MAIN ST. USA

Is Angie’s List Making Business List Owners Pay for Top Spots?

Angie’s List built its reputation on being a grassroots, trustworthy review site. But some business owners and former employees claim it’s anything but.

Photo Illustration by Sarah Rogers/The Daily Beast

Angie’s List built its $363 million empire on a friendly-faced Midwesterner delivering a simple promise: “Reviews you can trust.”

With a toothy grin and a knack for a good deal, Angie Hicks and her ratings website for local businesses became the “darling of Main Street USA.” Hicks giggles spontaneously, wears a single pearl necklace, and assures Americans that when they’re ready to spend money on home repair or health care, she’ll make sure “it’s money well spent.”

A small town girl turned Harvard-educated businesswoman, she’s a force America loves to believe in. Based on the site’s 3 million paying subscribers in 200 cities and businesses in 700 categories, they do.

The company she helped build from the ground up defines itself as a place where “real people” leave “real reviews” for everything from dog walkers to carpenters. It’s a site where the “members come first” and their trust is the “number one priority.”

But a Philadelphia woman punched holes in the airtight model this March, alleging that the company “does not help members find the ‘best’ service provider, but rather the one who paid the most money to Angie’s List.”

The plaintiff, Janell Moore, who filed the class action suit in March, says she became suspicious of Angie’s List after a contractor she hired from the company failed to finish remodeling her kitchen and refused to refund her $4,000. Moore claims it was only after leaving a negative review of the company that she was able to see other negative reviews, which led her to believe that the rating system wasn’t done fairly.

“Angie’s List falsely assures consumers that ‘service providers cannot influence their ratings on Angie’s List,’” reads an opening section of the 28-page complaint. “These and similar statements dupe potential and existing members into believing that Angie’s List reviews, ratings, and search results are valuable and trustworthy because they reflect unfiltered feedback of consumers, for consumers.”

After two months in court, Angie’s List filed a motion to dismiss on May 13, 2015, citing—among other things—Moore’s inability to “fairly trace” injury to their advertising model. In a section titled “How Angie’s List Works,” the company says that it’s transparent about money being involved in its rating mode. “Members are expressly told that service providers may pay to offer such promotions and that as a result they may be placed ‘at the top’ of search results,” the motion for dismissal reads.

In August, the case was transferred to Judge Stewart Dalzell, who suggested the case “had teeth.” He’s ordered a settlement conference for October 26, 2015.

***

Questions about the authenticity of Angie’s List have been around for years, fueled by the company’s revenue stream, which relies heavily on advertising. In 2014, for example, 76 percent of the company’s $315 million total revenue came from service providers (advertising). Twenty-three percent came from membership.

Similar numbers raised flags for Consumer Reports’ Jeff Blyskal, who reviewed the site along with Yelp and others in 2013. “[Angie’s List] makes a big point to say they’re consumer-driven, when in fact 70 percent of their revenue comes from advertising,” Blyskal wrote. “It’s not advertising Coca Cola, it’s advertising from the companies they rate.”

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A spokesperson for Angie’s List at the time called the allegations “baseless,” and pointed to the company’s public SEC filings, which “contain robust disclosures regarding its operations.”

Moore’s lawsuit echoes Blyskal’s concerns. “Angie’s List secretly alters the order in which service providers are listed… [It] ranks service providers based on how much providers pay in ‘advertising’ fees,” the suit reads. “A plumber with an ‘A’ rating and all positive reviews… who did not pay any ‘advertising’ fees will be ranked below a plumber who did pay ‘advertising’ fees but has worse reviews or ratings.”

While awaiting a settlement, Angie’s List continues to push forward, even emailing users offering a “movie on Angie” if they refer a member. Looking back at the company’s history, the roots of the “people first” model it promotes become clearer.

***

On a page titled “our story,” the company’s history is written like a storybook. It was the brainchild of William Osterle, a venture capitalist from Indianapolis who was struggling to find a heating and cooling contractor for a house he was remodeling in Ohio. Since the 1970s, Indianapolis had circulated a newsletter called “Unified Neighbors,” which provided reviews on local contractors. Columbus, he decided, needed one too.

