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Angie’s List Up For Sale?

Posted on Monday, Dec 15th 2014

According to local review site researchers, nearly half of all local searches happen on local directories and mobile apps. The researchers have also found that 72% consumers trust online reviews as much as they would trust a personal recommendation from a real person. The strength of the local reviews market is improving competition in the industry.

Angie’s List’s Financials
Angie’s List’s (Nasdaq: ANGI) third quarter revenues grew 24% over the year to $81.3 million, falling short of the Street’s projected revenues of $81.7 million. The company continues to suffer losses and reported losses of $0.08 per share, falling short of the Street’s projections of losses of $0.05 per share.

By segment, service provider revenues grew 30% to $63 million and membership revenues improved 7% to $18.3 million. Service provider revenues include advertising revenue, which improved 33% over the year to $56 million while e-commerce revenues increased a modest 9% to $7 million.

For the current quarter, Angie’s projected revenue of $80 million-$82 million, significantly below the Street’s target of $85.3 million.

Angie’s List’s Problems
Angie’s List big problem has been in expanding their paid member base. Since 2011, they have been cutting prices as well to get users to become paid members. The going has been tough considering that local review sites like Yelp are providing very similar services like Angie’s without asking users to pay for a membership fee. Additional competition is coming from niche sites and apps such as Handyman that simplifies the process of finding an efficient local handyman and booking their services. Things will become significantly tougher as Amazon enters the local services marketplace.

For now, Angie’s List total paid memberships continue to grow. Last quarter, total membership increased 25% to 2.98 million but gross paid memberships fell 6% to 350,376 accounts during the quarter. Angie’s List has tried to manage their financials by reducing expenses in wake of slowing memberships. For the recently reported quarter, their marketing expenses fell 20% over the year, thus driving acquisition cost per new member down 16% to $64.

Angie’s List Up For Sale
Last month, the market was abuzz with news that Angie’s List may be looking for a buyer for themselves. They are said to have hired an investment bank to explore strategic alternatives, including a potential acquisition. Angie’s List has neither confirmed nor denied the potential sell out.

Analysts believe that while Angie’s List may not be doing well on their own, they do have strong value in their local service related database, reviews, and advertising relationships with more than 51,000 service providers. Amazon could be an interested buyer as acquiring Angie’s List would give it ready access to the local market.

Angie’s List’s stock is trading at 52-week low levels of $5.54 with a market capitalization of $344 million. Its stock touched a 52-week high of $19.80 in February this year.

 

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