Angie’s List is Losing Money Hand Over Fist

It was a good week for Angie’s List but will it see continued success with its paid-content model?

On Wednesday, Angie’s List (NASDAQ:ANGI) set a $13 per share price its I.P.O and planned to sell 8.79 million shares.

The membership-only site for reviews on local services — including home repairs and cleaning — had been expected to raise $114.3 million in its offering, with an option to sell an additional 1.3 million shares. Bank of America Merrill Lynch (NYSE:BAC) served as the company’s underwriters.

Angie’s List hit the publicly-traded stock arena on Thursday and saw its inaugural post-IPO trades rise as high as $18 per share (up 39 percent) from its $13 offering price. On day two, its trading saw a different picture: Angie’s List suffered a volume decline and questions began to swirl on whether its paid-content model would work in public markets. The company’s numbers aren’t good and it has warned its net losses will continue while it plans to “aggressively to grow and penetrate our markets.”

The company said it will use its IPO proceeds for advertising, including efforts to increase memberships.

Angie’s List Beginnings

Angie’s List (NASDAQ:ANGI) began as a phone-in service before going to the web in 1999. Today, its $6 per month membership encompasses paid membership across 175 U.S. markets with one million members. In addition, its local businesses can advertise their discounts and promotions on the site.

According to the Wall Street Journal, it reported that 70 percent of Angie List’s first-year subscribers renew their memberships, and members of five years or long remain with the company 87 percent of the time.

It’s will be interesting to Wall Street on whether or not a company that has a paid membership can work considering the amount of free review services such as Yelp and Facebook.

Angie’s List brings a number of differences to the market including a long track record and the incentive for individual members to write reviews, enabling more feedback on companies and a greater chance to determine their viability.

In addition, the Wall Street Journal added,

The website differentiates itself from other review sites by emphasizing quality control. It refuses anonymous reviews, won’t allow companies to pay to be on the list, employs staff to internally audit the content, and uses fraud detection technology.

With its potential for success, will other paid-content models enter the public market? Time will tell.