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Angie’s List Anticipating Tough Competition From Amazon

Posted on Friday, Jun 27th 2014

A study conducted on online review sites last year found that 25% of the users believe that the information available on review sites is unfair. While some of the older sites are believed to be more trustworthy, more than a third of the consumers were still cautious about information on these sites.

Angie’s List’s Financials
Despite this mind-set, local review site Angie’s List (Nasdaq: ANGI) is managing to improve their financial performance. Their first quarter revenues grew 39% over the year to $72.7 million, marginally ahead of the Street’s projected revenues of $72.3 million. Net loss per share fell from $0.14 a year ago to $0.06 during the current quarter.

By segment, service provider revenues grew 45% to $54.4 million as it continued to benefit from the growth in advertising revenues. During the quarter, Angie’s List saw advertising revenues improve 46% to $48.1 million while e-commerce revenues grew 34% to $6.3 million. Membership revenues improved 25% to $18.3 million.

Among other operating metrics, total paid memberships grew 35% to 2.63 million while gross paid memberships improved 4% to 286,626 accounts.

Marketing expenses continued to increase, albeit at a slower pace. Total marketing expenses grew 19% to $3.8 million.

For the current quarter, Angie’s projected revenue of $79.5 million-$80.5 million, ahead of the Street’s projected revenues of $79.1 million. Analysts believe that the improved performance is attributed to the success of their new pricing structures that they were experimenting with in the earlier quarters.

Angie’s Growing Competition
While Angie’s List continues to invest in product improvement, the market they are in is getting tougher. Recently, Amazon announced plans to expand their presence in the local market segment. Amazon has announced that they plan to launch a local online review service later this year. Amazon is looking to release a marketplace for local services that will make it compete directly with the likes of Angie’s List.

To counter this competition, Angie’s List is continuing to add products and services to their offerings. They are currently working on a Snapfix mobile app that will let users take a photo of a project or provide a brief description of the job and Angie’s List will present a quote from a top-rated service provider. Once the user agrees to the quotes, they can schedule the work and accept payment on the app directly and even monitor the progress of the transaction.

However, despite the improvements in their offerings, analysts aren’t convinced with Angie’s model. Some believe that their business model is flawed because reviewers have to use their real names, which discourages them from giving negative feedback as they fear that they will be exposed to “potential harassment from businesses.

Angie’s stock is trading at $11.98 with a market capitalization of $700.96 billion. The stock touched a 52-week low of $9.60 in May 2014 and a 52-week high of $28.32 in July 2013.

Dark days ahead!


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