Based in Indianoplis, Indiana, Angie's List (proposed ANGI) scheduled a $106 million IPO with a market capitalization of $667 million at a price range mid-point of $12 for Thursday, November 17, 2011.

SUMMARY

With one million paid memberships ANGI’s stock is expected to do well the first day, just like all the other internet-based stocks with large lists of customers, such as Linkedin (LNKD), Groupon (GRPN), Pandora (P), Zillow (Z), Renren (RENN), HomeAway (AWAY), Demand Media (DMD), Yandex N.V. (YNDX) and Active Network (ACTV).

OBSERVATIONS

ANGI would like to be compared to Amazon, which invested heavily in customer acquisition before becoming profitable. ANGI’s hope is that customers, once hooked, will open their wallets in the future for ANGI’s advertisers.

The investor question is when can ANGI become breakeven – that depends on how ANGI manages its income statement. Once profitable ANGI could be worth much more than its IPO price, but is that in 2012 or 2013 or when?

FINANCIAL RESULTS

For the nine months ended September 2011 ANGI’s revenue increased 47% to $63 million from $43 million, compared to the year earlier period.

For the September nine months ANGI spent 113% of revenue of sales and marketing, as losses increased 126% to $43 million from $19 million. Cost of service delivery was 20% for nine months ended September 2011..

As a result of increased sales & marketing expenditures, ANGI surpassed 1,000,000 paid memberships in October 2011. For the nine months ended September 2011 the first year renewal rate was 76%. Service provider advertisers, account for 62% of top line revenue; memberships account accounted for 38% of revenue for the September 2011 nine months.

VALUATION

On an income statement basis ANGI is hemorrhaging losses now. Because members pay up front, ANGI’s cash flow is better than it appears on an income statement. ANGI’s price to sales is 7, Groupon’s is in the 9 range. ANGI’s loss rate is much higher than Groupon’s but ANGI has a more loyal subscriber/customer/member base than Groupon, and ANGI a relatively high average renewal rate of 79% for the nine months ended September 2011.

Valuation Ratios	IPO Mrkt	Price /	Price /	Price /	Price /	% offered
Annualizing Sept 3 mos	Cap (mm)	Sales	Earnings	BookValue	TangibleBV	in IPO
Angie's List (ANGI)	$667	7.0	-10	24.3	26.1	16%

On an income statement basis, ANGI seems overvalued based on continuing losses.

Quarterly results	June '10	Sept, '10	Dec, '10	March, '11	June '11	Sept '11
Revenues ($mm)	$14.5	$15.5	$16.1	$17.6	$21.0	$24.0
Revenue increase over prior qtr		7%	4%	9%	19%	14%
Operating loss ($mm)	-$5.8	-$7.0	-$7.2	-$8.7	-$15.2	-$14.8
Net loss ($mm)						-$17.4
Net income (loss) %	-40%	-45%	-45%	-49%	-72%	-62%

However, with one million paid memberships ANGI’s stock is expected to do well the first day, just like all the other internet-based stocks with large lists of customers, which includes: Linkedin (LNKD), Groupon (GRPN), Pandora (P), Zillow (Z), Renren (RENN), HomeAway (AWAY), Demand Media (DMD), Yandex N.V. (YNDX) and Active Network (ACTV).

BUSINESS

ANGI operates a consumer-driven solution for our members to research, hire, rate and review local professionals for critical needs, such as home, health care and automotive services.

ANGI’s ratings and reviews, available only to members, help members to find the best provider for their local service needs.

ANGI allows local service providers who are highly rated by members to advertise discounts and other promotions to members.

FRAGMENTED MARKET

The local services market is large, highly fragmented and inefficient. According to ESRI Business Information Solutions, consumers spent more than $400 billion on local service providers in 2010, including remodeling services, furniture repair and cleaning, movers, appliance repair and pest control.

In addition, according to the U.S. Center for Medicare and Medicaid Services, in 2009 U.S. consumers and private health insurers spent more than $420 billion on physician and clinical services, dental services and services performed by other health care professionals. Millions of small businesses and health care professionals vie for those dollars every year.

VERY GOOD DEMOGRAPHICS

ANGI’s members represent an attractive, targeted group of consumers for service providers.

The typical member is between the ages of 35 and 64, is married, owns a home, is college educated and has an annual household income of at least $100,000, based on information derived and interpreted by ANGI as a result of ANGI’s own analysis from general demographic data provided by Nielsen.

In 2010, ANGI members averaged 11.4 unique searches per member for local service providers and 37% of our members wrote a review on at least one service provider.

REVENUE SOURCES

ANGI generates revenue from both members and our service providers.

Members

From members ANGI collects subscription fees and, in certain cases, non-refundable initiation fees for monthly, annual and multi-year memberships. These fees typically are charged in advance and recognized ratably over the subscription period and the expected life of the membership, respectively.

As of September 30, 2011, 87% of ANGI’s total membership base had purchased annual or multi-year memberships. These subscription fees represent a significant source of working capital and provided a relatively predictable revenue stream.

Service provider fees

From service providers ANGI collects money from term-based sales of advertising to local service providers.

Members grade local service providers on an "A" to "F" scale. ANGI invites local service

providers with an average grade of "B" or better and at least two reviews submitted in the last three years to advertise to members through any or all of ANGI’s website, email promotions, monthly magazine and call center.

As of September 30, 2011, more than 210,000 of the 815,000 service providers reviewed on Angie’s List were eligible to advertise with us. Approximately 10% of these eligible service providers were participating as advertisers at September 30, 2011.

Service provider contracts in effect as of September 30, 2011 had an average term of 14.3 months, can be prepaid or invoiced monthly at the option of the service provider and carry an early termination penalty.