To get the business off the ground, he enlisted the help of a former intern who had worked at his firm—one he’d remembered as “exceptionally smart and hard-working.” Her job, going door-to-door looking for members, required not only brains, but humility. Hicks, a native of Fort Wayne, Indiana, and a first-generation college grad, fit the bill.

“Columbus Neighbors,” as it was then called, started off slow as a newsletter circulating around the few neighborhoods that joined. Over time, thanks to the Internet, it grew—becoming a fully interactive site by the early 2000s. When it came time for an official name, Osterle dedicated it to the woman who marched it into homes across America: Angie.

By October 2001, with 100,000 members, it was added to Inc. 500’s list of fastest growing companies and, following a decade of steady growth, went public in 2011. In November 2014 it was named one of the fastest growing companies in North America by Deloitte.

This January, the company made headlines for several milestones: 1,950 employees, a new mobile iOS app, and 3 million subscribers nationwide. In March it made the rounds on Twitter again when CEO Osterle withdrew the company’s applications for a $40 million downtown headquarters in response to Governor Mike Pence’s passing of the Religious Freedom Restoration Act. Osterle’s response to the act was motivated by concern that the legislation would allow for discrimination against members of the LGBT community.

The incident inspired Osterle to step down as CEO in April and pursue state politics in hope of fixing the “damage” the bill did to Indiana. Angie’s List has yet to replace Ostelere, tapping Chief Operating Officer J. Mark Howell as temporary CEO. This month it seems to be gunning for more positive press, announcing the “first annual service industry job fair,” hosted by Angie herself.

Moore’s lawsuit may very well get the company publicity—just not the kind it wants. If the hundreds of complaints written about in Consumer Affairs are any indication, Moore may not be the only one that has a beef with the company.

“I have had zero spike in my business despite multiple claims from AngiesList rep Jackie** that the money I pay them every month is doing anything for me,” George from San Francisco wrote on August 11. “Angie’s List sales reps call 4-5 times weekly and email constantly. I told them to stop calling me, which only lasted briefly. Talking with them about their advertising services is like speaking to a cult member who’s trying to lure you into their conclave,” Clint from Nashua, New Hampshire, wrote on August 4.

Not all the reviews are negative. On February 23 of this year, Charlie from Millbrook, Alabama, gave the company five stars, writing: “Angie’s list has been the best advertising outlet we have ever used and we have serviced 1,000s of customers through them…The Reason we have GREAT reviews is because we take care of our customers and they in turn give us GOOD REVIEWS.”

Stanley Genadeck, owner of a landscape and construction business in Minneapolis (whose company has a 5-star rating on Google) says he is an active “advertiser” with Angie’s List. After a few positive reviews on his page, reps called asking if he’d be willing to pay $33,000 to stay at the top of the page. Genadeck, who talked them down to $3,000, created a YouTube video to help protect other business owners from spending too much.

His monthly fee of $581.51 comes in the form of an invoice with the description “AL.COM Web Ad” and a reminder to make checks payable to “Angie’s List.” He says the money is the key to getting “optimized”—positioned higher on the site so that you’re one of the first to show up when members search. “When you pay them, they take the keywords that make you sound like a superhero and put them in big bold letters,” he says.

While Genadeck thinks the “advertising scheme” is shady, he doesn’t think it’s illegal. “There’s absolutely no lying. You cannot pay to be on Angie’s List, but as soon as you get two reviews… the sales reps are calling you,” he says. “It’s the hunter-gatherer sales model—they go for the jugular. They are trained to go for the absolute most they can get, whether that’s in the contractor’s best interest or not.”

After watching Genadeck’s YouTube video, which has racked up nearly 3,000 views since February, a former employee named Bill Ross called Genadeck to clarify a few things and offer more help for how to save money.

Ross was hired as a sales representative in May 2013, with little to no experience. His time at Angie’s List, which he elaborated on for Genadeck, Moore’s attorneys, and now me, lasted just 10 months. In July 2014, he was fired for failing too many times to meet his monthly goal. Ross admits he “wasn’t good at sales,” and that his firing was warranted.

