Angie's List Inc (ANGI), which operates a website that allows users to review local businesses, forecast quarterly revenue below estimates and reported a bigger-than-expected quarterly loss as it spent more to sign up customers.
The company's shares fell 16 percent after markets closed.
Angie's List, which competes with Yelp Inc and HomeAdvisor Inc, said it expects revenue of $80.5 million-$82.5 million for the third quarter ending September.
Analysts on average were expecting $86.63 million, according to Thomson Reuters I/B/E/S.
Angie's List's "big deals" product, which offers emailed discounts to members, lagged expectations and weighed on the revenue forecast, Barrington Research Associates analyst Jeff Houston said.
The company, named after co-founder Angie Hicks, also forecast marketing expenses of $20 million-$23 million.
Marketing expenses jumped 28 percent to $35.9 million in the second quarter ended June 30. Marketing costs for acquiring paid members increased 13 percent.
Total paid memberships jumped 31 percent to 2.84 million. Paid members are allowed to access ratings and reviews of local businesses, while unpaid members can only rate them.
The company is increasing its sales force and investing in display and mobile advertising to drive growth and cut spending on acquiring customers.
"Our revenue growth was not as good as we anticipated," Chief Executive Bill Oesterle said in an analyst call.
"Our big deal product ... grew only 21 percent over the prior year, negatively impacting our overall growth rate."
Revenue increased 33 percent to $78.9 million in the second quarter ended June 30, but fell short of analysts' estimate of $80.2 million.
Net loss widened to $18.4 million, or 31 cents per share, from $14.3 million, or 25 cents per share, a year earlier.
Analysts had expected a loss of 24 cents per share.
Revenue from Angie's List's service provider business, which includes revenue from advertising contracts and fees from e-commerce transactions, rose 39 percent. The company gets nearly 55 percent of its total revenue from the business.
Oesterle said he expects significant improvement in margins in the second half and expects to report a profit before interest, taxes, depreciation and amortization for 2014.
Angie's List, which went public in November 2011, is yet to report a quarterly profit.
The stock closed at $10.17 on the Nasdaq on Wednesday. Shares have lost about a third of their value so far this year.
(By Soham Chatterjee; Additional reporting by Lehar Maan in Bangalore; Editing by Robin Paxton and Joyjeet Das)