Constant Contact’s $1.1 B Sale to Endurance: Is There Synergy with Email and Hosting?

Constant Contact, the king of SMB email newsletters with 600,000 overall accounts, has been sold for $1.1 billion in cash to Endurance Holding Group, one of the largest web hosting, presence and domain companies with 4.5 million accounts and brands like HostGator and

The deal – which might be seen an SMB version of Salesforce’s $2.5 billion acquisition of ExactTarget in 2012– potentially represents a way to “save” Constant Contact, which is constantly under attack by marketing rivals. It also represents a way to add to Endurance’s average customer revenue, which currently runs about $10 or so a month (for hosting). CCI typically receives $20+ a month for its marketing services.

For CCI, the deal is the culmination of a multi-year effort that began with its founding in 1995; its IPO in 2007; and a more recent effort to provide comprehensive SMB marketing efforts. Indeed, its stock price fluctuations tell the story of a company that still depends on email in an age of email fatigue, spam and messaging; but remains the envy and target of every SMB marketer.

In fact, CCI has managed –with some success — to move its customers from one that is solely about email to a deeper relationship with extensions such as social media (Facebook ad management) events management, search, loyalty and other services. Via its costly, $65 million acquisition of Single Platform in 2012, it also added presence management, contact management and in some cases, larger customers.

None of the “new” services have been the home run that Constant Contact’s email services represent. But all of its efforts act on Constant Contact SVP Joel Hughes’ observation at BIA/Kelsey’s SMB event in Denver this September that “the two changes in SMB marketing are the advances in audience targeting, and the rise of native advertising.”

Can the two companies ultimately help each other? Endurance is not known as a deep integrator among the 40 companies it has acquired over the years, and its brand names don’t have high awareness outside of their customer base. In terms of brand awareness, it is no “Go Daddy.”

But its brands have deeply loyal customers like me (Local Onliner is hosted by Host Gator). Loyal and trusting customers may be more likely to buy enhanced services. It also has a reputation for low cost customer acquisition. This is a major plus, given that Constant Contact and its competitors in the SMB marketing space have a reputation for high cost customer acquisition.

For the two companies, it also seems like an easy merger. Both companies are headquartered in the Boston area, and already work together as marketing partners. Five percent of CCI’s new customers come from Endurance leads. Endurance says the combination will allow the two companies to reduce duplicated resources, saving millions of dollars a year. The current employee count is 2,500 for Endurance, and 1,400 for Constant Contact.

In our view, the CCI/Endurance combination gets it right in combining presence and marketing. Together, the two features represent the stickiest parts of the SMB marketing arena.

But the combination of Endurance and Constant Contact is going to have to fend off a lot of other players. Many of them will have a higher profile. In fact, extending the platform is the real quest for every company in the SMB space right now. Will email marketing and hosting turn out to be the right anchor for an SMB platform? Or will it be search? Or Deals and loyalty? The list goes on. In this case, timing and execution will be everything.

I like what Constant Contact co-founder and current PagePart CEO Randy Parker told me today – focus on the consolidation of this space. “It really is coming and there will be few companies acquiring the SMB,” said Parker. “The rest of us will just get ‘distributed’ through them.”

Constant Contact CEO Gail Goodman Keynoting at ILM East

Money2020: Payments and The Internet of Things


The Internet of Things is all about connectivity; it is especially conducive to the world of payments. Branching out from prepaid information on transit cards (i.e. London’s Oyster Card), financial entities have sought to add efficiency, security, reliability and safety to micropayments via Internet of Things tech.

At Money2020 in Las Vegas this week, the demos were alive with iOT. MasterCard and Visa, especially, showcased a wide range of truly useful applications.

Over at MasterCard, contactless card gas pumps, vending machines and coinless washer/dryer machines were highlighted. Regarding the latter, a member of MasterCard’s St. Louis based labs unit noted they had done their homework, interviewing multi-unit apartment owners, who have found it a costly burden to collect coins from machines, prevent coin box break-ins and know when they were needing repair.

Gas pumps, meanwhile – a mainstay of Digital Out of Home applications – were not only seen as logical candidates for contactless payments, but also to manage loyalty points and print out targeted offers to mobile phones. (yes, DooH is made old hat by iOT.) Excentus’ Fuel Rewards – a loyalty program — is a likely beneficiary of such efforts. In 36 months, Fuel Rewards has attracted six million members, who made 22 million transactions.

