Bloomberg News

As far as ANGI Homeservices (ANGI - Get Report)  and its new CFO are concerned, Amazon.com (AMZN - Get Report) is still a much smaller rival than offline referrals as a whole, and the company still has a lot of headroom to take share from its top rival.

Background

Like Match Group (MTCH - Get Report) , ANGI is a subsidiary of Barry Diller's InterActiveCorp (IAC - Get Report) . The company owns Angie's List and HomeAdvisor, the two biggest U.S. marketplaces focused on connecting homeowners with home improvement and repair service providers. It also owns several other businesses in the home services space; these include mHelpDesk, a field service software platform; Handy, a provider of home cleaning and handyman services; HomeStars, a Canadian home services marketplace.

ANGI monetizes Angie's List by selling ads that help service promote themselves on the marketplace, and (though it began letting users see reviews and other content for free in 2016) by charging consumers for premium subscriptions that provide features such as discounts, service quality guarantees and customer support. It monetizes HomeAdvisor by charging service providers a membership fee, and also for each lead generated through the platform.

On a pro forma basis that includes both Angie's List and HomeAdvisor's 2017 revenue prior to their Oct. 2017 merger, ANGI's revenue rose 19% in 2018 to $1.14 billion. A 33% increase in "Marketplace" revenue, which covers HomeAdvisor and Handy, offset a 9% drop in "Advertising and Other" revenue, which covers Angie's List, mHelpDesk, HomeStars and local advertising platform Felix. The company has set a 25% long-term revenue growth target.

I recently had a chance to talk with Jamie Cohen, who on Tuesday was named ANGI's CFO after having previously served as the company's EVP of Finance and Accounting. Here's a recap of Cohen's comments on several subjects.

Taking Share from Word-of-Mouth Transactions

Though Amazon launched a home services marketplace in 2016 and firms such as Yelp and Alphabet/Google (GOOGL - Get Report) also provide a measure of competition, Cohen insists that home services transactions relying on word-of-mouth remains ANGI's biggest competitor, and estimates that 90% of home services jobs still rely on it. "Our biggest opportunity is to move that word-of-mouth online," she said.

To do this, Cohen added, ANGI has been trying to make the process of switching from word-of-mouth to an online marketplace as effortless as possible by providing background screening, user reviews and other resources.

Along similar lines, IAC CEO Joey Levin estimated on ANGI's Q4 earnings call that the average U.S. homeowners "does about six to eight jobs a year," with the number going up to "a dozen or so" if one counts smaller maintenance and repair jobs.

"Right now, we do about 1.8 jobs [per year] for each of our customers," Levin said. "But...as we take friction out of the process, we can drive closer to that 6 to 8, and then help homeowners drive closer to the dozen jobs that they actually should do."

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Returning Angie's List to Revenue Growth

As the 2018 drop in "Advertising and Other" revenue signals, Angie's List revenue has been pressured by declining consumer membership fees following Angie's 2016 decision to let users see reviews for free. However, after having owned Angie's List for more than a year, Cohen says her firm is now "optimistic" that Angie's List can return to growth within the next 12-to-18 months.

Making Inroads With Millennials

"Our core [demographic] has always been homeowners, which tend to skew older, but we see enormous opportunities with Millennials," Cohen said, given that the internet is often "their go-to resource for researching a question or finding an answer." As Millennials start becoming the majority of home buyers, ANGI's sees the shift towards online home services platforms accelerating.

The Handy Acquisition

Cohen called ANGI's late-2018 acquisition of Handy "a relatively small tuck-in purchase." But she added that the platform is seeing a "very, very high" fulfillment and satisfaction rate for its services, and sounded upbeat about the deals Handy is striking with online retailers such as Wayfair (W - Get Report) to give consumers an installation option for purchases. "It's becoming...de facto for retailers to offer that delivery and installation [option]" she said.

Growing Sales and Marketing Spend

"I think we'll continue to see meaningful investment" in sales and marketing spend, Cohen said. She indicated branding efforts via advertising channels such as TV and radio will particularly be an area of emphasis, and noted that HomeAdvisor has seen good returns on recent TV ad investments.

On a GAAP basis, ANGI's sales and marketing spend totaled $541.5 million last year, and was equal to 48% of revenue.

Driving More On-Demand Transactions

In its Q4 shareholder letter, IAC said one of its 2019 goals for ANGI is to drive more on-demand and pre-priced transactions on its platform. When asked about what portion of transactions currently fit this description, Cohen declined to share a number, but did say that such transactions, which of course work much better for certain types of home service jobs than others, could eventually be a quarter of ANGI's business.

Cohen also mentioned that ANGI charged 1.5 times as much for on-demand transactions as it does for its core matching service. "We're constantly looking at our pricing, and that's something we do very granularly," she added.

M&A Efforts

IAC also said in its Q4 letter that it plans for ANGI to "enter adjacent categories through M&A" this year. The company has already struck one deal so far in 2019, buying home repair and warranty service provider Fixd Repair.

"I think we're looking at any opportunities that...continue to emphasize our presence in the home, and how we can reach homeowners and increase our frequency with them and top-of-mind awareness," said Cohen when asked about which types of firms ANGI could acquire going forward. Regarding the Fixd Repair acquisition in particular, she called home warranty services "a very natural and interesting space" for ANGI to be involved in.

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