Review Sites Yelp, Angie’s List Both Disappoint Market

Jacob Harper  |

Reviews website Angie’s List ($ANGI) and chief rival Yelp ($YELP) both released earnings on October 22, with Angie’s reporting before the bell and Yelp after. Angie’s missed expectations, while Yelp exceeded but then experienced a market pullback as investors reacted to lowered guidance.

Angie’s List failing to hit their projections is not much of a surprise considering Angie’s List operates an obsolete business model that without an overhaul is likely doomed to sputter out.

That assessment might seem harsh, but it’s becoming increasingly difficult to justify the site’s existence as a viable competitor in the tech space. On October 1 we noted that Angie’s had experienced a sizable spike in its stock price on the heels of buyout rumors, and speculated that uptick would be short-lived. That indeed became the case, as the rumor mill was unable to churn up actual profits for the troubled company.

The company experienced shrinking losses compared to last year, but also grew revenues. Angie’s List has struggled to entice users to pay for their review service, even going as far to test a whopping 75 percent reduction in sign-up fees for new users in a bid to bring in fresh customers.

No matter how much they lower fees, however, in their present iteration they’ll never compete with Yelp, who charge nothing for their much more comprehensive service.  It seemed Yelp has been on the up-and-up, but they too faced major problems and turned in decent earnings tempered by a poor outlook.

While in many ways Yelp trumps Angie’s List, Yelp certainly doesn’t possess and an unassailable business model. Their reliance on free user-generated reviews and accusations of paid bias concerning a significant percentage of said reviewers greatly undermines the credibility of their reviews.

Regardless of the cause both companies experienced noticeable stock pullbacks in wake of the earnings reports, in market moves that will certainly affect the review site space as a whole.

In the earnings report, Angie’s List reported a loss of of $5.2 million, or ($0.09) a share, compared with $13.5 million, or ($0.21) a share, the year prior. Revenues were $81.3 million, compared to $66 million the year prior. Analysts had been expecting a loss of $0.02 a share on revenues of $84.2 million

In the earnings report, Yelp reported earnings of $3.6 million, or $0.05 a share, compared with a loss of $2.3 million, or ($0.04) a share, the year prior. Revenues were $102 million, compared to $61.2 million the year prior. Analysts had been expecting profits of $0.02 a share on revenues of $99 million

Yelp’s biggest problem was guidance for the fourth quarter, with projections of $107 million missing earlier expectations of $111 million.

Both stocks dove, with Angie’s List dropping 19.44 percent to hit $6.67 a share. Yelp dropped more than 15 percent in after-market, settling at around $60 a share.

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