Web.com Buys Yodle; Moves Deeper into Value Added SMB Services

A chapter in local commerce ended today with Web.com’s agreement to purchase Yodle for $320 million. The deal is expected to close by the end of 1Q.

The companies will complement each other well, with Web.com’s huge 3.45 million SMB base being driven up the value chain from domain registration (via its Network Solutions division) and websites and presence management to Yodle’s higher priced and more complex services, including SEO, leads, office based automation and CRM.

Yodle currently has 58,000 subscribers and an average revenue per user of $300 per month — a figure driven higher by the 9,000 franchise locations it serves for 200 customers. Its integration will have a large impact on Web.com averages, moving Web’s average customer earnings from $167 to $226 per month. It also will provide Web.com with a large, 700 person local sales team.

The sale price, of course, has got to be a major disappointment for Yodle backers. It was less than two years ago that Yodle had been talked about as a $1 Billion + company on the brink of a planned IPO. Its positioning at that time suggested it had finally broken down the wall in local between acquisition and relationship marketing as Yodle invested in CRM, cloud-based software and leads.

But Yodle never pulled the trigger on the IPO amidst a tough market for tech IPOs, There was speculation that the company simply could not withstand the exposure of publishing its churn and customer acquisition rates, which like the rest of the industry, would presumably be very high. And then there was the damning Wall Street Journal article on April 16, 2014 on poor customer service and poor values that focused on Yodle and Reach Local; and an apparent slowdown on efforts to sell enterprise level CRM and cloud based services to top franchise companies, or “brand networks.”

Right now, the battle to sell marketing services to SMBs includes a shrinking number of players. High acquisition costs and churn rates continue to plague the industry. But the potential rewards are rich for a group that not only includes Web.com but also ReachLocal, Endurance/Constant Contact, Vistaprint, Main Street Hub, SignPost, Deluxe Corp., Hibu, YP and in some verticals, DemandForce, which was just sold to Internet Brands.

Cardlinx San Francisco: The Drive to ‘Incremental Spend’ by Consumers

The evolution of the card linked space is happening in unexpected ways, as we saw this week at Cardlinx’s San Francisco conference. It was the association’s largest event in its two year history. Basically — the table has been set; a number of early arriving guests have arrived; and we are now waiting for real momentum and numbers to come in.

The first to come on board have been the larger companies, which thrive on the analytics – they want to know who their customers are, and how to market to them. The smaller merchants are more impacted by the direct impact of offers that drive store traffic and are still using their traditional options (ads, dm, coupons, etc.)

The event’s large attendance –130+ — reflected the rollout of several key card-linked based projects, such as Plenti from Amex, Macy’s, AT&T, Enterprise Rent a Car, Exxon Mobile and others; and a major card linked rollout from Whole Foods. Living Social has added a card linked element in dining rewards; and Groupon is tentatively preparing one as well, with 15 percent off as a constant feature.

Card linking is also seen as being deeply integrated with payment and messengering programs that are more directly driving commerce. Facebook, for instance — a Cardlinx member –appears to be studying a role for card linking on its growing Messenger platform, which is already set to provide shipping updates, book rides and send money.

Widely used, well-subscribed platforms are expected to add scale to card linked concepts as well. Speaking at the event, Empyr CEO Jon Carder said he could see 20 million active consumers building a $10 billion annual business –with $750 million in revenues going to the participating card linked offer companies. “It is a network effect,” he said. “The more participants, the more consumers you have, the more revenue you get. “

Whole Foods has whole-heartedly embraced its card linked program – which is a bit of a surprise for a company that has historically been “discount reluctant.” Payments Marketing Director Marushka Bland said card linking will give it an edge as the company faces serious competition in the organic grocery space from Kroger, Costco, Walmart and others. The company is now “much more open to worrying about its customers and eager to focus on things like loyalty.”

