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Mobile Couponing

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Mobile Couponing

  1. 1. WV Mobile Couponing Kunal Gupta
  2. 2. Contents Executive Summary Market Overview Evolution of Mobile Coupons Who’s Using Mobile Coupons? Why Use Mobile Coupons? Key Players Comparison of Key Players Recent VC Investments Trends Risks Recommendations Appendix of Interviews 2
  3. 3. Executive Summary Technology is no longer a hurdle for the proliferation of mobile coupons Today’s mobile coupons are targeted marketing tools leveraging social and location profiles, that tie into POS systems through loyalty programs and barcodes displayed on devices 66% of young adults are likely to try a mobile coupon, but only 15% of mobile users have actually used a mobile coupon Mobile couponing is expected to be a $1B industry by 2011, $6B by 2014 Redemption difficulties have been mitigated by “save to card” programs Far more national brand trials are required before the masses adopt mobile couponing Payment and transaction processing is the next feature to be added to end-to-end mobile couponing solutions 3
  4. 4. Market Overview Google expects mobile coupon spending to reach $1B by 2011 (Mobile Marketer, 10/2010) Juniper Research says mobile coupons will reach $6B in global redemption value by 2014 (11/2009) For the 12 months ending 06/2010, coupons distributed via FSI’s (free standing inserts) grew at 8.4%, while digital coupons (including mobile) grew at 100% (coupons.com, 07/2010) FSI’s still represent 89% of all coupon distribution (Inmar, 02/2010) 4
  5. 5. Market Overview Redemption rates for paper coupons have historically been close to 1%, while mobile coupons demonstrate between 5% and 20% redemption (Cellfire, 02/2010) “The Holy Grail for local advertising is location-targeted coupons, and we’re building Google Offers to enable that…” – Mike Steib, Dir. of Emerging Platforms 5
  6. 6. Evolution of Mobile Coupons ‘05: Text messaged promotions and discount codes ’07 – ’09: Searchable coupon wallets in mobile apps, redemption by sharing screen with cashier ‘10: Targeted marketing tool leveraging social and location profiles, tied into POS systems through loyalty programs and barcodes displayed on devices ‘11: Aggregated feeds of national brand promotions, locationally and socially targeted, POS integration a must ‘13 and beyond: Local business adoption starts 6
  7. 7. Who’s Using Mobile Coupons? Consumers who print digital coupons have an estimated average household income of $96,000 (coupons.com, 07/2010) 46% of US adults who own a mobile phone are somewhat likely to try out mobile coupons (BizReport, 02/2010) 66% of US young adults likely to try out mobile coupons (BizReport, 02/2010) Only 15% of mobile users have used a mobile coupon (eMarketer, 11/2010) 7
  8. 8. Why do Consumers Use Mobile Coupons? Accessibility in an increasingly wireless world Convenience, especially given loyalty card integration Relevance using social and location based profiling Economic conditions requiring cost cutting 8
  9. 9. Why do Marketers Use Mobile Coupons? Detailed viewing and usage data, including individual user, time, place, frequency, and other related and unrelated contextual data On demand delivery and deployment to always on, always with you devices Low cost – high impact due to their viral nature — $49/ month for 3 dynamically changeable coupons (getyowza.com) — 5% to 20% redemption rates (vs <1% via traditional print) 10 to 12% basket lift 9
  10. 10. Key Players Companies — Coupons.com: founded 1998, unknown funding — CellFire: founded 2005, $26MM funding — ScanBuy: founded 2006, $22MM funding — Gowalla: founded 2007, $10MM funding — CardStar: founded 2009, $1.5MM funding — Armadealo: founded 2009, self financed — Foursquare: founded 2009, $21MM funding Most Active VCs (by approximate investment size) — Andreessen Horowitz, Menlo, Storm, Masthead, Greylock, Union Square, Shasta, Founders Fund, Verizon Ventures, Acta Wireless, Ron Conway, 10
  11. 11. Comparison of Key Players Overarching StrategyCompany Redemption Mechanism Source of Deals Target Niche Key Differentiator (in my own words) Promo codes, show your To become an ad network, Clothing and retail in malls, notArmadealo Aggregation from the web Focused on aggregation screen similar to AdMob hip urbanites To provide the end to end Direct relationships, Aggregators and affiliates Promo codes, show your tools and infrastructure for Focused solely onClip Mobile affiliates (eg newspapers) having existing relationships screen creation, distribution, Canada who upsell the service with local businesses discovery, and analytics To help brands recognize, Promo codes, show your Direct relationships with Brands that appeal to teensFoursquare reach, and reward their Sticky game mechanics screen, save to card national brands and young adults. patrons To improve and ultimately own Companies, brands, and Direct relationships with Great at technology, the interface between the affiliates who understand CardStar Barcode scan, save to card national brands, third party partnering and shopper and the merchant / mobile and have significant use of CardStars platform integration the merhcant loyalty program distribution channels Provide end-to-end mobile Marketers who seek to drive Working with the digital Third party (coupons.com) ScanBuy Coupons.com barcode creation, usage, and transactions through the use couponing industry - save to card analytics tools and solutions of barcodes leader Promo codes, show your Direct relationships with To be the Sunday paper of Mature adults, women, Mobile couponing CellFire screen, save to card national brands mobile coupons mothers incumbant Direct relationships with To create a socially curated Young adults, hipsters, User generated Gowalla Show your screen national brands guidebook urbanites database of locations 11
