While it’s too early to tell exactly what HomeAdvisor will do, there are most certainly big changes coming, and home service contractors need to be prepared—let’s look a few headlines:
Angie’s List Agrees to be Acquired
According to USA Today, on Monday May 1st, Angie’s List agreed to be acquired by IAC—the parent company of rival HomeAdvisor—for more than $500 million, which is $12M less than IAC offered struggling Angie’s List around 18 months earlier. The new deal is expected to close in the fourth quarter of 2017.
Ken Copley, an analyst and portfolio manager with Capital Executive LLC who follows Angie’s List said, “There will be cuts…You don’t make an acquisition like that and keep everything intact.”
In July 2016, Angie’s List changed its model, offering free membership in efforts to combat its dwindling user base. In the same year, Angie’s List lost $7.9 million.
Some of Our Own Observations
Just one month earlier in June, we questioned our local reps at Angie’s List when we saw a significant drop in leads for one of our HVAC clients.
The response was that Angie’s List was experimenting with their website model. The timing seemed very unfortunate, given that many home service companies rely on the summer season for a significant portion of their annual income.
Fortunately we already had a contingency plan in place—we had already implemented a lead tracking system for our home service contractor clients and could respond with other marketing initiatives to make up the difference. Our clients still finished the year strong despite a significant drop in leads from Angie’s list compared to 2015. As an additional consideration we also had to reassess the value of the Angie’s List program since the cost-per-lead had increased—less leads at the same cost equals higher cost per lead, which is not good news.
Cuts and Price Increases?
If you just spent $500M on a business that lost $7.9M what would you do? We can’t possibly comment on IAC’s actual plans, but if it were me, I’d be looking to reduce expenses and increase revenues—very likely through price increases.
The analysts are assuming cuts, which is a normal part of any acquisition as overheads are consolidated. According to Bloomberg, “IAC expects to be able to cut annual costs by $100 million to $250 million by the end of 2018.”
We can also expect some degree of turmoil as the two companies sort through their business plans and strategies.
Contractors—How Should You Protect Your Business Interests?
My first advice to the owners of Home Service Contracting Companies is actually no different from before this announcement, it’s just now more urgent—establish ways to measure the performance of your marketing programs. In addition, you now need keep a very close eye on Angie’s List and HomeAdvisor lead generation performance.
If you are not sure how measure marketing performance we can help you.
The cost of Angie’s List and / or HomeAdvisor is typically a significant line item in the marketing budget, and it’s about to come under some pressure—which leads to my second recommendation: build a contingency plan—do not leave all your eggs in one basket.
Even if the acquisition goes well, you will be strengthening your lead generation base regardless.
To learn more about building your Angie’s List contingency plan, schedule an appointment with our Home Service Contractor Marketing Consultants today. Call 703-988-9896.