SERVICE PROVIDER ADVERTISERS GENERATE 62% OF REVENUE

For the September 2011 nine months service provider advertising account for 62% of top line revenue.

Since 2008, service provider revenue comprised a majority of ANGI’s total revenue. ANGI is expanding its service provider sales force to continue to drive increased service provider revenue. ANGI expects service provider revenue to increase as a percentage of total revenue in the future.

ANGI’s high service provider renewal rates, both in number of service providers renewing and as a percentage of initial contract value renewed, provide ANGI with a relatively predictable revenue stream.

GROWTH PLAN

Increasing new paid memberships is the key growth strategy. Increased penetration in a market results in more member reviews of local service providers, which increases the value of ANGI’s service to consumers and drives further membership growth in that market.

Increased penetration in a market also drives increased advertising sales to service providers and supports higher advertising rates as the pool of members actively seeking to hire service providers grows.

To establish a new market, ANGI begins by offering free memberships and actively soliciting members’ reviews of local service providers.

As the number of members and the number of reviews of service providers grow, ANGI begins charging membership fees and offering advertising opportunities to eligible local service providers. Historically, ANGI has begun to convert most markets to paid membership status within 24 months after launch.

From January 1, 2008 through September 30, 2011, ANGI grew its operations from 45 to 175 paid membership markets across the United States.

Going for broke

"We expect marketing expense to increase in future periods as we accelerate our advertising spending to acquire new paid memberships." S-1 page 43 http://www.sec.gov/Archives/edgar/data/1491778/000119312511292292/d222159ds1a.htm

ANGI’s ability to increase advertising rates tends to lag increased penetration of its markets due to ANGI’s inability to increase rates under existing service provider contracts prior to renewal.

ANGI’s primary strategy for new member acquisition is national offline and online advertising. In 2010 and the nine months ended September 30, 2011, ANGI’s marketing expense was $30.2 million and $48.0 million, respectively.

COMPETITION

Traditional, offline competitors

ANGI competes for members with a number of traditional, offline consumer resources, such as the Yellow Pages and Consumers’ CHECKBOOK. Many of these competitors also have consumer reviews and information about service providers available online.

Online competitors

ANGI competes for members with "free to consumer" online ratings websites and referral services funded directly by service providers or by service provider advertising, such as ServiceMagic, Inc., the "Diamond Certified" directory operated by American Ratings Corporation, Yelp, Inc., Kudzu, an indirect subsidiary of Cox Enterprises, Inc., and Insider Pages, an indirect subsidiary of IAC/InterActiveCorp.

In Angie’s List Health & Wellness categories, ANGI competes for members with other online resources for patients, such as RateMDs, Inc. and Health Grades, Inc.

All categories

Across all categories, ANGI also competes with established Internet companies such as Facebook, Inc., Google (GOOG), Groupon (GRPN), LivingSocial, Inc., Microsoft (MSFT) and Yahoo! (YHOO).

USE OF PROCEEDS

ANGI expects to net $66 million from sale of 6,250,000 shares. Shareholders intend to sell 2.543,408 shares or 40% of the IPO

IPO funds are allocated to fund ANGI’s advertising strategy

to drive membership growth, for general corporate purposes, including working capital.

Angie's List	ANGI, C, 7					Post PO shares: 56mm
Consumer service reviews				Sept 9 mos	Sept 9 mos
Indianapolis, IN	2008	2009	2010	2010	2011	IPO Mkt
Revenues ($mm)	$34	$46	$59	$43	$63	Cap (mm)
Operations & support % of rev	36%	26%	21%	22%	20%	$667
Selling % of revenue	30%	28%	29%	29%	36%	@$12
Marketing % of revenue	44%	35%	51%	59%	77%
Sum of Ops, sales & mkty exp%	110%	89%	101%	110%	133%
Net loss ($mm)	-$20.0	-$12.0	-$27.0	-$19.0	-$43.0
Net income (loss) % of revenue	-59%	-26%	-46%	-44%	-68%
						% growth
OPERATING METRICS						2011 vs 2010
Total memberships	333,489	411,727	602,882	558,713	988,224	77%
Gross paid added memberships	193,011	219,140	355,580	270,588	557,061	106%
Marketing cost per member added	$77	$74	$85	$93	$86	-8%
1st yr membership renewal rate	$62	$67	$70	$70	$76	9%
Ave membership renewal rate	70%	73%	75%	74%	79%	7%
Participating providers	7,960	10,415	15,060	13,359	21,927	64%
Total service provider contract value	$22,489	$30,849	$43,050	$37,402	$65,104	74%
end of period, $thousands
Quarterly results	June '10	Sept, '10	Dec, '10	March, '11	June '11	Sept '11
Revenues ($mm)	$14.5	$15.5	$16.1	$17.6	$21.0	$24.0
Revenue increase over prior qtr		7%	4%	9%	19%	14%
Operating loss ($mm)	-$5.8	-$7.0	-$7.2	-$8.7	-$15.2	-$14.8
Net loss ($mm)						-$17.4
Net income (loss) %	-40%	-45%	-45%	-49%	-72%	-62%
Valuation Ratios	IPO Mrkt	Price /	Price /	Price /	Price /	% offered
Annualizing Sept 3 mos	Cap (mm)	Sales	Earnings	BookValue	TangibleBV	in IPO
Angie's List (ANGI)	$667	7.0	-10	24.3	26.1	16%
Valuation Ratios	IPO Mrkt	Price /	Price /	Price /	Price /	Stock
Annualizing June 3 mos	Cap (mm)	Sales	Earnings	BookValue	TangibleBV	YTD
SCORECARD		Mgt	Market	Market Do-	Proprie-	Total
1-5, 5 is high			Growth	mination	tary	rating
20 is perfect		2	2	2	1	7