David Hoppe

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:: Investing in nonprofits like Angies List

by David Hoppe

Everybody knows Angie Hicks. The founder and face of consumer guide Angie’s List is a fair approximation of Indianapolis’ own self-image: down-to-earth and upscale. Twenty years ago, Hicks started selling subscriptions to her service. Since then she’s become an almost ubiquitous television presence, with a seemingly nonstop ad campaign. Turn on the TV and there’s a good chance you’ll see Angie.

It’s funny how things work. If we see somebody often enough on TV we have a tendency to assume they’re a big success. This is why quantity is more important than quality in advertising.

What’s also funny is that we keep telling ourselves we believe in an economic system in which products and services stand or fall based on how well they compete in a mythical kingdom we call “the marketplace.”

Take, for example, Angie’s List.

As I write this, the Indianapolis’ City-County Council is considering a proposal to commit over $18 million in public assistance to the private corporate entity known as Angie’s List.  There are some compelling reasons why the city government might want to make this investment.

In the first place, Angie’s List has been a transforming force for the better on the city’s hard bitten near eastside and, in particular, along its East Washington St. gateway to Downtown. Over the years, as the company has grown, it has acquired otherwise derelict real estate and put it to productive use.

It has also become a significant employer and, with city investment, promises to add 1,000 jobs and relocate 800 more from various satellite locations. Angie’s List has also said it will renovate an old Ford Assembly plant, an underutilized neighborhood cornerstone.

For its part, the city must agree to spend $2 million on streets and infrastructure around the Angie’s campus (something it should do anyway). It will also put $16.3 million in tax-increment financing funds into the building of a parking garage and relocation of an IPS warehouse currently in that old Ford plant.

This is what you call a public-private partnership. There’s just one catch, and it’s on the private side of the equation: In the 20 years of its existence, Angie’s List has never, repeat never, turned an annual profit.

This, however, has not kept the business from growing, or kept people from buying its stock. But in America’s supposedly profit-driven marketplace, Angie’s List has never made the grade. Even in the third quarter of 2014, when Angie’s posted $81.3 million in revenue, it still had a net loss of $5.2 million.

This does not make Angie’s List that unusual. Amazon was expected to lose $810 million during the same period in 2014.  Growth, it seems, trumps profits in our economy.

This is not an argument against the city investing in Angie’s List. Maybe, though, it’s time we scrapped our time-worn distinction between for-profits and nonprofits — ditched that cliché about how much better things would be if they were “run like a business.”

Does the community profit? How we answer that question is what matters most.