Whole Foods started rolling out its affinity program on a small scale in 2014. It is currently rolling out digital coupons. “It is about our customers and how they shop with us,” said Bland. “Execution, targeting and attribution” are the keys to the program, with a target goal of 10 percent incremental spend.

Incremental spend is also the chief goal for Excentus President and CEO Brandon Logsdon, who stressed that the key is not to focus on Card Linked Offers, but on getting participation in card linked programs. (He’s right: I’m going to phase out my own references to CLOs.)

Excentus rolled out its Fuel Rewards program in 2012. More than 6.5 million cards have been registered, and there is an active group of 1.4 million linked cards. Customers have spent $450 million on a growing list of affiliating merchants, and gotten $3.6 million back on fuel costs (roughly 5 cents a gallon). Logsdon adds that the merchants are seeing brand new spending from the programs. Fifty percent of those coming in are new customers; and 65 percent of promoted sales are incremental.

Empyr CEO Jon Carder

Empyr CEO Jon Carder

The Failure of ‘Gimmick Commerce’ Brands

Graphic from Recode

“Gimmick Commerce” is one way to look at the sites that entice people to buy things online via promotions, flash sales and subscriptions. Mostly, it represents things that people don’t need.
But it has almost totally failed, per Recode’s Jason Del Rey in a provocative piece this week. In the deals space, Groupon has pivoted to a marketplace focus (i.e. normal shopping) and is trading at just $3 a share. Living Social is publicly struggling and experimenting with new models, like card linked offers.

The other deal sites are gone or totally pivoted. Just yesterday, Nimble Commerce, the last of the major independent deal aggregators, announced it was selling out to BlackHawk Network, a leading gift card company.

Other “gimmick commerce” models have also failed to gain traction. The flash sales space is basically gone, with Fab, Gilt, Ziulily bowing out at fire sale prices, and One Kings Lane positioning itself to do the same. Del Rey concludes that none of these companies have been able to cut into the Amazon behemoth, which accounted for 50 percent of all ecommerce growth last year (although Amazon surely engages in its own Gimmick Commerce).

The only companies that are growing and safe from Amazon are the specialty subscription services. With the exception of some of the high loyalty food delivery companies (Blue Apron) and subscription razor companies (Dollar Shave) most of these probably aren’t keeping their customers.

It’s a big, brave thesis. Rey points to the difficulty of building new brands and creating consumer habits from scratch – and the never receding desire to buy everything from a single source. But it is kind of broad — I don’t know that all these companies should be lumped together. And it shouldn’t be inferred that the new technologies and features like big data analytics, buy buttons, card linking and targeted offers that act as a foundation for these sites are being rejected. They remain transformative and will probably account for a big percentage of the next generation of impulse buying, if not shopping altogether.

Does Email Still Drive SMB Marketing? Privy Says ‘Yes’


We’re said to be in a post-email generation, as Millennials increasingly rely on messaging and other channels. There will need to be a lot of adjustment for marketing strategies.

But email is still the most reliable connection for most consumers. It remains the primary input for customer lists, which are now being collected by 80 percent of SMBs, per BIA/Kelsey. In fact, no other SMB marketing feature ranks as high.

Are SMBs doing enough with their email lists? The obvious answer is “no.”

Optimizing email for leads and engagement is the role that Boston-based Privy has given itself. Founded in 2012 as an offers company during the Groupon boom, Privy has remade itself as a freemium/premium email marketing enhancer that is tightly integrated with more than 10 top email programs (Mail Chimp, Constant Contact, Fishbowl etc.)

The 10 person company currently has a base of 14,000 SMBs under its email marketing efforts, and is now growing by 3,000 to 4,000 new small businesses every month. It hopes to enlist 50,000- 60,000 SMBs by the end of the year.

CEO and Founder Ben Jabbawy tells us that the company’s initial focus on offers and then “closed loop marketing systems” was an effective way to acquire consumers, but businesses were slow to adopt. The new focus on email list growth has given the company a period of rapid new growth – even though much of the leads- based functionality (attaching offers etc.) remains pretty much the same.