Visa’s demo highlighted contactless cars, vending machines and coffee stands. Key to the latter: payments were made by contactlessly waving a hand under a scanner. The unique hand data (finger prints etc.) is suggested as a superior alternative to thumb ID. It isn’t seamless, yet. My large hands required several do-overs to get them properly filed. Eye scanners from Eye Verify that measure the whites of your eyes and retinas were also highlighted at the show.


Money2020: The Payment Leaders and Their Itch to Get into Marketplaces


The march towards a new generation of marketplaces was clearly in evidence this week in Las Vegas, as the 4th edition of Money2020 attracted a huge, 10,000+ person ecosystem of financial players that all want a piece of the new world of marketing, commerce and logistics.

In the new era, marked by mobile-based services, Uber and Apple Pay have shown the way for new payment processes: the former by tying together geolocation and an e wallet; the latter by signing up thousands of merchants to accept simplified payments on iPhones.

These companies plus Google, Facebook, Amazon, Microsoft, Groupon, eBay, Twitter, Living Social and Foursquare have been among the dotcom and tech giants exploring the utilization of payments as part of a new breed of “transaction marketing.” Loyalty based plays such as Cardlytics, Edo Interactive, FiveStars, Belly and MOGL are also vying for a piece of the action.

What can be said is that everyone is evolving towards becoming some type of marketing integrators or platform. And services that are geared towards millennials need to get there quicker: millennials won’t do anything that isn’t geared around their phones.

Behind the scenes, billing and payment tech has actually been underpinning advances in business and social processes and lifestyles for generations – perhaps, in modern time, since Amex transformed from a pony express delivery company to a traveler’s cheque company. As recently as the 1980s, we saw how MCI’s revolutionary Friends and Family plan transformed MCI into a long distance giant.

The new generation of mobile-based, wallet-oriented payment services — combined with Internet of Things connectivity and biorhythm user authentication — will be triggering on demand services, promotions, loyalty, credit, loans, delivery/pickup, social media/reviews and back office features such as payroll.

As a show, Money2020’s growth has been spectacular. But in its 4th year, some wondered whether the Money2020 ecosystem has grown too fast too soon, and that “winter is coming” after a year that culminated in the launch of Apple Pay; the expected rollout of two IPOs; and major buy-ins from the dot com giants.

In truth, the industry’s not an overnight success – and the technology still needs to catch up (i.e. phone batteries that can stay powered up). Apple Pay and other mobile payment services have had modest growth in actual usage; First Data’s IPO was smaller than expected; and the loyalty programs have had trouble scaling merchants. In fact, there is real pessimism about Square’s upcoming IPS; and there’s been some retreat by the dotcoms, many of whom have realized that their role is less in banking and payments than in big data and marketing analytics.

Bain Capital Ventures Managing Director Matt Harris noted that all this talk of the “winter” amount to “nothing.” The opportunities are as rich as they’ve ever been conceived, he said.

In fact, everyone should hurry to assume their parts in the ecosystem. All the trends point to 2016 as the mobile payment industry’s probable tipping point. eMarketer’s Bryan Yeager suggests that mobile payments will grow 3x over 2015 – from $8.7 billion to $27.1 billion.

Banks, of course, are widely assumed to be the most vulnerable to disruption in the new environment. But at Money2020, they showed that they plan to fight back, while leveraging an enormous volume of customers that give them a headstart. Chase, for instance, has 94 million debit/credit card accounts. CEO Gordon Smith, in a keynote, said he’ll be able to preload all these accounts by mid -2016 with Chase Pay: a comprehensive new platform that lets customers pay for goods in store, online, over the air, or with a camera in app.

Capital One, similarly, has come out with Spark Business, a new SMB platform that takes an agnostic approach towards single source banking as it builds in analytic services, management features such as accountings, payroll and benefits. “Banks (only) solve banking problems,” noted Cap One’s Keri Gohman, head of Capital One’s Small Business Bank. “They aren’t developing for SMBs, they are going up from consumers, or down from corporate.” The new platform is “more powerful for adding more connections and partners,” she said.

