eye and say, €˜I’ve lost all your money.'”

Stuart MacDonald, founder of the Cana-dian offshoot of U.S. travel site Expedia and a Toronto-based investor focusing on online properties, says this retreat was a wise move. “Global players based in the U.S., Europe and Asia are doing big things, but no one really thinks about us here in Canada,” he says. “There was an opportunity for a Canadian player to build something great to service this market and then grow from there.”

By 2008, HomeStars had turned a profit, helping it to secure angel investment, and hired content and sales teams to expand into Calgary and Vancouver. (The firm makes almost all its sales using local reps, but contractors in some markets sometimes approach HomeStars to buy a premium listing.) The company has since expanded into Ottawa and Edmonton, and has other markets in its sights that it won’t reveal.

MacDonald says HomeStars’ reputation as an honest review site has been key to its growth: “There’s an authenticity and sincerity that is very apparent.”

But review sites can quickly lose credibility if they run too many suspect reviews, so HomeStars goes to great lengths to root these out. Unlike Yelp or Google+, HomeStars has human content managers who read every review before it goes live. If a review looks iffy, a manager contacts the homeowner and contractor for proof—such as scanned bills, photos, cancelled cheques or email exchanges—that the two parties have done business together. HomeStars also investigates if anyone flags a posted review that reads as if the contractor wrote it, or if a contractor claims a review is by someone who wasn’t a customer.

HomeStars president Brian Sharwood, who sometimes works on the verification team, says many homeowners are surprised to hear from the website’s staff: “We’ll get a note back: €˜You actually cross-checked your reviews. I trust the site even more now.'”

Sharwood says HomeStars must genuinely serve homeowners’ needs in order to attract the eyeballs that contractors are keen to reach: “If we were to take our focus off homeowners and start building things for contractors, we’d become a lot less useful for homeowners.”

HomeStars sometimes has to push back when contractors want special treatment. “They’ll ask us for placement on the top of the page,” says Sharwood. “Or they’ll email us, saying, €˜My customer said this about me, so you can just post it.’ We tell them we can do that only if we talk to that customer directly.”

HomeStars is extending its homeowner focus into mobile apps. This fall, it launched Ping, an app that helps homeowners who try to book projects through its site but don’t hear back from busy contractors. Homeowners use Ping to enter project details, get a list of the top-ranked contractors for the services they’ll need and contact them through the app. Contractors receive a text about this inquiry, and with one tap can accept or decline the project.

Peterson says HomeStars is planning other “homeowner intelligence services” as part of a push to build a strong brand nationwide. “We’re always thinking about what we can do better,” she says, “because there’s no pinnacle, there’s no €˜We’re done.'” One likely offering: a pricing tool that informs homeowners about, say, the average cost to build a deck in Toronto or to install windows in Calgary.

As with HomeStars’ other services, homeowners will use the new ones only if they believe they’re getting the straight goods. Asked for his best advice for other review sites, Sharwood says they need to convince potential users that there are people behind the site, not machines. He shakes his head at how many sites don’t get this: “You scroll through and you can’t even find the names of the people running it.”

HomeStars goes the other way, featuring photos and bios of its executive team, and even the bios of its board of directors and advisors. “The biggest thing you need to do is to gain trust,” says Sharwood.

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