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I recently wrote an article drawing attention to Angie's List (NASDAQ:ANGI) biggest problem: It is not managing to maintain the strong growth that it had achieved in the quarters following the IPO.

In that article I covered the fact that ANGI's growth in terms of paying memberships is:

a) Crucial for them to maintain their business model (although at present most of their revenue actually comes from the service providers).

b) Traditionally seasonal (with a regular intra-year pattern).

c) Stalling quite fast.

In that article I was bold enough to make some predictions about future growth of paying memberships. In particular, I wrote this:

"Let's risk some specific predictions for member growth in the next quarters:

· End of Jun. 2013 vs end Mar. 2013: Close to 13 or to 14%. (Was 22% in 2011 and 17% in 2012.)"

Well, the numbers for this second quarter of 2013 have now been presented by Angie's List (see here), and they show a 11% growth from the previous quarter. This value (11%) is even below my prediction, and means that the membership growth is now compressing faster (from a reduction of 5% between 2011 and 2012 to a reduction of 6% between 2012 and 2013).

In short, this most recent growth rate not only fully confirms the continued reduction of growth, but also shows an acceleration of the process.

The following table illustrates the membership evolution since 2011, the year of ANGI's IPO:

(click to enlarge)ANGI

In spite of the more pronounced reduction of growth in the second quarter, to discount the possibility that this quarter may simply have been slightly below average, I will keep my previous predictions for the next two quarters unchanged at:

  • End of Sep. 2013 vs end Jun. 2013: Close to 12 or to 13%. (Was 20% in 2011 and 16% in 2012.)
  • End of Dec. 2013 vs end Sep. 2013: Close to 7%. (Was 9% in 2011 and 8% in 2012.)

This evolution confirms that ANGI is failing to maintain the very fast growth that has been presented as the main justification for the high stock valuation.

One of the reasons for this is that the difficult (and expensive) selling of new memberships needs to compensate for all the previous clients that leave, before it manages to expand the membership basis.

And, naturally, as the overall number of clients is still growing, if a similar percentage of clients keeps leaving in each quarter, ANGI needs to recruit more and more new subscribers in each quarter just to compensate for those leaving.

ANGI's business model is basically unattractive for their clients, and after an impulse registration, and after some time paying for a membership that provides little value, most members will end up leaving. And, in the long run, no amount of hard working salespeople can compensate for an uninteresting, outmoded, business model.

My overall prediction for the future of Angie's List remains the same: Quite negative.

Disclosure: I am short ANGI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.