Angie’s List, Home Advisor & Strategic Alternatives

The news that IAC’s Home Advisor is merging with Angie’s List to form a new public company is both surprising and not all that surprising.

In InsiderPages’ early days, we considered Angie’s List one of our top competitors but we were always baffled why anyone would pay to get access to their members’ reviews, particularly when sites like ours and Yelp’s were giving the content away for free. Back then Angie had the last laugh, as InsiderPages got acquired by CitySearch but she went public and sponsored what seemed like every NPR station in the country. So from a historical perspective it’s a little shocking to see it go for a “mere” $500 million.

But their stock price tells a different story:

So it’s not surprising that this deal appears to be another in a string of “Local” consolidations that I suspected would happen post-Yext’s IPO.

Now of course, Yext is hardly the key driver in this deal. More than likely it’s the scarcity of “free” customers from SEO, thanks to Google grabbing more SERP real estate (for both paid ads and its recent Home Services ads which mimics Home Advisor’s and Angie’s List’s ability to connect you to a local pro) and more competitors jockeying for the crumbs, combined with the increased cost of paid traffic that results from said competition and the havoc this dynamic wreaks on business models, even those that come with strong consumer brands. I am not saying this is all because of SEO (I don’t know how much organic traffic either site has been getting lately but I wouldn’t be surprised if the trend has been downward), but let’s face it, SEO subsidizes every other marketing channel and when it stops working, everything else starts circling the drain.

And while various reports mention that Home Advisor had been pursuing Angie’s List for two years, it’s not hard to imagine that recent events helped push the two companies into each others’ arms.

Sales at Angie’s List have been sliding. AL was one of the only home services lead-gen companies I know of that created a two-sided market where consumers paid to get access to presumably high-quality reviews of local service pros by other members while businesses paid for the presumably high-quality leads Angie’s List sent them. But like every subscription business, subscriber churn is the key to everything, and given that there were so many free options in the market (Google, Yelp, Thumbtack, Home Advisor, etc.) to find a local service pro, it likely became harder and harder to keep subscribers around. That’s why you always heard so many Angie’s List ads. They had to keep the phone ringing. And to keep those advertisers paying they needed the Glengarry leads…

Eventually, Angie had to give in and ditched the membership subscription fees, but as Groucho Marx used to say “I don’t care to belong to any club that would accept people like me as a member”. And my guess is that advertisers looking for quality perhaps couldn’t see the difference between an Angie’s List lead and those from another similar service.

I suspect the appeal of Angie’s List to Home Advisor, besides the cost savings and customer base, was the brand. No offense HA, but yeah…

One of the questions though is whether this move is the start of a new chapter of growth or just rearranging deck chairs on  Titanic the Internet (pick your fave hegemon) Google | Facebook | Amazon.

So who do you think is next?

Full disclosure: AngiesList, HomeAdvisor and Thumbtack are all former LSG clients and we still are likely trying to manipulate $YEXT’s stock price