Founded in 1995, Angie’s List built slowly but surely until hitting critical mass as a nationally known brand and landing $60 million in venture funding in 2008. The site has multiple revenue streams ( the majority from vendors–not consumers), most of them recurring. Unlike other subscription sites, Angie’s List relies heavily on offline channels such as print magazines, television ads, and PR, to grow. We interviewed co-founder Angie Hicks Bowman for this Case Study.
Consumers seeking honest reviews of local service vendors (ranging from plumbers to dentists), as well as local services seeking new customers. As of Aug. 2010, Angie’s List is currently in over 200 cities across the United States. The consumer demographic is about 50% men and 50% women, but skewed slightly toward wealthier adult women ages 35-65, which is almost certainly the reason why Hicks is the company figurehead, rather than co-founder and CEO Bill Oesterle.
It’s the chicken-and-egg problem every user-generated content site faces at launch. How do you get enough subscriber-written content to attract subscribers to write–and pay for–the content? Instead of launching nationally, the company decided to divide and conquer, focusing on just one city, gaining critical mass there, and then launching in the next city on its target list.
Currently, the site targets cities with 250-300k-plus population, or unusually heavy consumer demand for the service. Early on, when Hicks’ first target was Columbus, she went door-to-door to collect reviews and vendor names. After that, she outsourced companies to conduct surveys of households in the target market (usually via telephone). The surveyors asked questions like: What service companies do you use? How would you rate those companies?
The site offers free “grassroots” memberships to consumers in newly launched cities for the first six to 12 months, and calls the new members to elicit more reviews. But most of the site’s reviews come from members who feel compelled to share reviews because they “owe” Angie’s List. Hicks explains: “There is a culture around the list that’s evolved over the years. Consumers feel a responsibility to give reports. They understand that’s what makes the list grow.” Once consumers submit one review, they’re likely to submit other. The site periodically sends gifts to consumers who post a lot of reviews; everyone who posted eight or more reviews in 2009 received an iPod shuffle, for example. Less than 1% of reviews come from providing a free review gathering service to vendors–all they have to do is turn over their local customer list!
Reviews are quality controlled to some extent–no member can review the same vendor more frequently than every six months, and vendors are not allowed to post reviews. And, unlike competing free reviews sites, the site does not allow anonymous reviews. “We have a number of systems in place to track any reports we think might not be authentic,” Hicks said. “Any time we question the validity, it’s reviewed by people here.” In addition, BPA Worldwide audits the review submission system each year to test for bugs and other problems within the system.
The site publishes about 60 monthly magazines, a printed copy of which is sent to members in cities with enough coupon ad revenue to warrant it. An electronic copy without coupons is also posted online. Its content is focused on slightly up-market lifestyles–boats, personal libraries, chefs, stamped concrete, fancy tiles, etc.
Lastly, the site contains some free content (we suspect mainly for SEO purposes) such as blogs, an occasional video “podcast,” articles from past issues of the magazine, and “The Penalty Box,” which lists companies that have not responded to member complaints. However, you must be a member to access any and all reviews.
The site launched healthcare provider ratings in 2008. Consumers like it–roughly 10,000 of each month’s 40,000 reviews are now for dentists, doctors, etc. However, the medical community isn’t so happy. Some doctors asked patients to sign waivers agreeing not to write online reviews. “They were mostly concerned about their being anonymous reviews,” Hicks said. But, upon learning more about Angie’s List, the pushback has subsided. “We used the magazine to address that as a free speech issue,” she added.
In 2008, the company raised $60 million in separate rounds from Battery Ventures, Lighthouse Capital Partners, and Prism Mezzanine Fund. Hicks told us proudly, “We haven’t been impacted by the economy.” This is largely because the company has worked hard to develop multiple revenue streams on both sides of the audience equation:
Revenues from Consumers
#1. Annual subscriptions: As of Aug. 2010, the Hicks said the site has more than 1 million paying members. “We’ve always been a paid service. We were in the world of newspaper and magazine subscriptions, so we were copying that model and started five years before the big internet boom. Other companies were free. But we knew consumers valued our info so we decided to stick to our (paid) game plan.” Memberships range in price from $2-$7 per month and $10-$60 per year depending on the subscriber’s location. This makes sense because depth of content varies greatly — cities newer to the list, or in less populous areas have far fewer reviews and vendor listings. Hicks says, “Pricing is a mysterious thing; it’s one of the biggest challenges. We’ve experimented over the years.”
Revenues from Vendors
Although they can’t post reviews, vendors are offered special, always-free memberships so they can see reviews posted about them; and, to entice them to submitting customer names for the site’s outreach campaigns, as well as to purchase a range of services from the site. These include, but are not limited to:
#1. Third-Party Advertising: Vendors who get an A or B (out of possible A-F) rating based on reviews on the site, can pay for discount coupons to run in the site’s monthly print magazine for their area. Only high-density member areas have magazines. They can also run coupons on the site. And recently, the site launched a group couponing offer where vendors can offer a deep discount (i.e. 50% off on pest control) to members, but a certain number of members must respond for the discount to be effective. These group coupons are sent to both members and non-members.
In addition, Vendors with A or B reviews can pay to have their discount offer mentioned on the phone when customers in their area call Angie’s List seeking referrals. The offer is limited to three vendors per category per area. The order of names revolves, so a particular company would be the first one mentioned during every third call. (Note: the call center is completely in-house. It has roughly 100 reps. About 10% of members use the call center. Each call is answered by a real person.)
