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Angie's List Falls on Price Cut News

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Shares of Internet software & services provider Angie's List, Inc. (ANGI - Free Report) closed 17.5% lower at $17.31 on Oct 3. The fall in stock prices was attributable to a Wall Street Journal report that cited the company’s CEO of disclosing a plan to reduce new annual membership fees by 75% from $40 to $10.

Headquartered in Indianapolis, Ind., Angie's List is a subscriber-based consumer-driven service provider that offers online access to business ratings and reviews. Its members can review services in 550 categories ranging from dentists, doctors, veterinarians, gardeners, plumbers and other businesses.

Angie's List went public in Nov 2011. The company reported a loss during second quarter 2013 as per-subscriber fees declined to $31.72 from $49.57 in fourth quarter 2010. The strategic move to reduce annual membership fees is perhaps aimed to arrest the dwindling revenues from subscribers and attract newer ones.  

In addition, newer subscribers would increase its overall subscriber base and improve its bargaining power for higher ad prices from service providers who advertise on the site. Incidentally, ad revenues from service providers increased to $79.36 per subscriber in the last reported quarter from $66.55 in fourth quarter 2010.

The decision to lower membership fees could have been also spurred by a stiff competition from other players in the market such as Yelp, Inc. (YELP - Free Report) and Google Inc. .

Angie’s List will continue to renew membership fees for new customers at the reduced rate. However, for existing subscribers, renewal will be based on the existing higher prices and could be adjusted on a one-off basis on customer complaints. Moving forward, the company might remove this price anomaly to ease out customer reprisals.  

Angie’s List currently has a Zacks Rank #3 (Hold). Another notable company in the industry worth mentioning includes Brightcove, Inc. (BCOV - Free Report) , which carries a Zacks Rank #2 (Buy).

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