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The Angie’s List Business Model – How Does Angie’s List Make Money?

In a Nutshell:

Angie’s List is an online database of local service providers where you can hire, rate, and review the businesses. Their listings are spread over more than 700 categories including plumbing, roofing, house cleaning, and other services.

Angie’s List primarily makes money by selling leads to businesses. Earlier they used to charge businesses for the top listing on search results. But their business model has changed completely over time.

Founded in 1995, Angie’s List was the first mover in the home services marketplace business. Its customers were the top 1% of the United States who could afford the annual premium for accessing their database. In October 2017, HomeAdvisor’s parent company acquired Angie’s List and merged both the companies into ANGI Homeservices.

What Does Angie’s List Do?

Angie’s List (now Angi) is an online marketplace that connects home services contractors to customers. Founded in 1995, Angie’s List was initially a portal to rate and review local businesses within the community.

If you wanted roofing done for your house, they would show you all the agencies in your neighborhood along with their reviews and ratings.

Angie’s List started out with a two-sided business model and charged a monthly fee from both the customers and businesses. But soon came fierce competitors like HomeAdvisor and Thumbtack, who opened gates to consumers completely free of cost.

And hence, Angie’s List did away with the two-sided model and made it free of cost to consumers (and charging only the businesses).

Today, Angie’s List business model has completely changed directions. They are now in the business of selling leads to agencies and contractors.

Angie's List business model

Whether it’s your routine repair and maintenance tasks, or you are planning to transform the appeal of your house – they have got you covered.

The consumer simply goes to the app/website and chooses the service they want to avail of. Angi then shows them a list of businesses to get a quote from. And finally, you can book the service and make payment on the app itself.

The businesses on their platform are called “pros” and Angi uses its own filters to vet them. According to their website, “The business’s owner, principal, or relevant manager must pass a criminal background check, and the business must maintain all applicable state and local licenses. “

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Angie’s List History

Angie’s List was founded in 1995 by two co-founders: William S. Oesterle and Angie Hicks.

Hicks was already working under Oesterle, who was a venture capitalist at that time. The idea for Angie’s List came to life when they had trouble finding a decent construction contractor in the city. They realized the huge untapped market that was sitting in front of their eyes.

In 1995, they launched a call-in and publication service that contained reviews of local home service businesses. They named it Columbus Neighbours at that time.

Angie Hicks would personally visit the households and make them sign up for membership. She also collected data on various local contractors from them.

Within one year of launch, the company had successfully recruited over 1,000 members. They had proven the business model and now it was time to scale up.

Oesterle, being a venture capitalist himself, had access to the right people and the right networks. Angie’s List took the funding in 1996 and acquired their immediate competitor at that time – Unified Neighbours.

Come 1999, and they digitalized their whole database (thanks to the internet). The huge pool of ratings and reviews was now accessible to everyone in the world.

From then on, it was a steep growth across the United States and the company even expanded into different segments (e.g. auto care). Angie’s List reported 2 million paid members in 2013.

In 2016, they reached a record level of 5 million members (a whopping 50% gain from the previous year). It was a direct result of dropping the paywall for customers. Angi had now allowed unrestricted free access to the entirety of its database.

In 2017, Angie’s List was acquired by HomeAdvisor, another huge shark in the home services digital marketplace niche.

HomeAdvisor + Angie’s List = ANGI

HomeAdvisor (originally ServiceMagic) was founded in 1998 and has a business model similar to Angie’s List.

By 2015, HomeAdvisor raked in over $300 million in annual revenue and nearly a hundred thousand verified businesses/contractors.

On 2nd October 2017, HomeAdvisor acquired Angie’s List and became ANGI Homeservices. The two leading market players came together to form the biggest home services digital platform.

Even though Angie’s List was more popular than HomeAdvisor, the latter was making much more money throughout the year.

Angie’s List business model focused on paid membership all these years. So even though they were more “premium”, their user base was limited. On the other hand, HomeAdvisor had a steady business model where contractors paid hefty listing fees.

In a nutshell, HomeAdvisor had a far better business model while Angie’s List enjoyed a higher brand value and a larger network of contractors. So an acquisition made sense.

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How Does Angie’s List Make Money?

Angie’s List makes money through advertising fees, subscription fees, lead generation services, and service warranty subscriptions.

Angi’s business model can be broken into three different segments:

  1. Online Marketplace for Consumers and Service Providers
  2. Lead Generation Services
  3. Fixed-Price services

1. Marketplace Model

Angi has two brands operating in the marketplace model i.e. HomeAdvisor and Handy

HomeAdvisor is an online home services marketplace that connects households with vetted contractors. While the access is free for customers, the company charges a fixed subscription fee from service providers.

