Angie’s List Inc. is taking a page from the Groupon playbook to build its new e-commerce initiative into a genuine revenue generator.
The Indianapolis-based company for years has relied on memberships and advertising to drive its consumer-review service. By providing reviews of plumbers, mechanics and electricians, for instance, Angie’s List members can shop for recommended service providers.
But its e-commerce effort, which allows those providers to offer online deals directly to members, is starting to contribute to the company’s financial performance.
For the first time since its founding in 1995, the company in the fourth quarter reported a profit, earning $2.4 million on $46.2 million in revenue. Sales from Angie’s List’s e-commerce ventures known as Storefront and Big Deal accounted for 13 percent of the revenue.
While the figure still lags the company’s flagship service provider and membership revenues by a wide margin, it confirms to Angie’s List executives that the model can succeed.
E-commerce revenue for all of 2012 more than doubled from the previous year, to $14.5 million.
“This is the future of the business,” CEO Bill Oesterle said. “This is potentially transformational for us, and I don’t use those terms lightly.”
Oesterle founded Angie’s List 18 years ago and shortly thereafter hired company namesake Angie Hicks, whose pitches have become ubiquitous lately on certain cable television stations.
The company largely operated as a call center service in midsize cities such as Indianapolis; Charlotte, N.C.; and Cleveland before launching its website in 2001.
Angie’s List now operates in more than 200 markets, giving the company ample opportunity to shop e-commerce offerings to its 1.7 million members.
They either can receive e-mailed coupons promoted as the Big Deal or visit the Storefront on Angie’s List’s website to shop for discounts ranging from a $75 interior and exterior window cleaning to a $1,299 exterior house painting.
Angie’s List takes a commission on each transaction. Oesterle declined to divulge rates but said the amount varies by service category and geographic region.
The Groupon-like deals that Angie’s List e-mails to members accounted for much of its e-commerce revenue last year, Oesterle said, though the company thinks its Storefront ultimately will become more popular.
In a recent report, Deutsche Bank mentioned Angie’s List’s partnership with San Francisco-based Square Inc., in which the bank said the collaboration should help Angie’s List “capitalize on its larger ‘Storefront’ initiative.”
Square’s electronic payment service allows users to accept credit cards through mobile phones. The partnership enables Angie’s List service providers to collect payment and feedback from members who purchase deals electronically.
Oesterle views the e-commerce initiative as a natural extension of Angie’s List.
“We have all these people who come to our site to find good service providers, but they’d have to leave to consume the service,” he said. “Now we have a checkout lane where you can complete the transaction.”
Nolan Taylor, an assistant professor of information systems at Indiana University Kelley School of Business in Indianapolis, thinks Angie’s List can find a niche among a crowded field of competitors.
Besides Groupon, others include Deal Chicken and Living Social. But Angie’s List might have an advantage, he said.
“It’s almost like purchasing security,” Taylor said. “You’re buying something that’s been reviewed by people with similar interests, unlike Groupon, where you have to use personal knowledge or outside reviews.”
Yet some of the more expensive deals, such as the $1,299 house-painting, might not be as attractive to consumers who typically get several estimates before dropping that much cash, Taylor said.
“If I see a dinner for $20, I don’t have to do a lot of budgeting for it,” he said. “But if I’m looking to get a whole new roof for my house, seeing a deal probably isn’t going to affect my response much. These are big-ticket items.”
Oesterle acknowledged that certain products and services sell better than others. Carpet-cleaning is performing “unbelievably well,” he said, “because a lot of people need it and it’s pretty well-understood.”
Angie’s List also is pleased with the renewal rates from service providers that use the e-commerce services, Oesterle said.
One of them is Chris Cunningham, who owns Service Plus, a heating, cooling and plumbing company with locations in Fishers and Avon.
He’s advertised deals through Angie’s List since the start and said he’s redeemed more than 1,000 of them. His first deal, an air-conditioning tune-up, resulted in 150 service calls.
The key for Cunningham is to convert first-time calls to repeat customers.
“Not a day goes by without one,” he said.•