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Summary

  • Angie's List reported a larger than expected loss on lower than expected revenues after hours on Wednesday.
  • Service provider revenue continues to grow faster than membership, strengthening my belief that the ANGI business model is unsustainable.
  • I predicted that increasing competition would slow revenue growth, which is what we see in this earnings report.

Angie's List (NASDAQ:ANGI) reported a larger than expected loss on Wednesday, and its revenues grew slower than expected. The stock is down over 12% after hours. The stock is now down 58% since my original bearish call in September.

Underneath the headlines, two big numbers stand out to me. One is 77%, which is the percent of total revenue provided by service providers, up from 73% a year ago. The other number is $90, which is the marketing spend per new member, up 13% from $80 a year ago.

These two numbers reinforce the fact that ANGI, which markets itself as a "consumer driven organization" is actually beholden to service providers, and consumers recognize that fact. As the unreliability of its ratings becomes more clear, ANGI has to spend more in marketing to acquire the same number of members. Competitors like Yelp (NYSE:YELP) and Porch.com (which I highlighted as a threat in January) are also slowing ANGI's growth.

Source: Update: Angie's List Earnings