Cardlytics has filed an S1 for an IPO that would help it raise $75 Million as it continues its long-term efforts to spur “transaction marketing” with its bank partners. Since its founding in 2010, the S1 reveals that the company has burned through more than $248 million, but sees light around the corner, despite ongoing losses. In 2016, it enjoyed revenues of $112.8 Million, up 44.8 percent from the prior year, as customers like Bank of America generate a network effect for highly targeted retail and brand offers.
Does this mean that Transaction Marketing is poised to happen? Here’s where we are: Just a few years ago, “transaction marketing” — the use of data from purchases to “close-the-loop” to help target customers, send out promotions and inform media planning — was seen as transforming the world of transactions, including local commerce. It was seen as the next logical step for leapfrogging the world of Groupon and prepaid deals.
Moreover, transaction marketing wasn’t just about retailers and brands. It was also about adding a seat to the table for Big Data providers– those companies tracking transactions, including banks, credit card companies, payment processors and Point Of Sales system.
Today, however, we have reasons to be skeptical that transaction marketing could emerge as a real disruptor. Yes, we see an increased amount of Big Data in the marketplace. Online to offline concepts, such as card linked offers, have gotten some buy-in. CRM-based, predictive marketing analysts, such as Radius, Buzzboard, FreshLime, SignPost and Local Data Exchange are also hoping to make an impact based on a variety of inputs, such as social media. Google and others are also exploring different ways to get involved.
But close-the-loop transaction marketing, itself, hasn’t really taken off. Most of the technology vendors in the space -– there were more than 20 in 2014 — have consolidated or closed down. There are a number of reasons for this:
1: Retailers and brands haven’t leaped at the chance to expose their data to competitors.
2. It’s expensive to add new “middlemen” – especially in low margin categories such as restaurants.
3: Consumers haven’t found many of the participating promotions to be appealing and haven’t changed their buying patterns. The Burger King coupons only go so far.
4: Banks – seen as the real financial drivers – aren’t stepping up to the plate. They were expected to use transaction marketing to add new revenue streams, and better engage consumers and retailers; a real plus at a time when payment alternatives like PayPal and Square are taking off. But despite a flurry of rollouts, most banks seem to view transaction marketing as potential compliance headaches, and just a minor source of revenue in a period of record earnings.
5- Bank check-ins may not be a great driver for retail promotions. Data shows that bank customers log into their mobile banking accounts 7.7 times per month, but these log ins may be out of context.
Against this backdrop, we have the Cardlytics S1. In it, the company reveals that it remains deeply reliant on Bank of America, which accounts for 47 percent of its revenue. But it also shows a very broad network, with 2,041 Financial Institutions contributing to its network.
It also has developed relationships with brands retailers that could take its offers far beyond the Burger King-type offers that it may be associated with. These include 20 of the top 25 U.S. restaurant chains; 23 of the top 50 U.S. retailers; three of the five largest U.S. cable and satellite television providers; and three of the four largest U.S. wireless carriers.
Altogether, Cardlytics says it analyzes one of five debit and credit card swipes and sees the account information for 94 Million consumers. Despite its ongoing losses and a layoff of employees in 2016, the company believes it could be turning the corner. “We believe purchase intelligence is the next disruptive opportunity in marketing,” it notes. It also sees rich growth opportunity with new verticals, such as hospialilty and travel.
To us, the concepts behind transaction marketing are as appealing as ever – this would bode well for Cardlytics chances . Transaction marketing capabilities are certainly nice to have.
But as we have seen, many of its elements are provided by other types of Big Data companies. Until it proves itself as “have to have,” companies like Cardlytics may not be sustained as standalone business drivers.