Angie's List business model in doubt

Is the stock's recent pullback a buying opportunity, or the start of a breakdown as it struggles to compete with free rivals like Yelp?

By Stock Traders Daily Sep 5, 2013 2:52PM

Bathroom remodeling (c) Digital Vision, PhotolibraryBy Neal Rau, Stock Traders Daily

 

Shares of Angie's List (ANGI) plunged  as much as 16% after the company disappointed Wall Street with its second-quarter earnings report in July.  The company lost 25 cents per share, which was an improvement from last year's 41-cent-per-share loss.


The stock is up 117% over the past 12 months, but has now fallen over 25% since July 1. So, is the recent pullback a buying opportunity, or the start of a downtrend in the stock?

 

Angie's List spends about 80% of its revenue on sales and marketing, and charges for its services, while competing against Yelp (YELP) and IAC's (IACI) Home Advisor, both of which offer similar services for free. As a paid service, Angie's list has a much lower subscriber growth rate and fewer unique visitors. To give you an idea, Angie's List has just recently reached 2 million subscribers after 18 years of doing business. Yelp added almost 3.5 million reviews last quarter alone.


Of course, Yelp offers a much broader range of reviews, and not just services. Yelp averages 108 million unique visitors each month, and about 32% of those are from mobile. During the second-quarter conference call, Yelp's CEO cited a study by Nielsen that found that when consumers find a local business on Yelp, 89% make a purchase within a week. Angie's List will need to find new ways to compete with impressive numbers like that from competitors. 


Shares of ANGI recently broke below support based on the report offered by Stock Traders Daily, which has now converted to resistance, and the stock is currently sitting below converted resistance accordingly.

 

Angie's List acquired start-up SmartHabitat for $2.65 million in an effort to transform local service and improve user experience. The company said it plans to build a new platform that will include web, mobile and call centers. The new tools and interactive content will allow the company to provide a more customized experience for members, tailored to their specific interests. Angie's List is betting that the consumer will chose premium features and reviews for a cost, over a higher volume of reviews for free. That's fine, but the company is not profitable and carries about $14 million in debt -- so it can't afford a misstep.

 

Angie's List has been able to increase the subscriber count by decreasing membership fees in the past, but the company also raised service providers' participation fees at the same time. Over the past 3 years, quarterly revenue per subscriber decreased 34%, while revenue per service provider rose 64%. Service companies might consider paying for ads on Yelp or Google if fees become unreasonable.

 

If the company continues to operate with an older business model, Angie's List will have to find innovative ways to compete with free services like Yelp and HomeAdvisor. And if it struggles to find new ways to add subscribers and revenue there will be pressure to reduce prices to consumers.


The stock is still up over 75% year to date, but since making all-time highs in early July, shares have fallen sharply. According to the real time report offered by Stock Traders Daily, long-term support has just broken lower, which raised sell/short signals. As long as the stock remains below long-term support (now converted resistance), we expect shares to trade lower.


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135Comments
Sep 5, 2013 4:57PM
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Before I retired, I ran a very successful handyman business that had a 98% repeat business rate, most of which were ongoing continuous customers.  I came highly recommended, and got my new  business through word of mouth.  I never got written up for anything wrong or negative.  Because I did not get on Angie's List or any others, I, and many others like me, were cast as "unknown" or "risky" businesses.  That is patently unfair.  Their ads are misleading and damaging to honest and professional businesses.  People should know that there are plenty of great business people out there who may never make these lists, and that their absence is not an indicator of poor performance.
Sep 5, 2013 4:08PM
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I thought a business couldn't pay to be on Angie's List, that they were listed only because of reviews made by subscribing customers.    Then I get the Angie's List magazine and it is full of businesses advertising their services.  I cancelled my one-time subscription because either I didn't understand fully the business model or Angie's List is not competely straightforward about the whole set-up.
Sep 5, 2013 5:04PM
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When I found out angie charges a subscription fee, I blew it off.
Sep 5, 2013 5:23PM
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I paid for one year.  During that time, I never had any luck with the vendors listed.  Either they never returned my call, or when I did try to actually use one, they were horrible.  When I rated them with an F, the owner was given my phone number so she could call and ask me to changed my rating.  I will never pay to use that site again.  Total waste of money.   
Sep 5, 2013 5:08PM
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Angie's list is a rip-off. come on people be smart everything is word to mouth just ask people,and always get three quotes for any job! 
Sep 5, 2013 4:13PM
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Another seemingly prudent idea that began legimately(?) and eventually falls into a quasi- fraud model.

 

Not disappointed/surprised anymore.