The POS leaders also intend to fight back against the new breed of cloud-based providers. They’ll leverage their existing customer base – VeriFone, for instance, has 90,000 taxi and gas station screens around the world. Taxi passengers in Las Vegas, for instance, can opt to pay $3 to make a credit card payment, and receive local promotions at the same time.

But VeriFone will also work to add new capabilities, and open app stores that give them a new revenue stream for every kind of service. Its rivals in the POS terminal business – namely First Data’s Clover and Poynt – are also building App stores.

“The industry is on the cusp of something historic,” noted PayPal CEO Dan Schulman, who notes that PayPal has 107 million account holders around the world. “We can take basic transactions and make them faster, easier, more secure and most importantly, less expensive. We can truly democratize money. (We can) rethink what financial services can be in world of mobile and software. It is not (just) about tapping a phone or swiping a card. It is much more profound than that.”

Should Angie’s List Merge with IAC’s Home Advisor?

Home Service leads is a hot space, with a new generation of players throwing hundreds of millions of dollars to get into the market(s), including Thumbtack, Google, Amazon, Home Depot,, Porch, ReachLocal, Yodle, Serviz, BuildZoom and the list goes on.

The old leaders in the space – IAC’s Home Advisor (ex ServiceMagic) and Angie’s List — presumably remain on top. But they are seeing a lot of pressure as they strive for profits, brand recognition, and to keep their traditional merchant ties and consumer activity.

Indeed, the two companies have evolved their services considerably. Both have made marketplace adjustments to focus on features such as on demand leads, mobile-centric research and ordering, social-driven reviews (and in Home Advisor’s case, service cost estimates.) But there is always a sense that they are under performing, given the market’s growing acceptance of mobile comerce. Wall Street has certainly given Angie’s List a drubbing.

Now TCS Capital Management, a giant New York-based investor that has quietly amassed 9.1. percent of Angie’s List, is seeking to push the companies together in a merger. Would it be a good marriage that leads to new profits, customers and sustainability? Or would it be an unwieldy combination of two struggling companies with very different strengths?

IAC could probably buy Angie’s List at a discount, given its recent struggles. The two large players — ostensibly, direct competitors — could double up on national advertising; scale back duplication in customer service and merchant sales; re-focus the huge marketing costs that both companies have recently been taking on with TV campaigns; and perhaps attract interest down the road from a mega player such as Google that is not deeply rooted in the space.

But are Barry Diller and the IAC team ready to make such an investment? It has seen some positive activity with Home Advisor recently. According to CEO Chris Terrill, who was speaking at BIA/Kelsey’s SMB event a few weeks ago in Denver, the company is on pace to make $350 million this year, and has seen seven quarters of accelerating growth. It also has seen real success with a strategy of focusing on individual verticals, instead of a broad, Yellow Pages like, multi-vertical approach.

But it is an open question whethere IAC is “all in.” While we see the new TV branding campaigns – at last — and the new focus on on demand, we’ve also seen cutbacks overseas. IAC may also be distracted for some time by its just announced efforts to spin off its Match dating properties (Tinder, Match etc).

Angie’s List, meanwhile, derives a great deal of its value not only from its advertising revenue, but from its unique, premium subscription model; its behind the firewall reviews; and its ties to a devoted merchant base. Some services thrive exclusively on their Angie’s List activities.

It might be attractive for Angie’s List to get rid of its huge expenses supporting customer service. But would its appeal hold if the subscription model was dropped and it was made free? And what would be left for loyal customers if the brand was dropped? And would Home Advisor’s aggressive moves into social media and on demand serve the typical Angie’s List subscriber, which generally skews older?

In truth, Angie’s List may not have a choice but to seek a sale to a rival player: it doesn’t have deep pockets, and with so many choices out there, the market might be moving away from the premium subscription model. Advertising has become an increasingly dominant part of the Angie’s List business model. Still, a sale or merger with Home Advisor doesn’t really seem like an ideal marriage to us.

