Angie’s List Trying To Scale

Over the past decade, the growing importance of niche communities in today’s business dynamics has become increasingly clear. Local search and classifieds have helped address the needs of these communities. While Yelp remains a leader in leveraging user-generated content, Angie’s List has also established itself as a strong contender, albeit with a slightly different focus. Angies’s List was founded in 1995 in Ohio by Angie Hicks and William Oesterle as a website to list actual customer reviews of various local service providers. Service professionals including doctors, plumbers, contractors, and others in more than 500 categories are rated by customers in a report card–style review. Based on the reviews, the service publishes an overall grade for the service provider to help future customers make decisions about which service to use.

Angie’s Business Model
Unlike many other startups, Angie’s List has a revenue model in place. The company began with letting users call up to get reviews and information on service providers, today for a fee, they can not only call these specialists, they can also access their online review database and a local magazine and get member discounts. The company charges a $5.00 sign-up fee and a tier-based monthly or an annual access fee. The charges vary depending on the location of the consumer, the categories of services the consumer wants to get information about, and the duration for which the consumers want to sign up. For instance, a consumer wishing to access the entire database in New York for a month pays $5.60 plus the joining fee, compared with a Columbus, Ohio, user who will have to pay $6.80 and the joining fee.

Additionally, service providers who have maintained an average of A or B rating can advertise in their magazines or on their site by offering member discounts. Last year, Angie’s List also began a Grouponesque service offering, “The Big Deal,” which is a local discount coupon service for members. Angie’s List plans to offer such deals to more than 200 markets by the summer of 2011.

The company’s latest financials aren’t known, but Angie’s List was estimated to have recorded $60 million in revenues in 2010. Since inception, Angie’s List has raised more than $147 million in funding from investors including Aquent, BV Capital, Battery Ventures, Saints Capital, and Lighthouse Capital Partners. Earlier this year, it raised $53.6 million in funding from undisclosed private investors. At the end of last year, Angie’s List was estimated to have more than a million paid subscribers. According to Compete, the site had more than 1.5 million monthly unique visitors in March 2011. Angie’s List grew by over 50% in 2010 and the company would be looking at deploying these new funds to achieve their target of exceeding that growth rate in the current year.

Analysts believe the local search and review market will be worth $459 million in 2015 from $98 million in 2009. The market is dominated by players like Yelp and Google Places. Yelp has more than 45 million unique monthly visitors with a database of more than 16 million local reviews, and it also has a significant international and mobile presence. Yelp’s rapid user growth can be attributed to the fact that it offers free services to end users and charge businesses instead. But Angie’s List has managed to create a niche for itself through designing a highly specialized list of services it reviews and ensuring availability of better curated information. For instance, it recently added a category for classic car restoration specialists. Clearly, its focus on quality and variety of content has helped it to differentiate itself from the bigger players.