  12. 12. Recent VC Investments Recent Company Amount Raised Series Announced Investors Location ($MM) Andreessen Horowitz, Union Square, OReilly Foursquare 20 B Jun-10 New York, NY Alpha Tech Amplifier, Acta Wireless, LaunchCapital, Cardstar 1.5 A Mar-10 Boston, MA Verizon ScanBuy 16 B Feb-10 Masthead, Hudson, Longworth, Motorola New York, NY Greylock, Shasta, Maples Investments, Kevin Gowalla 8.5 B Dec-09 Rose, Chris Sacca, Jason Calacanis, Shervin Austin, TX Pishevar, Gary Vaynerchuk, Ron Conway CellFire 12 C Feb-08 Silver Creek, Menlo, Storm San Jose, CA 12
  13. 13. Recent Trends Technology has ceased to be the issue holding back the proliferation of mobile couponing Problems with mobile coupon redemption are being resolved through integration with loyalty cards – the “save to card” model Delivery platforms are leveraging location information to better match consumers and merchants Targeting engines are incorporating Facebook Connect for the social information needed to keep promotions relevant National brands are doing trials with multiple solutions providers, despite a lack of baseline evaluation metrics 13
  14. 14. Future Trends Most companies who do not integrate their coupon redemption process with loyalty programs or directly with the POS will slowly go extinct over 12 to 18 months Payment processing will become part of the end-to-end solution offerings of mobile couponing companies — Consumers will be able to redeem coupons from their phones, including purchasing goods for shipment to their doorsteps 14
  15. 15. Future Trends Trials by 500+ national brands will bring mobile couponing to the masses within 18 to 24 months — Only two or three mobile companies will achieve financial success working with these brands Local merchants will adopt mobile couponing after the national brands, no sooner than 2 years from now — Successful solutions providers will partner with companies having existing relationships with local merchants, e.g. newspapers, Yelp, print coupon distributors 15
  16. 16. Future Trends Mobile couponing players will divide into two groups — Offering a database of mobile coupons users will search to find what they are looking for (CPM/CPC business model) — Offering context based alerts, informing users that a coupon they may be interested in is available (CPA/CPC business model) Distribution reach, user engagement, content relevance, and user experience will be the new criteria for success — Several current competitors have three — All four are needed to “win” the industry 16
  17. 17. Future Technology Innovation Coupons.com, Catalina Marketing, or a similar company will develop and sell a platform for integrating digital coupons across all POS systems — Already have relationships with national and local retailers — Already have required access to diverse POS systems and technical expertise to link into them — Necessary in order to capture those customers not using and those merchants not offering loyalty cards NFC will be become an alternative to the barcode redemption model for mobile coupons — Will take 2 to 4 years before the infrastructure is in place in the US to transact using NFC 17
  18. 18. Risk Factors and Concerns Coupons must be available — First time users who cannot find coupons in their areas will not return to the service Coupons must be redeemable — Cashiers and clerks must be trained — Technology integration must be flawless — Consumers will not tolerate not receiving a discount they believe they are entitled to Apps distributing mobile coupons must be sticky — Solutions must keep users engaged by offering something unique, incorporating social elements, employing game mechanics, etc. 18
  19. 19. Investment Recommendations Invest in mobile couponing companies that: — Solve the redemption problem by integrating directly with the POS, versus loyalty card systems — Allow you to continue the purchase process and complete the transaction right from your mobile device — Generate revenues from brands and merchants on a cost per acquisition basis — Aggregate digital deals already found around the web and through other mobile coupon providers — Capture the local business opportunity through partnerships, rather than one-to-one acquisition — Use location as a means to target coupon recipients as well as find merchants offering deals — Incorporate the social graph through Facebook Connect to make coupons viral as well as to keep coupons relevant 19
  20. 20. Appendix Interview Overviews 20
  21. 21. Armadealo Spoke with Matt Greer, CEO Trying to create an ad network — The AdMob or Millenial Media of mobile coupons — A platform to get any deal to any mobile user Interested in clothing and retail, mothers and teens, not hip urbanites Aggregate deals from the web Regarding redemption, believes the retail industry favors promotion codes over loyalty program integration that competitors are pursuing Needs to gain an audience to achieve success, something that Gowalla and ShopKick have done well — Consumer acceptance is still 2 years away Ultimately successful company will have an SDK to plug any promotion into any mobile network — Similar to Third Screen Media 21