#2. Profile upgrades: Free vendor profiles are fairly robust, including contact info, an MP3 (such as a radio commercial), a logo, accreditations, and up to three photos. However, some vendors pay to spruce up their profiles with up to 57 additional photos, third-party logos (for example, if they are a certified dealer of a brand-name product, they might want to add that logo to their profile), and an icon noting if discounts are available to Angie’s List members through the List’s advertising program.
#3. Promotional Items: Vendors who win an annual “Super Service” award from the site can purchase the rights to use the award icon in a variety of promotional situations. (The site has a list of rules; basically, most passive advertising such as sticking the award logo on your site for a year is free, but running the logo in your advertising is not.) Award logos are dated by year, in part to help the site develop recurring income from this source. “This is a very, very, very small portion of revenue,” Hicks said.
#4. List Rentals: The site offers local vendors do-it-yourself DM campaigns, including easy design, printing, list rental (not Angie’s List members), and mail shop services all rolled into one (www.mailmadesimple.com). The site also offers paid co-registration, and — very rarely and carefully — co-branded advertising blasts to its email lists.
#5. Merchant Accounts (http://angieslist.chasepaymentechsales.com): Classic affiliate partnership play, in this case powered by Chase Paymentech. Generally these deals include a residual income stream for the lifetime of each referred account, although we have not confirmed this for this particular partnership.
Hicks told Subscription Site Insider, “For us, it’s a combination of more than 25 different vehicles that we use in concert. We’re very analytical with marketing, very driven by the numbers. Everything is decided based on metrics.”
The site’s ads on television, on the radio, and in mass media print feature real-life reviews with catchy horror stories like painters who tracked red paint all over the floor. “Most of our traffic is driven from offline,” Hicks said. “TV being one of them.” Media buying focuses on national campaigns.
“Word of mouth is a big contributor to growing the service.” The List sends a bag of M&Ms to every member who refers a new number. “When we first started, we sent $7; then a combo of cash and M&Ms. But people called in for their M&Ms. Now we even ask if you prefer plain or peanut.”
The List is one of the few membership sites we know of with a 6-person PR team, including a full-time in-house communications director. The site issues roughly 50 press releases per year, staggered at least several business days apart. The releases often focus on particular articles from that month’s magazine. Release headlines are written carefully to contain popular keywords for news-engines, such as “Halloween Costumes” in late October.
The site contains an easy-to-download press kit (no registration required) featuring 15 pages of facts, customer quotes, bios, and key new releases presented as a Word document for easy cutting-and-pasting into stories.
Many PR efforts are concentrated on using Hicks as a spokesperson. In fact, the site tour begins with her photo and if you search her name on Facebook, you’ll see text ads reading “Meet the Angie Behind Angie’s List.” Hicks speaks at public events and holds informal member meetings. “When I travel, I invite members in a city to come have coffee, get feedback on what’s like to use the List in their city, what we could do better, etc.”
Search Marketing and Social Media
“We have built an online marketing team that focuses on SEO, PPC, and social media,” Hicks said, adding they also run online display ad campaigns. Social media tactics include: posted copies of their television ads on YouTube (http://www.youtube.com/user/AngiesListHQ), a Facebook fan club with about 2,300 fans (as of Aug. 2010), and Twitter account with about 2,200 followers (@AngiesList).
The site offers commissions of $6-$64 per referred membership sale.
The site uses email for member involvement, sending articles and requests for reviews roughly every two-to-three weeks. Plus, it promotes gift memberships heavily in email; members received seven blasts promoting gift memberships between November 3 and December 28, 2009.
Technology and Vendors Used
Adobe Web Analytics, powered by Omniture: Site analytics technology http://www.omniture.com/en/products/online_analytics
Adobe Test&Target, powered by Omniture: A/B and multivariate technology http://www.omniture.com/en/products/conversion/testandtarget
Chase Paymentech: Merchant Account http://www.chasepaymentech.com
Gomez: Site performance testing http://www.gomez.com/
Ocean Media Inc.: Does Angie’s List media buying http://www.oceanmediainc.com/
Young & Laramore: The site’s ad agency of record since 2005 for mass media campaigns including television, radio, print, and some online http://www.yandl.com/clients/angieslist/tv/index.html
About Angie Hicks
In the early 1990s, Hicks served as a DePauw University fellow (a type of “high-powered intern”) working for Bill Oesterle at a venture capital firm. The two then co-founded the company in 1995 with Hicks as the sole employee. At first Oesterle served as an advisor, and then joined as CEO a few years later. Hicks received a Harvard MBA in 2000.
Her advice to other subscription site entrepreneurs, “You’ve got to stick with it, and also there are lots of opportunities out there. We’ve seen that we could have shifted gears and done different things, but part of it is understanding the model you’re building and not getting distracted. The best-executed plans are the most focused.”
Subscription Site Insider’s Analysis
Angie’s List operates in an online niche where traditional competitors, such as the Better Business Bureau and various yellow pages, are floundering to this day. The site’s use of an in-house call center for in-bound and outbound calls, as well as of customer referrals is unusual. We don’t know any other company’s reliance on metrics and we assume that a 100+ person call center really pays off despite the cost. Other sites should consider testing it. However, the site needs consumers to feed it with new reviews, trust its reviews, and refer new members. If their trust is broken, this relationship could be damaged. A big part of the brand is based in transparency and truth-telling. And the brand itself is transparent regarding its relations with vendors by publishing its vendor advertising rules on the site’s FAQ section and in each issue of the print magazines. The site is very careful to appear publicly to be nearly entirely member-supported, yet we suspect its revenues from vendors could equal as much as half of its revenues. So far juggling act has worked out.