Angies List Ratings Given High Marks by Auditor

picture-31According to a press release I received this morning:

The processes Angie’s List relies on to provide reliable, fair and accurate consumer ratings on local companies have been certified by BPA Worldwide, an international, independent auditing firm.

Angie’s List, the nation’s leading provider of consumer ratings, was last reviewed by BPA in 2007, earning high marks for fairness. The current audit covered the company’s activities through February 23, 2009.

“In our opinion, the Angieslist.com service follows a consistent, documented set of techniques and processes to present fairly, in all material respects, the ratings and input of the site’s members,” BPA said in its letter apprising Angie’s List of its findings.

“Our audit included examination of member feedback for service providers that advertise with Angie’s List and service providers that do not advertise with Angie’s List.  We found no variation in processing member feedback for all service providers,” the auditor said.

AngiesList reports 750K members. That’s a fraction of the 25+ million users on Yelp or Citysearch. But AngieList doesn’t have to sell ads to SMBs (there is some advetising in the printed magazine). Fees vary by market but in my area they’re $6.95 per month. Assuming members pay an average of $5 per month, that would mean roughly $45M in annual revenues. It’s likely lower than that because of discounts and other factors. But that’s still very healthy revenue.

Angie also writes a blog. What about Twitter? :)

Reviews have become increasingly important, both in terms of consumer reliance upon them for decision support but also as Google starts to factor in this information as part of its organic local ranking algorithm.

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13 Responses to “Angies List Ratings Given High Marks by Auditor”

  1. Rob Shields Says:

    In addition to subscription fee revenues, Angie’s List also generates revenue from businesses who pay for things like ads in the member magazine, page of honor nominations, the rights to display Super Service Awards, and for the premium placement in their lists (which requires businesses to offer members an special offer). Though these revenues are not as significant as those generated by the member fees, they are probably not insignificant. On the whole, I think your estimate sounds about right +/- 10%.

  2. Greg Sterling Says:

    thanks Rob. At a time like this the subscription model, which seemed maybe foolish in the past, now looks much more attractive.

  3. Rob Shields Says:

    I agree. Although, frankly, I don’t really get why their members are willing to pay for access to reviews on Angie’s List. Personally, I don’t see a stark difference in the quality of reviews that I read on Angie’s List and those of other free review sites. Angie’s List doesn’t seem to have an substantial advantage in terms of quantity of reviews either. I must be missing something.

  4. Greg Sterling Says:

    Angies List is like consumer reports in a way; it’s been doing this longer than anybody else and has acclimated people to the idea of paying for the service although there are ready alternatives.

  5. Steve B Says:

    I’ll be surprised if Angie’s List is still a subscription business in a couple of years. I think it’s harder to run a “consumer report type” business with so many strong local sites — yelp, citysearch, kudzu etc etc …

  6. Brian Sharwood Says:

    The issue I see with Angies List is that customer not only pay to read reviews, but they pay to write them as well. So if I have a bad experience with a contractor or home improvement specialist, and want to let the world know, I’m not going to dole out money to just speak my mind. It skews the content in a particular direction. We’ve talked to contractors who will actually pay for their customers’ Angie’s list account, just so they can get the review. Sites like ours, at HomeStars.com are free both to users as well as reviewers. Our model is similar to Yelp, and we, of course, feel the pressure from the advertisers, but it only takes a little explanation to let them know that by altering or removing reviews devalues the site, and they won’t benefit from their listing anyway.

  7. M. D. Vaden of Oregon Says:

    One defect with Angie’s list, is layman judging professionals. There could be plenty of homeowners giving great reviews to companies that don’t deserve it.

    Let me take lawn care for example.

    Maybe a company keeps a lawn really green looking and weed free for a year – so the homeowner gives sterling remarks about this lawn service.

    What the homeowner may not know, is that herbicides were applied double rate, and although the grass looks great, the trees in the lawn are starting to have problems they did not detect. Also, ryegrass needs 8 lbs. of Nitrogen per 1000 square feet per year, but fine fescue only needs 2 lbs. of Nitrogen per 1000 square feet per year.

