Washington, D.C. – A new report by the Consumer Federation of America – Angie’s List: An Evaluation of Its Usefulness for Consumers – provides a detailed assessment of this online rating service that documents many shortcomings but also explains its potential value to consumers.  This report is the first in a series evaluating online services rating local service providers.

Angie’s List, founded in 1995, was originally supported mainly by annual consumer subscriptions and prioritized service to these subscribers. Today, while consumers can join for free, Angie’s List derives almost all revenue from advertising purchased by some of the local businesses that the online service lists and rates.  Angie’s List recommends and gives preferential treatment to these advertisers that can easily mislead consumers into thinking that these businesses are the best ones and should be patronized. The report shows that these profiled businesses are often not those rated the most highly by consumers and by a nonprofit rating group.

CFA’s report includes the following conclusions about the usefulness of Angie’s List:

• Angie’s List is subject to conflicts of interest because it is supported almost entirely by payments from the businesses it evaluates.
• A large majority of businesses rated on Angie’s List are given the same “A” rating, making it difficult for consumers actually to identify the best businesses.
• A number of businesses with fewer than five consumer reviews, some with only one review, receive an “A” grade.
• There is circumstantial evidence that some businesses have engineered the submission of fake reviews.
• Angie’s List does not provide reliable information, based on actual price shopping, about which businesses charge the lowest prices.
• Businesses that advertise on Angie’s List have advantages over non-advertisers in listing placements, characterization, and ability to have negative reviews deleted.
• Only those businesses that pay to advertise on Angie’s list are recommended as “top-rated pros.”
• Advertisers are always listed first on those pages listing all businesses providing a specific type of service.
• Advertisers are given information about consumer users in order to market directly to these consumers, and some of these businesses do so immediately through phone calls and/or emails.

CFA’s report suggests that Angie’s List can offer value to consumers who are willing to provide their personal information for advertiser marketing and willing to search carefully for useful information on the website.  In using Angie’s list, consumers should ignore Angie’s List’s recommended and profiled companies and, instead, look only at the customer reviews of all A-rated businesses with at least 25 recent reviews, paying closest attention to detailed comments and to negative reviews.  Angie’s List should not be the only source of information in selecting a service provider.

“When possible, consumers should rely on nonprofit organizations that evaluate businesses and are not funded by the companies they are evaluating,” said Stephen Brobeck, a CFA senior fellow and the report’s co-author.  “But when these organizations are not available, shoppers can benefit by consulting a variety of information sources, including the detailed consumer comments on Angie’s List,” he added.

The report emphasizes that, in joining Angie’s List, consumers open themselves up to email and phone marketing by Angie’s List advertisers, who are not necessarily the best businesses offering a particular service.  To join, consumers must provide personal information including name, phone number, street address, and email address.  Essentially, a consumer trades off their privacy and access to advertisers for their own access to the millions of consumer reviews collected by Angie’s List.

“While advertised as free, there is a price consumers pay for joining Angie’s List,” said Jack Gillis, CFA’s Executive Director and the report’s co-author.  “Consumers must submit personal information and then expect phone calls and emails from advertisers,” he added.

The full report can be found here.