Angie's List upends its business model, goes freemium

Angie's List had previously required users to pay a membership fee to see ratings and reviews

A year or so ago, my toilet suddenly started leaking. There was water all over the floor, and obviously I needed to contact a plumber. I had seen all the advertisements for Angie's List on TV so I figured why not see who I could find on there. To my surprise, I needed to become a member to find someone to hire. I couldn't even see what their ratings were! Needless to say that I found what I needed elsewhere.

Why in the world would I pay a membership fee to a company just to get access to someone for a one-time job? It's a question that Angie's List has also been asking itself, apparently, especially in the face of increased competition.

Angie's List announced on Thursday that it is changing its business model by introducing a freemium model, getting rid of its ratings and reviews paywall, all as part of its Profitable Growth Plan, which it plans to implement over the next five years. 

While users will be able to use the service for free, others will have the option to pay, if they chose to, for premium tiered offerings with "additional high value services." 

Up until now, to use Angie's List, you would have to pay a membership fee, which would change depending on what kind of service you wanted to use. So, for example, in the San Francisco Bay Area, if you wanted to access services for your home, lawn, car or pets, it would cost $3.37 a month, or $8.99a year.

For health and wellness services, it would cost $11.32 a month, or $3.50 a year.

"Angie's List is more than just a review site. Our mission is to make it incredibly easy for you to hire remarkable local service. This means we also offer live support. Like a personal assistant, our customer service team can match you with a highly-rated provider, book estimates if you want them, schedule your job and manage follow up communication - saving you the time consuming work of hiring providers," the company said on its website, explaining the reasoning for that business model. 

However the Internet is changing, as is the online home services industry, which now has numerous other players, none of whom charge a membership fee to access their content. 

There's Yelp and Craigslist, but now it also has to deal with Amazon, which launched a professional services provider in March of last year. Called Amazon Home Service, it launched with 700 services categories, including iPhone repair, yoga classes, car maintenance, TV wall-mounting, car battery installation and house cleaning.

The biggest threat to Angie's List, though, is probably Thumbtack, which now has over five million projects requested every year in over 1,000 categories. The company operates in all 50 states, and now has over 200,000 unique paying professionals. Thumbtack now generates $1 billion in revenue for independent small businesses every year and has have more paying pros on its site than both Angie’s List and Yelp combined.

Last year Thumbtack raised a $125 million funding round, giving it a $1.3 billion valuation.

In a statement, Scott Durchslag, Angie's List President and Chief Executive Officer, explained why the company was going in this new direction. 

"The new plan announced today transforms our legacy business model to bring in a new era of growth and profitability at Angie's List. Angie's List is the premier brand in the $400 billion home services market," he said.

"By removing the paywall for ratings and reviews, our new Profitable Growth Plan removes the barrier that has limited our growth and enables Angie's List to engage with more consumers and more service providers than ever before. Through this three-phased plan, we expect to reignite revenue growth and drive significant increases in profitability over time with minimal disruption to the business."

Angie's List says that the early pilot results from these changes have been successful, showing "significant increases" in many areas, including consumer engagement and service provider value, consumer registrations, total profile views, reviews and originations.

The company also made it clear that it expects to see increased profit as a result, with an expected $750 million in total revenue by 2020. For 2016, it is expected revenue of $345 million to $355 million, so it thinks that will essentially double in just the next few years. 

Angie's List users should expect all of this start to start sometime in the next quarter, with a full rollout of the premium model to be done by the end of the third quarter of this year. 

Last year Angie's List rejected an offer to be acquired by IAC for more than $500 million, saying that it "dramatically undervalues the Company and its long-term standalone prospects." 

(Image source: angieslist.com)