Angie’s List Provides New Details in S-1; 820,000 Members

Angie’s List issued an S-1 this week as it seeks to raise $75 million from an IPO. The S-1 is full of details about the 16-year-old service reviews company. Its massive, $60 million national ad campaign over the past 18 months, for instance, has produced a membership roster of 820,000 paying households in 170 U.S. markets.

The company, which earned $35.58 million in 2010, has also seen a shift of its revenue pie. While revenues were split 50/50 between membership fees and advertising in 2008, it has now shifted to 39 percent membership fees and 61 percent advertising. The company currently has 19,750 advertisers.

Additional opportunities come from the launch of Angie’s List’s Big Deal, which has been introduced in 27 cities and is available to members and non-members alike. More than 62,879 deals have been sold since its launch in June 2010.

Key to the company’s next stage is a successful introduction of new a la carte verticals such as Health & Wellness and Classic Cars, and increased user penetration in large markets such as New York and Los Angeles. The key is to maximize marketing dollars from its national ad campaigns, which receive 100 percent of its marketing budget.

Several major questions remain about the company.

1. Can it make money? Angie’s List has been outspending its revenues in its rapid push to gain scale via national advertising.

2. Can it compete against free services? Like cable TV and newspapers, Angie’s List’s business model is based on a dual revenue stream of membership (“paid circulation”) and advertising. Customers will only continue to pay for the service if reviews are considered more accurate, more local and more numerous than competitors.

3. Can it go more local? As Angie’s List’s growth relies more on suburban and exurban areas, it will be challenged to provide more locally-oriented service providers. Its current metro-wide approach includes many service providers that are farther than 50 miles away in some cases.

4. Can it market locally? Angie’s List is currently devoting 100 percent of its marketing dollars to national advertising. The effort treats the entire country as a single market, making it less efficient to reach smaller markets. If Angie’s List is to grow these markets, it is going to need to rely more on local media, social media and word of mouth.

5. Can it acquire and integrate companies? Angie’s List is mostly homegrown and remains a relatively straightforward operation that relies very lightly on innovative technologies. As the company seeks to add more features and grow overseas, however, it is likely to need to acquire various entities (a la ServiceMagic). It remains to be seen how well it will integrate other operations.

A full report is being published next week for BIA/Kelsey Marketplaces clients.