In the mid-1990s, Angie Hicks' co-founder had lots of trouble finding good
contractors in Columbus, Ohio. So why not create a website that allows for
trusted reviews? Of course, the result was Angie's List. It definitely was a
good move. Now the company has filed to go public. Angies List covers more than
550 categories, such as plumbing, roof repair, remodeling and auto repair. As
for the ratings, they are based only on member feedback and comments. There are
no anonymous reviews. And the audience is highly engaged. It generates roughly
40,000 reviews per month (the total is 2.2 million). OK, so how does the company
make money? The main source is from memberships. In all, there are about
820,000. And it is an attractive group. The average member is between 35 and 65
years old, is married and has an annual household income of at least $100,000.
Yet it has not been cheap to build the customer base, which has required an
expensive nationwide advertising push. The marketing expenses came to $29.2
million in the first half of 2011. Keep in mind that the amount was $30.2
million for all of 2010. Unfortunately, revenues have not been increasing as
fast. During the first six months of 2011, the top line rose by 40% to $38.5
million and the net loss was $25.8 million. The accumulated losses are a
whopping $143.2 million. Actually, the top line might face some headwinds.
Perhaps the most important one is the weakening economy. How many people will
want to plunk down cash for a membership? A better alternative might be to go to
one of the many rivals. They include Google (NASDAQ: GOOG ), Microsoft (NASDAQ:
MSFT ), Yelp, Yahoo! (NASDAQ: YHOO ), Groupon and even Facebook. Finally, the
IPO market suddenly has turned sour because of the recent plunge in the equities
markets. For example, there has been deterioration in stocks like Pandora (NYSE:
P ) and LinkedIn (NASDAQ: LNKD ). What's more, there are many concerns about
the upcoming Groupon deal, which might see a markdown in its valuation. In other
words, with big-time losses, Angies List could have a tough time getting its IPO
off the ground at least in 2011. Tom Taulli is the author of various books,
including "All About Commodities." He does not own a position in any of the
stocks named here.
No comments:
Post a Comment