Sep 5, 2013 5:41PM
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i think its a joke people can make false claims and ruin yer business angies list needs a bad review
Sep 5, 2013 6:20PM
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I did not like Angie's list for several reasons.  Anyone and everyone can ( AND DO) post false comments regarding "complaints" or "compliments" whether customer or business.  Happens on other sites as well.  I know many business owners that do this routinely. They often ask employees, relative, friends to post how great they are.  Some will even put false complaints about competitors.  

 

If there is a complaint against a business there should be a clear and concise way for that business to put a reply or "the other side of the story" on there.  Try finding it on Angie's List.  Its literally buried if there at all.

 

I understand their business model is about wanting to inform consumers etc.  But how do you know what is and what is not a true review or problem?  I've seen people in my profession, for instance, that I would NEVER seek services from.  Yet they seem able to routinely get noted as wonderful on Angie's List.  A true consumer forum MUST have both sides of the story and the resolution of a problem.  Being "one sided" is helping no one. 

 

Lastly, Angie's List is expensive to join and I just didn't feel I got anything of value from it. There can be many reasons why one person will like a particular business or service and reasons why another person won't.   

Sep 5, 2013 3:46PM
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why use angies list just ask your friend.  if you pay your money you can join angies list as a business.
Sep 5, 2013 7:42PM
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Thank goodness an article like this FINALLY comes out!  Angie, and her so called "list", is a stupid, faddy, type thing that's simply useless, and more importantly, largely fraudulent! I cant add much more that hasn't already been said here, but I certainly wanted to stress my opinion, and add my two cents worth here. This has just been a gimmicky get rich quick scheme orchestrated by this Angie Hicks woman. Time for her and her useless list to go. You're a FOOL if you participate in this crap. Nothing but fraud, smoke, and mirrors, and payola.
Sep 5, 2013 4:32PM
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it's true you cant pay to be GET on the list, but once your on they charge you for your placement on the lists it becomes a merry-go-round, you pay to be first on the list, then they go to another company on the bottom of the list and say if you want the #1 spot you need to pay this amount then they go to the next company and the next company and so on, they also have other way to keep charging you to remain on their site
Sep 5, 2013 4:44PM
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How dumb am I, I thought Angie's List was free ... DUH!
Sep 5, 2013 8:23PM
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I subscribed to Angie's List for a year.  At one time, they offered a free gift if I posted a review in a certain category.  I did just that, and after three months, I still didn't see any free gift at my door.  When I contacted Angie's List several times over the next few months, there always seemed to be a myriad of excuses as to why my gift wasn't sent.  It wasn't the gift, but the IDEA that they promised something they couldn't deliver. I thought of giving Angie's List a poor review as a business that didn't provide what they promised, but I'm sure it never would have been posted.  I cancelled the subscription after the year was up, and told them exactly why I no longer wanted to subscribe.
Sep 5, 2013 7:26PM
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All one has to do is call the Better Business Bureau to get information,  for home improvement, one only has to visit a Lowes or Home Depot in commercial sales to get names of reputable contractors...It's no that hard to find out..These venues will not cost you anything...


Sep 5, 2013 6:24PM
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I worked for a heating contractor in Monroe WA, who asked his employees to write positive reviews on Angies List so that he had some good reviews about his company.
Sep 5, 2013 7:21PM
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angie is a crook herself and I hope her list gets thrown in the trash where it belongs.

Sep 5, 2013 7:20PM
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Angie has blown through way too much money just trying to sell the product.  Owners should sell, sell, sell!
Sep 5, 2013 5:05PM
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Angie list is a fad. Have you seen the people in their commercials...sheesh...

Kind of embarrassing to part of that gay goofy train.....

Also Angie list is for dumb people who don't have any friends and don't know

how to use a phonebook.

Sep 5, 2013 6:18PM
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yelp is horribly dishonest and good reviews are often bought or planted.
Sep 5, 2013 11:50PM
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Someone should investigate Angies List. I have been a plumbing contractor on Angies List for years. I have the highest rating. I don't pay to be on the list. But I get called every week to try and get me to pay Angies List hundreds of dollars a month in order to get higher on the list. I could be the worst plumber in town and get placed higher on the list if I am willing to pay lots of money. Is that how it is supposed to work? I have lots and lots of positive reviews. A1 rated. But you would have to scroll down a long ways to find me. The contractors in front of me pay to get moved up the list. You won't here Angies List advertise that. They just say that no one can pay to "get on the list". You do have to pay plenty to be on the list where anybody can find you. If you want to use Angies list to find a good contractor or anything else. Do not use the people on the top of the list. 
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