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Angie’s List Faces Tougher Competition

Posted on Wednesday, Jul 29th 2015

Competition in the home services market is heating up. Not only tech giants like Amazon and Google appear interested in the market, but smaller vendors like Thumbtack are also growing rapidly. All this competition is making it difficult for established players like Angie’s List to stand their ground.

Angie’s List’s Financials
Angie’s List’s (Nasdaq: ANGI) second quarter revenues grew 10.7% year over year to $87.3 million compared with the market’s projections of $89.4 million. Loss per share improved 55% over the year to $0.14 per share and was better than the Street’s forecast of $0.17 per share.

By segment, service provider revenues grew 17% to $70.4 million while membership revenues fell 9% to $16.9 million.

Angie’s List’s Growing Competition

Angie’s List’s has been having significant trouble in growing the paid member base. During the recent quarter, while paid members did grow 12% over the year to 3.17 million, growth has decelerated significantly from the 31% number reported a year ago. Also, average revenue from each of those members has fallen 21.7% to $28.38 as the company continues to offer deals to get new customers to join.

Consumers were staying away from Angie’s because players like Yelp offer similar services for free. And now, things are about to get tougher. Last year, Amazon entered the local services market through their offering Amazon Local. Amazon Local offers savings of as much as 75% on local services. It may not be a site focused on reviews, but it also provides detailed information and reviews on their local vendors. Recently, Angie’s List sued Amazon Local claiming that Amazon Local’s employees obtained access to vendor information on Angie’s List by signing up as members and downloading provider profiles. Amazon Local has not commented on the accusation.

Besides Amazon, it appears that Google is also entering the Home Services market. Last week, Google announced the acquisition of Homejoy, a home cleaning services provider. Homejoy set up shop in 2012 by allowing residents to get their homes cleaned for as little as $20 an hour. But the company had not been doing too well. Homejoy, again, may not be identical to what Angie’s List offers, but analysts estimate that this is Google’s way of entering into the home services market. They expect Google to expand into other services including plumbing, cleaning, and home repairs. Google should also be able to leverage their search leadership so as to offer users the capability to directly access these local services by clicking on the results of a search query.

Angie’s List’s Improvements

Angie’s List is trying to combat this growing competition by improving their offerings. During the current quarter, they began testing their latest product on mobile called SnapFix. SnapFix enables customers to submit the details of a job by taking a photo and adding a brief description of the task needed. The service has seen positive reviews from customers who are finding it useful in speeding the completion of their home service projects. Service providers also like the product because it is leading to a high conversion of leads.

The market is not pleased with their improvement though. Their stock is trading at $4.16 with a market capitalization of $243.43 million. It touched a year high of $8.90 in October last year and had fallen to a low of $3.78 last week.

Thumbtack’s Offerings

It is not only bigger players that are competing with Angie’s List. San Francisco-based Thumbtack is also posing a growing threat. Thumbtack was founded in 2008 as a local service booking engine. It allows its 2 million subscribers to issue a service request and have service providers bid on their request. Their portfolio includes a wide range of a services ranging from accounting, statistical analysis, craft work, 3D modeling, CAD services, legal and tax related services, photography, pet care, repair and technical support, writing, translation, and transcription services.

Thumbtack’s Financials

Thumbtack earns revenues by charging vendors a fee for their bids. Vendors need to purchase Thumbtack credits to be able to bid on projects. Each bid costs them between 5%-10% of the estimated cost of the project. Analysts estimate that as of last year, Thumbtack had recorded $2 billion in annual gross sales. That puts their revenues anywhere from $100-$200 million annually.

They have been venture funded so far with $148.2 million in funding from investors including Google Capital, Javelin Venture Partners, Sequoia Capital, Tiger Global Management, and Draper Associates. Their last round of funding was held in August last year when they raised $100 million in round led by Google Capital at an undisclosed valuation.

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