Angie’s List IPO Won’t Come Highly Recommended

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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.

Angie’s 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, Angie’s 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.


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