Users can browse through the reviews and ratings of various contractors and book a slot within the app. Angi charges a per-match fee from business owners irrespective of whether the client converted or not. The customer makes the final payment directly to the service provider.

Handy is another brand under Angi that is known as the Uber for cleaners and handymen. It is a sharing economy platform where customers directly book handymen for small jobs like residential cleaning or installations.

Here’s how Handy works:

  1. User places an order directly on the Handy app (just like Uber).
  2. The company then hires independent service providers to get the job done.
  3. The customer makes the final payment to Handy.

The biggest advantage to Handy is that most of its orders come from repeat customers. Angi doesn’t have to burn cash for customer acquisition because the company already enjoys a loyal user base.

2. Lead Gen Services

Angie’s List is the third brand under Angi and it primarily generates revenue by selling leads to businesses.

It used to be an online directory with crowdsourced reviews and ratings of local businesses. Up until 2016, it was a two-sided revenue model and they charged a subscription fee from both customers and service providers.

The company had to scrape off the customer paywall to target the newly emerging market – millennial homeowners. They are less likely to pay for information upfront but might be willing to avail premium services along the way (such as enhanced customer support and better pricing).

Now they directly sell leads to business providers and charge them on a lead-to-lead basis.

Angie’s List also offers a premium subscription where users enjoy services at a discounted price.

Here’s a breakup of Angi’s annual revenue (Source: FY2019 10-K):

  • 73% of revenue is generated by HomeAdvisor matching fees and bookings via Handy.
  • 6% comes from HomeAdvisor’s annual subscription fees from service providers.
  • The remaining 21% comes from Angie’s List advertising revenue, consumer subscription and other small services.

3. Fixed-Price Business Model

Angie’s List has already started offering certain home improvement services at a fixed price. This greatly reduces friction between the buyer and the seller and provides a lot more opportunities to Angi.

Angie’s List was traditionally a marketplace allowing buyers and sellers to strike a deal independently. As a result, the platform had a lower match rate, and service providers were charged for the leads even if they didn’t convert.

What’s more, the service providers don’t want to spend hours negotiating with the leads when they can instead get direct customers via other channels. (The home improvement market is at an all-time high.)

Having fixed rates for services is highly lucrative for both customers and businesses. It highly increases customer loyalty and creates scope for bundling of services in the future, ultimately increasing the average customer value.

On the other hand, service providers don’t have to go through the hassles of nurturing leads, converting them into paying customers and even paying for the leads that didn’t convert.

Angi acquired Handy to speed up its implementation of the fixed-price model. In 2020, the company raked in over $162 million in revenue from the fixed-price business model. But since this is just 11% of total annual revenue, there’s still a huge potential for growth.

In an interview, the CEO Brandon Ridenour said that this 11% could go up to 50% in the coming 5-7 years. Considering the current rate of growth, the fixed-price model alone could bring in over $1.8 billion in 2026.

Angie’s List Funding, Valuation & Revenue

According to Crunchbase, Angie’s List has raised a total of $182.6 million in 9 rounds of funding (venture funding and debt financing). Notable investors in the Venture Funding rounds include Headline, Battery Ventures, Saints Capital, and Cross Creek.

The company raised another $114.3 million during its IPO in November 2011 at a valuation of $722.7 million. The 8.8m shares were priced at $13 and opened on the first trading day for $18 (a whopping 33% premium!)

In 2017, Homeadvisor’s parent company IAC acquired Angie’s List for $781.4 million and merged both the home service marketplaces into ANGI Homeservices.

Since its inception, ANGI has made 5 major acquisitions namely 7home, Handy, Fixd Repair, and Umbrella (the latest one acquired in Jan 2021).

Angie’s List is no longer a “list” and has turned into a full-fledged home services brand. The name “Angie’s List” doesn’t match with the portal it has now become. Hence, in March 2021, Angie’s List was renamed Angi. The company also changed its name from ANGI Homeservices to Angi Inc.

The name change seemed necessary to set the right brand positioning in the minds of customers.

Angi’s annual revenue for 2020 was $1.468B, which is a 10.69% increase from 2019.

Due to the Covid-19 pandemic, people were trapped inside their homes with nowhere to go. And if you are going to spend a whole year working from home, you naturally become interested in home improvement and miscellaneous repairs.

As soon as the pandemic ends, people will be going everywhere! They won’t be interested in painting the house or fixing that broken shelf. However, the long-term trend of home improvement will never diet out.

America has over 138 million occupied houses and roughly 4 million home services contractors. An average household requires 7-8 services per year and the trend has only been increasing. Considering these factors, the company estimates total market size of $500 billion!

Even today, over 80% of the home services market remains offline. Given the high ticket value and complexity of jobs, it’s quite understandable.

But that means there’s huge scope for companies like ANGI. Innovations like the fixed-price model will highly improve efficiency and attract a larger pool of people.