Both consumers and contractors can feel cheated by online "recommendations"
Homeowners often complain about online platforms that claim to have competent handymen and contractors eagerly waiting to do whatever needs doing around their house. The results are often less than satisfactory and homeowners understandably feel misled.
It goes the other way as well. Many service providers say they have paid hefty fees for leads that turned out to be worthless. The Federal Trade Commission investigated the complaints and now HomeAdvisor, also known as Angi's, has paid more than $3 million in refunds to irked businesses.
It gets a little confusing, since – like so many people today – Angi has a lengthy family history. The service started out around the turn of the century and was known as Angie's List, positioning itself as a cyber version of the helpful lady next door who just seems to know everybody.
The modest little venture grew quickly and took on new business partners and shareholders. With age came bulk and soon it was thought it needed to slim down slightly to keep its edge, so Angie's List became Angi (no "e" and no list. Then Angi moved on to an entirely new life, setting up housekeeping with HomeAdvisor and more or less kicking the Angi persona to the curb.
Pay to play business model
Along the way, Angi – like so many consumer sites – shifted its business model from consumer subscriptions and advertising to referral fees. After all, consumers are reluctant to pay anything for information and when they do, it's generally only a few dollars a month.
Businesses, on the other hand, will pay relatively substantial fees for a solid lead, one that leads to a job that bills out several hundred or even a few thousand dollars.
This has become an inconvenience for consumers – since the "recommendations" from online sites tend to be based at least partly on pay to play, meaning the handyperson pays to be listed as a trusted professional and then pays again when a consumer is referred to them.
This can get expensive, as I realized one day several years ago when I was looking for somebody to install some new windows at our Long Island beach condo, known to friends and associates as the "Closet by the Sea." It was pretty small, in other words, with just a handful of windows.
In filling out my service request, I failed to convince whichever platform I was using that the windows were for Long Island, New York, not Northern Virginia, where Google insisted I was located.
An eager contractor called up and said he could be there faster than soon. But when he learned the job was on Long Island, the air was filled with curses since he was in Northern Virginia, a few hundred miles away.
"This is going to cost me $80," he fumed. "This happens all the time and it is really getting old." I got a similar earful from a few other unhappy Virginians.
[Disclosure: I am the founder and ex-CEO of ConsumerAffairs.com, an online news and review site. During my time there, we relied on advertising to pay the bills, along with occasional grants from consumer organizations and attorneys. I no longer have any financial stake in the site].
You may say it's just too bad these things happen and that contractors need to take the good with the bad. But of course, a non-productive expense adds to a business' overhead and, one way or another, raises costs for consumers or limits their choices when cash-strapped businesses go under.
"False, misleading, unsubstantiated"
As a corrective measure, the Federal Trade Commission said today it is sending 110,732 checks, totaling $3 million, as refunds to businesses that paid for memberships to HomeAdvisor and is also sending claim forms to businesses that are eligible for additional refunds.
The refunds stem from the allegation that HomeAdvisor used deceptive marketing tactics when selling home improvement project leads to service providers, including small businesses operating in the “gig” economy.
The FTC’s March 2022 complaint alleged that since at least mid-2014, HomeAdvisor made false, misleading, or unsubstantiated claims about the quality and source of the leads it was selling to home service providers in search of potential customers.
The agency also charged that HomeAdvisor told businesses that their annual membership would include one free month of mHelpDesk, an optional scheduling and payment processing service marketed by HomeAdvisor, but in reality the company charged an additional $59.99 for the first month.
The agency is also sending 91,273 claims forms to businesses that paid for mHelpDesk. The deadline to submit a claim is February 26, 2024. More information about the refund process is available at www.ftc.gov/HomeAdvisor or by calling the refund administrator, Rust Consulting, Inc., at 1-833-915-1144. The Commission never requires people to pay money or provide account information to get a refund.