By now most of you have read about Angie’s List (Nasdaq: ANGI) second quarter earnings. In a nutshell, they were terrible. I just wanted to add a quick thought to the commentary out there.

I thought the best take on ANGI was Mintzmyer’s piece entitled Angie’s List Underwater And Deteriorating Further. Specifically, the note about ANGI spending $132.62 per ‘net new member,’ -which is the highest amount in 9 quarters. Of course, ANGI made no mention of that metric in their press release, as they have kept the quarterly churn #’s private. However, a simple analysis of the first & second quarter #s gets an approximate churn of 137,000 members leaving the service over 90 days.

Put another way, every day more than 1,500 members leave Angie’s List.

The true profitability of the overall business must take into account this deteriorating number otherwise your business becomes a run-off enterprise. Think of an oil producer – without drilling new wells the overall revenues will over time decay to nothing.

Similarly, ANGI needs to attract 137,000 new members every quarter (based upon the Q2 churn) just to stay even with its subscriber base.

ANGI spent $28m in the quarter attracting a total of 347,000 “gross subscribers added” (no word on how many of those new adds were freebies or low-cost areas such as Little Rock, AK where the going rate is $20/year. At that rate it would take 6 years to recoup the marketing spent bringing in that customer!)

Another way to look at it is that ANGI spent $11 million in marketing (137k divided by 347k) just to stand still, and an additional $17m was ‘invested’ into growing the business. (Again, this is all assuming the quality of lost ANGI customers equates to those gained; unfortunately given the amount of information released by the company there’s just no way to know)

Assume for argument’s sake ANGI would stop attempting to grow its’ subscriber base, and return those marketing dollars back to shareholders – the company’s operational loss would have switched over from -$14.3m to a measly $2.7m gain. Annualized that’s less than $10 million.

In other words, the idea that ANGI is artificially generating losses to grow it’s business covers up a very important fact – namely that what it’s built to date isn’t that profitable after all.

At the time of this report, the author was short ANGI common stock and long ANGI put options