He says he was reluctant to give his full name and to speak about his time there in general. He claims his intention is not to “destroy the company,” but rather to help small business owners from losing money. “I wanted to add transparency to the process for Service Providers because they actually do something,” he tells me. “They fix or build something. I just want them to know more so they cannot be cheated.”

***

On May 5, 2013, Ross’s first day at Angie’s List, he was ushered into an orientation with 95 new hires—29 of them sales reps. “It blew me away,” he tells me over the phone. “How could your company be growing so much that you need to add 29 salespeople at one time?”

The orientation lasted two weeks, with the final days spent making phone calls with supervisors near the sales area—a place internally coined the “bullpen.” Each month graduates were placed on teams and assigned a “territory” with anywhere from 400 to 900 clients. He said company policy mandated that anyone who didn’t sell $7,500 worth of products in 80 days (including the 14 training days) be fired.

Each rep was a given number to quote to each company, but told that sticking to it was not a requirement. “You could add 100 percent to it and just the same you could discount it,” he says. “Price was an illusion.” He says the phrase “you can never quote to high” was used frequently—even displayed on an LCD monitor in the sales department. “If there’s a dog walker and I could get $10,000 out of them, I would try,” he says.

Over time, the tactics ate away at him, he says. “It was difficult for me to keep my integrity and feel like I was being fair. When I struggled with the moral and ethics of selling what I felt was overpriced advertising, I was told that I couldn’t be sure it wouldn’t work and that as long as they were happy it didn’t matter. I suppose to a certain degree that was true.” As long as no guarantees were made, he said, generalities were encouraged.

At the end of the month, each rep changed territories, adopting the clients another had failed to sell. With two other departments selling special “deals” to the same list of clients, repeat calls were frequent—and, to the clients, infuriating. “Angie’s List is a relatively well known name,” he says. “If you’re getting three calls a week with different sales people, you don’t understand what the company does anymore,” he says.

Ross worried the company was exploring ways to unfairly target small business owners who didn’t pay to be on the list—people he says top management referred to as “freeloaders.”

It’s unclear to Ross where exactly the “optimizing” strategy came from, and when. He says he worked on a great team with “wonderful people” who tried to look past the fact that their product was vague and their methods, in his opinion, less than genuine. His direct manager was one of the “best people” he’s ever worked for, he says.

Ross claims met Angie “a couple times” but wasn’t convinced she played a major role. “She was nice, but she was a figurehead. She’s not a person who says: ‘This is the plan, this is how we’re moving forward,’” he says. “She does corporate speak and ‘brand ideal.’ If you eliminated her job I don’t think the company would change.”

In Ross’s mind, it was the co-founder, Osterle, who was more likely to be driving the advertising ship. Osterle, he says, took high-performing sales reps on “lavish” vacations and gave them $1,000 bonuses for every $5,000 sale. He hosted a service provider conference complete with musical entertainment guests like Train, and charged business owners hundreds of dollars to come. “I think he fancied himself a Jeff Bezos,” Ross says.

After three warnings for not meeting his goal, Ross was fired—writing he claims he had seen on the wall months before. These days he works as an advertising sales rep for a newspaper. Ross’s perception of the company is impossible to separate, entirely, from his firing.

The careers page on Angie’s List website shows several employee testimonies that run in stark contrast to his statements. “I am extremely proud to be a part of a forward thinking company that’s glowing with innovation, determination, and the persistence to always offer the best,” says Erin Beckman from advertising sales. “Daily, I am surrounded by an energized pulse of creativity, genuine interest, and support.”

After reviewing Ross’s allegations, a spokesperson from Angie’s List sent the following statement: As we understand it, the statements were made by a former employee to an attorney who is actively engaged in litigation against Angie’s List, and should be considered in that context. Many of the statements are untrue and others are taken out of context such that they are misleading.”

The attorneys for Janell Moore did not return The Daily Beast’s request for comment.

Correction 8/21/15 12:53 PM: A previous version of this article stated that 73% of Angie’s List revenue in 2014 came through service providers’ advertising and 30% from membership. In reality, 76% of the 2014 revenue came from service providers' advertising and 23% through membership.