In a dramatic turnaround, Angie’s List (NASDAQ: ANGI) reported net income of $4.8 million for the second quarter of 2016, a huge shift from a net loss of $8.3 million for the same period in 2015 and $4.0 million for the first quarter of this year. In March, Angie’s List, a consumer resource for reviews of local service providers in more than 720 categories, announced that it was doing a major revamp of its membership-based service.
Among the changes Angie’s List has planned are the introduction of freemium and premium tiered subscription offerings and making its ratings and review services free. Premium services are to include emergency service hotlines and services that guarantee a pre-qualified contractor to respond to a subscriber’s home within hours of their call for help.
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Angie’s List has been rolling out the changes slowly. On July 13, the company announced that all reviews are now free, and it introduced two premium membership tiers in addition to the freemium tier:
- Green: Free-of-charge, nationwide access to more than 10 million verified consumer ratings and reviews and a digital copy of the company’s monthly magazine
- Silver: All of the features of the Green membership, as well as Angie’s Fair Price Guarantee and Angie’s Service Quality Guarantee, exclusive discounts, chat and email customer support, and a bimonthly print version of the company’s magazine for $24.99 a year
- Gold: All of the Green and Silver membership features plus a complaint resolution process and customer support by phone for $99.99 per year.
“This is a transformative moment for the new Angie’s List as we welcome more consumers into our community so they can experience the industry-leading value and unique services that we provide,” said Angie’s List President and CEO Scott Durchslag at a launch event in New York. “Now with our new offerings, the 10-12 million visitors coming to our site each month looking for help with their home will be able to more easily find the best local service providers.”
Durchslag joined Angie’s List in September 2015. He was previously with Best Buy and Skype Global. So far, the Angie’s List transformation appears to be successful, based on the financial results but also the growth in membership. Highlights include:
- New member signups increased 411 percent
- Unique new member visits increased 219 percent
- Unique new members searching Angie’s List increased 197 percent
- Unique new members viewing profiles increased 182 percent
- Total free memberships: 152,586
- Gross free memberships added during Q2: 152,586
- Total paid memberships: 3,147,566 (compared to 3,172,066 as of 6/30/15)
- Gross paid memberships added in Q2: 129,534
- Average paid membership renewal rate: 73 percent (compared to 78 percent as of 6/30/15)
- Participating service providers: 54,690 (compared to 53,514 as of 6/30/15)
“We have made tremendous progress in transforming our business model and technology platform. As a result, we are seeing an extraordinary re-acceleration in new member registrations and user engagement on our site,” said Durchslag in a press release about the Q2 results.
“We are very encouraged by the loyalty of our paid subscriber base. In addition, we have a substantial opportunity to convert our new free members into premium subscribers over time. We are committed to maintaining high quality members for our service providers, and surveys in our pilot markets suggest that our new members are similar in quality and hiring intent to our existing subscriber base,” Durchslag added.
“Since dropping the reviews paywall, we have added approximately 700,000 new members as of yesterday (July 26), fueling year on year growth in new member engagement and service provider profile views. That said, while we are confident that these increases will create incremental revenue, we have more work to do to drive revenue growth from these changes and are just beginning to realize the potential of our new business model,” added Durchslag.
Angie’s List also reported some big changes in expenses which helped to provide the company with a net gain rather than a net loss:
- Operations and support expenses of $10.2 million, down from $15.5 million year-over-year
- Selling expenses of $27.0 million, down from $31.6 million year-over-year
- Marketing expenses of $14.4 million, down from $28.7 million year-over-year
- Product and technology expenses of $13.3 million, up from $9.6 million year-over-year
- General and administrative expenses of $12.0 million, up from $9.6 million year-over-year
In its earnings report, Angie’s List provided this summary and business outlook moving forward:
Although the transition to a new business model is showing new members and user engagement re-accelerating at exponential rates, the Company will withhold financial guidance until it can more precisely determine when this will translate into revenue growth and adjusted EBITDA.
Because the Company is principally a subscription-based business, its revenue is relatively resilient. The Company’s revenue growth remained nearly flat in the first half of 2016 despite changing from a paid to a freemium business model; the adverse revenue impact from migrating to a new technology platform; and the many other changes simultaneously made to turn around the business. While the Company’s subscription-based business model has provided stability, it necessarily follows that it will take time for revenue to re-accelerate as it now more than ever depends on the origination and renewal of longer term contracts with service providers.
Moreover, the Company recently began pursuing other new revenue initiatives to further monetize participating and especially non-participating service providers. The Company also sees opportunities to generate incremental revenue by expanding targeted advertising to monetize more traffic and upselling free members to paid tiers. These initiatives could yield incremental revenue in the next six months, but there is no firm basis yet on which to forecast their timing and magnitude.
It is great to finally see Angie’s List share some good news and to show a profit for a change, particularly as they go through this huge membership transformation. Under new leadership, the company has made some major changes to how it is doing business, and it has done so quickly. In addition to the membership changes, it has cut expenses in big categories which is impressive since the new technology platform used to fuel the new membership programs was a new expense.
The early results for a reimagined Angie’s List are encouraging, but it is smart of Angie’s List to hedge in its summary and outlook. Its stock is currently up (as of July 28) and is making an upward trajectory after some record lows in September 2015.
We always love sharing success stories, and while this it is too soon to predict long-term success, Angie’s List seems to be making the right moves under Durchslag’s leadership. We hope the company continues to add new members paid and free and to continue its transformation. If it is successful, Angie’s List may serve as a good case study for other subscription and membership businesses contemplating a reboot.