Angie's List (ANGI) got off to a strong start when it began trading publicly today, (November 17). Unlike other recent dot com IPOs like Groupon (GRPN), Linkedin (LNKD), and Pandora (P), Angie's List is looking at Ms in the market cap instead of Bs. At its current pricing of $13 per share, the company will be valued at around $700 million dollars. However, the company has many of the same symptoms of its dot com counterparts: its market cap is more than 8 times revenue, the company still has not proven it can post consistent positive earnings, and like Groupon, the company has marketing expenses that are close to its revenue.
Angie's List has about 1.5 million subscribers, meaning that investors will pay about $467 per subscriber. Annual membership fees are between $10 and $50 per year. Considering that over half of this revenue is spent on marketing, one can assume that people who buy ANGI at $13 are expecting some substantial growth. Potential investors need to keep in mind that Angie's List was founded in 1996 and is growing much slower than its fellow dot com giants. Revenue in 2010 was $59 million and through three quarters of 2011, the company has reported $62.6 million in revenue.
The big difference between Angie's List and other recent tech IPOs is that it costs money to subscribe. All of the other popular sites are free to use to a certain extent. Pandora users can buy Pandora One for no ads and unlimited listening and Zynga (ZYNG) gamers can pay for special items, but a big part of many top dot coms is that users can use the sites for free. There are plenty of competitors like Yelp that offer very similar services for free. Angie's List has an accumulated deficit of about $160 million, but with 1.5 million subscribers, the company has proven that there are people willing to pay money for consumer reviews. It will be interesting to see how the stock performs in the coming months.