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I’ve been seeing a lot of interest in $ANGI in my small corner of FinTwit. Bull thesis seems to be pretty standard platform stuff: offline-to-online conversion, 2-sided marketplace, reduce friction for homeowners, so on so forth.
All of this sounds good, but I am skeptical on the stock because of the other part of the 2-sided marketplace: the contractors themselves. After having spent a day among the "indigenous population" on forums like contractortalk.com, my impressions of contractors are:
1. The ones who post are super distrustful + entrepreneurial: prefer to build a website and handle SEO themselves rather than pay for PPC, and if they do use PPC, they really like FB for the targeting (and oddly Bing (!) of all things for the cheapness)
2. Have low capacity, don’t really look to expand once they hit their desired income level
3. Word of mouth is widely regarded as best ROI in marketing, but doesn’t scale well – inability to scale doesn't matter because of point 2
3. Word of mouth is widely regarded as best ROI in marketing, but doesn’t scale well – inability to scale doesn't matter because of point 2
4. They dislike the customers that are on lead generation services because those customers tend to be extremely price sensitive
5. Established contractors all seem to have a Rolodex of customers that provide regular enough work.
5. Established contractors all seem to have a Rolodex of customers that provide regular enough work.
All of these taken into consideration, I believe the TAM is significantly smaller than the $400 B that IAC gives; ANGI is going to be used as a crutch by the bottom ~50% (maybe lower) while they build up their own books.
If this plays out, customers will be displeased because only the lower quality/inexperienced contractors will list on ANGI. Meanwhile, for those that do opt to use ANGI, I don’t see anything preventing contractors from moving offline after getting a customer’s contact info.
In addition, you don’t really have network effects either as you build up the database – any network effects that exist are going to be purely local, simply because contractors already have their own “turf” and they can't really expand their radius.
Long story short, I can’t think of any particular reason for TAM penetration, user retention, and/or engagement to actually move up over time consistently. If I'm missing something, please let me know!