Two types of campaigns are typically run, says Jabbawy. “The first is a generic, ‘Hey , welcome to the website’ type effort. They may see a 1.5 – 2 percent conversion. The second is offer-based. “Join our list and get X% off.’ Offer driven campaign can see conversion rates jump to 5-15 percent. Offers are (still) a great carrot to incentivize customers to establish relationships.,” he says.

While the core email programs provide a lot of services, Jabbawy says Privy’s ability to provide more sophisticated targeting, offer tracking and redemption fully complement them. “When businesses sign up for Constant Contact or Mail Chimp, they typically have (few) email contacts,” he suggests. “The majority have sub 100 email contacts, or sub 500 contacts.”

Privy is offering a feature-rich freemium tier, with paid plans costing either $19 a month, $79 a month and higher (which is mostly for Enterprise players.) Given the expense of cold calling and acquiring SMBs in general, Jabbawy says it is an attractive offering.

And while email is the focus, a Privy campaign just as easily leads in to website-based marketing. Privy simplifies getting SMBs onto Websites, he says. SMBs that have Shopify, WordPress and Weebly.com accounts are the company’s fastest growing channels.

American Express Cuts Back: Big Impact on SMB Digital Marketing Support?

American Express is under the knife, as it cuts $1 billion in spending with the end of its Costco and JetBlue co-branded cards. The cutback will probably cut into many of the forward looking promotion and marketing projects that Amex underwrites with Facebook, Twitter, Foursquare, Uber, Pinterest and others.

It will also lead to the departure of many executives – Leslie Berland, EVP, Global Advertising, Marketing and Digital Partnerships, for one, is rumored to be headed to Twitter as CMO – where she would be able to work with Buy Buttons, coupons and other promotions to fan commerce that would supplement or compete with Amex efforts. In this case, the use of Twitter and other social media to fan commerce will seem a whole lot easier than directly fulfilling sales and ecommerce.

For Amex, however, it is not all bad. If we want to be cheerful about it, the looming cutbacks also represent a great “focusing” opportunity for the company, which is perhaps the most aggressive digital marketer in the field with mobile-oriented initiatives for deals, loyalty, prepaid cards and wallets.

The company and its premium model have actually been under stress for some time — even before the loss of the two reseller deals (Costco alone represented 10 percent of Amex revenue). While there is Apple-like seamlessness in Amex as the acquirer, the issuer and the network, many merchants have been hesitant to pay the .5 percent Amex premium over other credit card issuers – especially after Amex moved away from its exclusive emphasis on the wealthy and rolled out the Bluebird debit product with Walmart and other value cards to compete for the high volume of underbanked customers.

Given the cutbacks, we wouldn’t be going too far out on the limb to predict that Amex won’t be underwriting major promotions from major merchants in the near future. This past holiday season, we already saw Amex end its subsidy of Small Business Saturday purchases (which went from $25 in 2013 to $10 in 2014 to zero in 2015).

One could argue that Amex has already incubated its digital offerings, which launched in 2011-12 out of a distinct business unit designed to “challenge the status quo.” Indeed, these efforts may not really require additional financial support. We know that a good promotion these days still results in tens of thousands of sales – Amex definitely remains an inviting publisher for deals . But they are no Super Bowl.

As for the focusing opportunity? That would be for Amex to reimagine itself as a marketing machine for its merchants – something that is well underway. That could mean a series of acquisitions (I might speculate that could mean one of the SMB loyalty plays, Big Data companies – Amex was an initial investor of Radius Intelligence–, or even a social media power, such as Twitter, Yelp or Foursquare).

At Money2020 in 2014 – more than 14 months ago — CEO Kenneth Chenault telegraphed the company’s next moves. When it comes down to payment innovation, it all comes down to one thing: Merchants want to grow sales. Does the innovation “help merchants meet customer needs?” he asked. “Do they provide incentives for changing customer behavior?”

