Summary
- ANGI Homeservices has changed its business model to fixed fee for services, which should result in a higher take rate.
- The company is now focused on monetizing Vimeo's subscriber growth.
- Care.com is now focused on short term child care needs which should reduce churn rates.
- IAC/InterActiveCorp (IAC) is a conglomerate with an attractive mix of holdings with huge addressable markets and newly developed plans to monetize the growth.
- The top three most important holdings in the IAC portfolio should ensure that IAC achieves a five year CAGR of 10% at a minimum.
ANGI Homeservices
IAC’s largest holding is ANGI Homeservices (ANGI), which makes up 51% of total revenue. ANGI is a marketplace for fixed price home services. This is a highly fragmented market on both the supply and demand side. Home services has a large total addressable market (NYSE:TAM). Home service jobs are “old school” in that word of mouth drives marketing and scheduling and negotiating is done over the phone. It has been estimated that 90% of these transactions are still conducted offline.
ANGI's strategy is to remove the friction from the home service job market. The company now has a fixed price offering that is totally transparent. Many people are reluctant to hire someone for routine maintenance job as everyone has experienced sticker shock. You hire someone to clean the eavestroughs and next thing you know you are saddled with a thousand dollar bill.
The TAM for home maintenance jobs is enormous at $400 billion. Although ANGI is the leader of the market, it still only has 3-5% of the market for home service professionals. In other words, ANGI controls 30-50% of the online market. There is a good runway for growth.
Like any marketplace, liquidity is key on both the demand and supply side of the coin. ANGI believes that the supply side liquidity will be improved as they move from the "lead gen" business model to the fixed price model. Now a plumber can benefit from having scheduling, billing and collection totally automated. Tradespeople were not fond of the "lead gen" model as you would end up paying for leads that did not transpire into any business.
The market is still valuing ANGI's earning projections based on the lead gen model that is only a mid-single digit percentage of the job value. However, the take rate with a fixed pricing model is 2-3 times greater. The operating margin under such a scenario would rise from 3% in 2019 to 12% in 2024. With the huge addressable market and improved value proposition for home service professionals ANGI is being underestimated by the market.
