Homejoy

Homejoy was an on-demand home cleaning marketplace that raised $40M. The company grew rapidly through aggressive Groupon-style discounting—offering $19 cleanings that cost $40+ to fulfill. Once promotions ended, customer retention plummeted. Meanwhile, both customers and cleaners had incentives to transact off-platform to avoid fees. The company also faced a misclassification lawsuit (contractors vs. employees) that threatened to significantly increase costs. Homejoy shut down in 2015, unable to solve the retention problem or the economics of its marketplace. The lesson: growth built on unsustainable discounts is illusory—you're renting customers, not acquiring them.