Last week, as part of its ongoing effort to court the interior design industry, Houzz announced it had purchased the project management software company IvyMark for an estimated $30 to $40 million. On the surface, it seemed a relatively minor acquisition for a company that, just eight months earlier, had raised another $400 million in venture capital, reportedly bringing Houzz’s valuation up to $4 billion.
The news was met with a strong reaction, however, by many in the interior design community. It brought into sharp relief the challenge that Houzz is facing, in some circles, of winning over designers.
Launched a little over a year ago, IvyMark had quickly become a trusted resource for some 2,400 interior design professionals. It was a place where designers stored their client contracts, purchase orders and preferred vendor lists. Now, without warning, it was sold to a company that some in the design industry fear is evolving into more of a competitor than an ally.
Once more of a Pinterest-like site, where consumers would scroll through inspirational images to find ideas from their homes and connections to design professionals, Houzz has transitioned itself into an e-commerce giant. Boasting more than 10 million products available for sale from more than 20,000 sellers, it often uses images originally supplied by designers and architects to promote their work, to help market and sell products to consumers.
At the center of much of the anxiety is a technology that Houzz created called Visual Match. It can scan an image of a room setting and identify products that are similar to those in Houzz’s database of merchandise. Once a matching sofa, for example, is identified, a tag is placed on that item within the image. When a visitor to the site scrolls over the tag, an array of sofas available for purchase are shown below the image.
Many designers are dismayed by the use of their photographs for this purpose. Some feel the items shown are often a less-expensive version of what was actually used in their project or that this technology competes against them and their service.
Houzz co-founder and president Alon Cohen responded to this issue last week, saying, “We hear you on the tags that are displayed on photos. As a result, we’re making a change to the way photos are displayed and hiding the tags whenever a designer’s photos are displayed to homeowners in their local area. We hope that this, in addition to our partnership with Ivy, will help demonstrate our commitment to the needs of the trade.”
Because part of what Houzz purchased from IvyMark was specific client and project information that designers had entered into IvyMark’s software program, there were concerns that this information would be used to target or sell to designers’ clients directly. Cohen responded, “Now I’d like to address the concern that Houzz will use the designers’ client information in Ivy proposals/invoices/POs to market similar products to their clients. Let me be clear: We will not do that. Period. Not in emails, not in phone calls, and not in ads. Our goal is to help you grow your business and become more profitable by streamlining your operations.”
IvyMark’s co-founders were also eager to address the concerns that some of their users had regarding the sale to Houzz. When asked why Houzz wanted to acquire Ivy, they wrote, “Houzz knows it needs to do more to support designers. Providing a tool like Ivy and making it even more powerful for designers is important to Houzz because it wants designers to truly see Houzz as a source of support and growth, which has always been part of their mission. There is work still to do for Houzz on that front.”
It is easy to understand how Houzz’s massive scale and some of its more aggressive sales tactics have caused some to fear its place in the design industry landscape. Perhaps this acquisition of IvyMark is Houzz’s best chance yet to show many in the industry that it truly does wish to be partners. Certainly, responding directly to designers’ concerns, as it has done recently, is a promising place to begin.