Home Angie’s List Bets Wall St. Its Paid Membership Model Will Beat Yelp

Angie’s List Bets Wall St. Its Paid Membership Model Will Beat Yelp

This week two tech companies built on user-generated reviews but with very different goals made financial news. Yesterday, Yelp, the local recommendation site, filed its first major step toward going public. It wants to raise $100 million in an IPO. Angie’s List, which provides consumer reviews of services providers such as dentists and electricians, officially went public this past Wednesday. Its stock rose 33% and at the end of the day, the company was valued at $801.7 million.

Both Angie’s List and Yelp offer user-generated reviews, but there’s a key difference. Yelp had 61 million unique visitors as of the end of Q3 2011 and 22.4 million reviews. Angie’s List is much smaller, but it has more than one million paying members.

For Yelp, mobile is the key. It is banking on consumer location data, which gives the company further insight into its users, and can offer advertising options to local businesses based on that. Seventy-one percent of Yelp’s revenue comes from local advertising, 21 percent is from brand advertising and eight percent from “other services.” It relies heavily on Google for traffic, which is unfortunate, considering the fact that Google Maps just added a My Places tab so users can see reviews and other recommendations based on places they’ve already shared.

Angie’s List is focused on consumer reviews for home and service providers. The majority of Yelp’s reviews are for shopping and restaurants. The two companies are not actually direct competitors. Here’s a breakdown of Yelp’s review types from its S-1 filing.

Angie’s List focuses on home and local services, auto and health, which only make up 19% of Yelp’s reviews.

Compared to Groupon’s flashy daily deals and blinged out cat, Angie’s List feels pretty boring. Nothing is delivered daily. And more importantly, there is no cat. Plus, Angie’s List began in 1995, and is not part of a consumer’s daily experience. The year 2010 brought a $27.2 million net loss on sales of $59 million. In the first nine months of 2011, it did bring in $62.6 million, but it still lost $43.2 million.

Angie’s List didn’t begin as a tech start-up. It started as a phone-in service, and went to the Web in 1999. Angie’s List offers free memberships to attract new users and reviews, and then, after two years of membership, that market converts to a paid member-base and Angie’s List cashes in. The site passed the one million membership mark in October 2011.

Consumers value things they pay for. Angie’s List members pay for their content. Yelp’s unique visitors and review writers do not. Angie isn’t the cool kid in the room, but her paid membership business model might just work.

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