  22. 22. Clip Mobile Spoke with David Ofierski, CEO Only focused on the Canadian market at present Unlike the US, Canada has a handful of loyalty points umbrella programs, making “save to card” programs easier to implement Where the US is regionalized and fragmented, Canada is dominated by a few key players across the country in every industry — Shell and Petrol Canada in gas — Shoppers in drug stores — Easier for Clip Mobile to get scale in Canada Partnering with newspapers and business affiliate groups for access to local businesses – people with access to the people who write checks Mobile coupon discovery, distribution, and sharing must all be social and viral Pros of the brand / app — does not interfere with customers’ brand (eg Quiznos) — 12 to 18% retention rates Cons – not sticky enough — Foursquare is sticky, but people use it for location sharing, not couponing Coupons themselves must be attractive, else even if consumers find them, they won’t use them – avoid CPA model and avoid this risk Traditional media is the biggest threat to mobile couponers trying to establish their own relationships with brands and local merchants 22
  23. 23. Foursquare Spoke with Eric Friedman, Director of Client Services Smartphone adoption is still holding back mobile couponing from reaching its tipping point and becoming mainstream The biggest industry success with regards to mobile couponing has been the ability to target consumers where they shop and WHEN they shop The biggest challenge facing mobile couponing is coordinating logistics on the merchant side The product with the best user experience will emerge victorious in this space 23
  24. 24. CardStar Spoke with Stuart Hilger, Director of Business Development Focused on capturing consumer loyalty first, then additional content to present Make it simple to extend loyalty and other programs to mobile Create a technology platform for third parties, with functions like save to card, real time analytics, and coupon clearing Major merchants don’t have a clue about what to do with mobile – barely understand text based — Loyalty card programs do not require change of behavior or new learning Too many solution providers are in the merchants’ kitchens — Education becomes complicated — Sales cycles are lengthened — No effective due diligence to evaluate competing technologies translates to difficulty getting merchants to take action Try to align with companies who “get it” and have distribution channels Solution must be viral to become a household name, like the Sunday paper Technology is not a hurdle for mobile couponing adoption Need to tie in mobile payments piece — NFC will take too long to achieve critical mass because no infrastructure exists 24
  25. 25. ScanBuy Spoke with David Javitch, VP of Marketing Not a focus or competency to get into mobile couponing ourselves Partnered with coupons.com — Relevant content for users after they scan a barcode for information using ScanBuy — Coupons keeps consumers engaged with ScanBuy Scanning directly off the phone at the POS is difficult because of lingering technical issues between laser and optical scanners Integrating Facebook Connect to enable sharing content Current promotion with Target — Phase 1 is to launch a product video — Phase 2 is to offer a coupon and allow click to buy Location data may be the next big trend to get mobile promotions going, but consumers will have to opt in to drive it — Only 50% of ScanBuy’s consumers provide location data 25
  26. 26. ValPak (Philadelphia Franchise) Spoke with Paul Berman, Founder and President Local businesses are starting to ask questions ValPak nationally has been talking about mobile coupons for a while, but doesn’t seem to have taken much action We have long standing relationships with the local community, they trust us and seek our guidance for their marketing needs — We typically have to do all of the heavy lifting Local businesses will wait to see what the Walmart’s of the world do, and then say “I want that” Need to keep local merchants educated about mobile Mobile couponing solutions must be simple to administer and track, and must provide quality and reliable usage and redemption data Mobile couponing companies will have to work with us to get to local businesses, and we want to work with them 26
  27. 27. Mobignite Spoke with Nic Lumpp, Co-Founder Coupons alone are not fun Saving money is fun, or at least pleasant and rewarding You can make saving money (vs coupons) sticky with even simple game mechanics — Shake your phone to reveal — Scratch your screen like a game card to reveal Coupons are used for one of two purposes — Acquire new customers — Keep existing customers College campuses are an open market and huge opportunity — Audience wants and needs to save money — Local businesses face fierce competition and need to continually attract consumers — Perfect base for viral growth – like Facebook — Need to partner, door-to-door doesn’t scale 27
  28. 28. 8coupons.com Spoke with Landy Ung, Co-founder Have been facing coupon redemption issues since launch in 2007 Key to mobile coupons is content – the right content to right people at right time We work with aggregators to get the best deals – Valpak, Groupon, etc Allow people to post their own deal to help coupons grow virally Valpak has it’s own mobile strategy, which makes it hard for others to compete Mobile payments / NFC will come first (2 to 3 years from now), before we close the mobile coupon redemption gap Need education to get mobile coupons to the masses – eg cashiers Much easier to work with national brands vs local small and medium size businesses 28

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