MerchantCircle: 5,000 Paying Customers

MerchantCircle, which is partially owned by IAC, is apparently beginning to make some headway in selling search oriented services to small businesses. It reports that it has achieved a base of 5,000 paying customers, who buy services costing $30, $60, $100, and $250 a month. “Most of them are coming in at the lower end” – the “starter circle” package –“ but we do have customers at all price points,” said a spokesman.

The company also has 500,000 “registered” users and hopes to have one million registered users by the end of the year. Darren Waddell, VP of Marketing, estimates that 75-80 percent of its users have no other web presence. “They rely on us as their only web presence. And all the people buying advertising for us, it’s more like 85 percent that have never purchased online advertising before.”

Waddell asserts that the site’s best customer acquisition vehicle is “people bringing in others by word of mouth. Another way people find us is with vanity search. Someone searches for themselves and see they ranked highly and say, ‘who is that? Who built a web listing for me’?”

Indeed, MerchantCircle has pre-populated 15 million merchant listings, which users can enhance with MerchantCircle provided blogs, newsletters and other customer interactions. “We get their listing highly indexed with Google, Yahoo!, MSN and Ask.com,” says Waddell. “So we’re using search as a front door.” Next on the agenda is an upgrade of the listings to videos made with templates. Similar to SpotMixer, such video might be category specific and allow businesses to see what they can do with video as a hook.

Another way that people find the company, of course, is more notorious – an aggressive auto dialer campaign that compels people to go online to register in order to see what someone has allegedly said about them The company downplays the importance of the campaign, but many people are still apparently receiving the calls.

I have actually gotten many emails from irate business people who have received such calls and wanted to vent. Here is one email I got from “Dave” on May 15.

“I received one of the MerchantCircle automated calls in my voicemail box this morning. It said ‘Hello, this is the MerchantCircle Verification Department. We are calling regarding a customer who found your MerchantCircle page on Google. On Monday, May 12, 2008, this customer asked us to verify that you are indeed a legitimate business. To verify your business, go to MerchantCircle.com and enter your business telephone number in the blue box. Again, that’s MerchantCircle.com. Thank you.’”

But Dave notes that “we do not have a MerchantCircle Page and do not intend to have one.” He may have been unaware, however, that MerchantCircle automatically generated a page for his business. (But who is the mystery customer?)

5 thoughts on “MerchantCircle: 5,000 Paying Customers

  1. There’s a certain cachet in burning a $100 bill every few seconds.

    $30 x 5000 customers=$15,000 per month in revenue*

    I have to ask — what’s the burn rate to achieve all this revenue? Just how much per month do these guys pay for autodialers, for example?

    Who is making the ongoing funding decisions for this “business”? What is the expectation for positive cash flow? Or a user-base that can create an actual profit?

    Maybe Merchant Circle is making it up in Google Adsense Ads. Those pay a dime a click, some of them.

    Private Memo to IAC:
    There’s guys advertising on Cable– supposedly you can make $20K/month at home clicking Google ads. You might considering investing in some insomniac stay-at-home moms with twitchy mouse fingers Maybe in China, where labor is cheap? They probably couldn’t do any worse than Merchant Circle.

    * Assuming that “Most of them are coming in at the lower end”…but with this particular group, I would wonder just how low that ‘lower end’ goes. I seem to remember that there were lower-priced options available earlier on.

  2. While we’re not prepared to disclose financials at this point, $30 x 5000 equals $150,000, not $15,000.

  3. Not all that impressive. Even at $150K/mo. – that’s revenue. Since MerchantCircle is largely a reseller of AdWords for the most part, their margin is not all that significant. Actual gross profit is substantially less than $150K, and then you have all the other associated costs. Clearly the largest unaccounted for expense is the legal expense of defending themselves from the inevitable class action of small businesses who file against the phone practices used by MerchantCircle. They already have a unsatisfactory rating from the Better Business Bureau. Eventually, I wouldn’t be surprised if IAC/CitySearch becomes part of the suit. If I were a trial lawyer, that is a much more attractive target. By funding and partnering (advertising) with Merchant, IAC is likely to be named as a defendant in any potential lawsuit, whether they like it or not.

  4. Merchant Circle is a spammer, pure and simple. They robocall my cell phone on a regular basis even though it is a personal phone and on the do not call list. They’ll get nothing but grief from me, and the same goes for anyone I can identify as their customer.
    In your previous (2006) post you questioned the legitimacy of complaints about Merchant Circle. It is their marketing tactics that are illegitimate. Every time they call I fill out complaints to FCC and BBB. It is their responsibility to comply with do not call rules – I will not help them out by contacting them directly.

  5. Darren, we are a location based social media service for small businesses and want to discuss how we can develop a strategic partnership.

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