Amex CEO Ken Chenault at Money2020 2014

Vistaprint Adds ‘Local Listings’: Our Interview with Scott Bowen, VP of Digital Services

What’s really important to SMBs in digital marketing? SEO/SEM, social media, Websites, mobile optimization and promotions immediately come to mind. The core feature probably remains listings (and “enhanced” data related to listings such as location info, hours and photos.)

Listings are seen as the #2 offering after Websites by Vistaprint, which has just launched Local Listings in the U.S. and Europe. The $10 a month service is aimed at micro businesses and will distribute enhanced data such as business hours, locations and photos to 100+ publishers, as well as provide detailed analytics at perhaps “half the price” of competitors such as Yext, Moz, Go Daddy’s Locu, Constant Contact’s Single Platform, etc.

VP of Digital Services Scott Bowen tells us that Vistaprint is ideally positioned to reach customers that already buy its business cards and its growing list of supporting physical and digital products. The listings product, which has been built in partnership with Neustar-Localeze in the U.S. and Uberall in Europe, can boost their website traffic rates by up to 60 percent.

Even businesses that aggressively claim listings don’t often go much beyond Google, Bing, Yelp and YP, says Bowen. “The three or four dozen ‘long tail’ publishers give you that more reach and make a positive impact on your organic search position,” he notes.

Listings also complement Vistaprint’s other digital offerings – some of which are being white=labelled from other vendors. They’re anchored by the company’s website business (as low as $5 a month), but also include social media marketing ($10 a month); and email marketing (as low as $5 a month).

Currently, Vistaprint’s digital services are being offered a la carte. Some customers are already committed to other vendors for components such as domain listings. (in fact, Go Daddy looks like the closest competitor here). Bowen believes that microbusinesses will ultimately want a one-stop shop for all their physical and digital marketing needs, positioning Vistaprint as an omnichannel provider to small business owners.

While it is an intensely competitive space, Vistaprint has some advantages over the others in terms of its huge base of business card customers, and by extension, being able to populate the most up to date info in the listings template. “There is a lot of information on a business card,” says Bowen.

The service is currently live in the U.S., France and the U.K., and will launch within the next couple of months in Germany. Bowen feels that the various European markets have more potential in terms of being a greenfield, but they also have “very different competitive landscapes.”

Vistaprint VP of Digital Services Scott Bowen

On Demand Trends: ‘People as a Service’ (PaaS)

We talk a lot about “on demand” jobs, or gigs. But does the on demand economy extend to full time, professional positions for administration, marketing and sales? Longtime local search and promotions vet Andy Steuer (IdeaLabs, Merch Engines) thinks so.

Steuer is an investor in two sister companies based on the idea of “People as a Service,” or PaaS — a play on Software as a service. Helpware provides employees on an as needed basis; Leadware helps sales teams build out va targeted research, lead generation, leads and sales. “The challenge in any business is to keep operating costs lower,” says Steuer.

Both companies provide English-speaking workers from The Ukraine. Workers are billed out at $1,800 to $2,600 a month based on disciplines, with an account manager for every five consultants to insure high quality output from the team. The workers are entirely dedicated to the hiring company for as long as they are needed. Many are proficient in a number of categories.

Typical Helpware roles include customer service, accounting support, search marketing and marketing support. “They work with a lot of CFOs on billing reconciliation, analytics, and support customer service teams and marketing teams to onboard and manage client campaigns effectively” and things like that, says Steuer. Leadware operates on the same principals, but operates on its own, helping companies build out their own “predictable revenueve sales” funnel.

“With Leadware, for every thousand leads, you might may have 200 conversations and emails, leading to 20 appointments and four sales,” says Steuer. As companies build, they can keep adding more Leadware consultants. Then as sales are made, Helpware is there to help companies scale their back office operations efficiently so they can boost their EBITDA quickly.”