    Suppose the lawn service is applying the same rate of fertilizer to both species of grass on a big lot, both grasses may look wonderfully green, but the fine fescue may be building excess thatch which the homeowner has no idea about.

    And yes – this happens. And because of a dozen real scenerios like this, I hardly put a grain of salt of confidence in online reviews similar to Angie’s list.

    And ask yourself, how do you really know if someone’s opinion is bogus or not, if they don’t post a copy of the contract for readers to review?

  8. Greg Sterling Says:

    There are always problems with the user-review scenario. However a consensus of reviewers (beyond one or two negative or favorable reviews) is likely to be accurate.

  9. Brian Sharwood Says:

    That’s what we see on our site. 1 or 2 reviews means the company has done a decent job before, 10-15 reviews means the company cares and looks after their customers. Yes, consumers will be wrong sometimes. But it is also up to the companies to really explain the product to their customers. In the end the satisfaction is with the customer.

  10. M. D. Vaden of Oregon Says:

    The “consensus” you mention, is the likely strength in the online review process. At least customers can be experts about what they consdier good customer service to be.

    A paid membership into a review site is an advancement over free review options. I’ve seen anonymous people on – say – Yahoo, post an identical, verbatim, negative review against half a dozen companies which they had not employed at any time. In a framework like Angie’s List, that is highly unlikely.

  11. Brian Sharwood Says:

    We’re pretty careful at HomeStars only to post reviews where a job was performed – or at least we try. About 75-80% of the reviews we post on HomeStars are for companies that have registered and are aware of the company, and they will tell us whether the job was or was not performed. We are also pretty good at catching duplicate content and removing it. It’s not good for us, nor for the readers, nor for the companies.

  12. Evan Conklin Says:

    I have years of experience with Angie’s List as a local plumber in Seattle. They have gotten money out of me and gave nothing in return except much trouble from customers that tend to be pretty passive aggressive. Angie’s List get paid on both ends – Any contractor listing you see is only visible to you if the contractor is paying Angie’s List through the nose. My cost for Angie’s List “hot leads” was $300 each. Testing Angie’s List cost me $7000 over two years. While paying such high costs for leads may work for a major construction project , it won’t work for a service call where we charge by the 1/4 hour.

    Google clicks have gotten as high as $38 per click here in Seattle when the search term used is “plumber” or “plumbing”. On the average it takes 15 clicks to get a call. Do the math on the cost to the guy ringing your doorbell.

    Angie’s List cost per job performed was 75% of my company’s average invoice total (about $400). My company does over a thousand jobs a year.

    Any homeowner service using this advertising method is paying way too much to maintain any integrity in the service. This type of advertising creating an incredible amount of pressure to convert to a commission-based high profit business model for basic traditional services. If I pay Angies List hundreds of dollars just to ring your doorbell how can I treat you fairly when your plumbing problem requires an hours work? I can’t so I cancelled my advertising contract with Angies List.

    Angie’s List uses a unique money making model that actually is a kind of pyramid scheme. They put all the local harvested contractors into their listings but you only will call highly rated ones. In order to be highly rated you must pay Angie Thousands of dollars a year for position in order to be seen AND time in grade is required to accumulate favorable reviews. Only a dozen or so can be in that position. The homeowner only calls the ones at the top so all new advertisers must invest thousands on continuing annual contracts to play the game on Angie’s List.

    My solution was to put up a free local business directory with the policy of no shills, no fake listings, no paid advertising just so my neighbors and the local small businesses here in Seattle could find each other. (www.SeattleOnly.com) It may take a while for the new directory to get any real traffic as it is dependent upon local participation by local businesses and consumers.

    In my opinion, it is time for both local business and consumers to get control over how we find our services and customers as the marketers are hijacking the business to consumer relationship and forcing costs so high that nobody can bear the costs.

    Question: Why should we need out-of-state corporations to connect homeowners to services down the street? Surely there is a simple, inexpensive way for us to know our neighbors and small businesses. We all need to put a little thought and effort in that direction.

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