Source: Home Advisor

Square’s S1 Filing: Diversified Customer Base, Good Growth, High Deficits

When Square launched its credit card processing reader for smart phones in May 2010, it was one of the most enabling services for very small businesses we’d ever seen. It allowed businesses to affordably process payments at 2.75 percent of revenues instead of paying 5-6 percent; and take credit cards without investing $1200+ for POS; it also provided a complete set of analytics so that businesses knew how to target.

Since then, the challenge for Square has been scale up to include larger and more lucrative businesses; fend off increasingly stiff competition from players with arguably deeper ties to the SMB community, including PayPal, Intuit Amazon – as well as new cloud based POS type products from First Data’s Clover and Poynt as well as traditional POS players such as Verifone ; expand internationally – currently there are only some sellers in Canada and Japan; and build a complete eco system around its core processing services, including – Windows style — the development of a wide range of third party apps.

Success as an ecosystem would allow Square to become a true disruptor for all kinds of SMB services, back office logistics and marketing. In addition to Square Analytics, these services have now come to include Square Capital, a fast SMB loans service based on payments; and Caviar, a food delivery service with 1000 restaurants in key cities. But the company faces competition in each of these areas – a factor that has forced it to give up its initial hope for instance, to charge for its readers and stands.

It hasn’t been an easy climb. A 2012 deal with Starbucks to process all its payments gave Square credibility and brought Square up to scale very quickly. But it has also been a yoke around its neck, resulting in hundreds of millions of dollars in losses. That deal has proved unsatisfactory for both sides, and is likely to end soon. Talent wise, Square has suffered from high turnover and earned a reputation as a disorganized, difficult place to work.

Yet, the company continues to grow, provide exciting new services, and has taken its place as a major enabler and innovator of the new SMB economy. In 2014, sellers using Square processed payment transactions worth $23.8 billion generated by 446 million card payments from 144 million payment cards. Square’s own revenues from transactions and other sources amounted to $850 Million in 2014.

This week, Square has optimistically filed an S1 that reveals a great deal more about the 1,171 employee, tight lipped company than previously revealed. Among the highlights:

Revenues still come mostly from payments and POS services. 95 percent of revenue still comes from payments and Point of Sale services. This suggests that efforts to diversify are taking some time.
Customers are becoming more diversified. While Square has a reputation as mostly serving coffee shops and flea market vendors, its customer base is now comprised of 21 % retail; 17% services; 15% food; 14% contractors and repairs’ 11% health and beauty; 9T individuals; 6% health; 4% charity/education; and 3% transportation.
Larger businesses are beginning to adopt Square. 11 percent of transaction revenues come from companies earning $500k or more; 26 percent comes from companies making between $125-500K. The ratio of transaction revenues for companies making less than $125,000 has fallen from 92 percent in 2011 to 63 percent.
Larger companies use a wider range of services. On average, more than 70% of sellers who process more than $125,000 per year engage daily with analytics in their Square Dashboard.
Square’s digital receipts are a powerful feedback mechanism with customers. More than 1.5 million monthly feedback communications sent by buyers to sellers through digital receipts
Square’s cumulative deficit has been $473.2 Million. It needs for the IPO to be successful.

As Twitter Streamlines, Does Commerce Make the Cut?

Is Twitter Commerce going to make the cut? Up to 336 Twitter staffers are slated to be let go in a streamlining effort, and many divisions are likely to be impacted. Logically, it would seem that an experiemental area such as Commerce could be back burnered as Twitter focuses on ad contracts with big whales like national brands.

But Commerce, naturally, continues to tempt Twitter and its social media peers. As commerce experiences become increasingly focused on a combination of social media and mobile, it is no coincidence that Google, Pinterest, Facebook, Foursquare have been testing out buy buttons.

In Twitter’s case, its buy now button tests have included key retailers (Home Depot, Burberry), non profits and musicians. The buy now platform has also been fleshed out with a full slate of payment partners (Stripe), ecommerce platforms, and content partners, including social shopping, digital content sellers and fan commerce.

The Commerce divison, which is helmed by former Ticketmaster CEO Nathan Hubbard, also includes a full slate of promotional offers, incentives, rewards, disocunts and other programs for registered credi and dibit card holders – on built on the foundations of Cardspring, which Twitter acquired in July 2014. There is also talk of Twitter developing a marketplace. It may also more tightly integrate with payment companies such as American Express, which are already using Twitter as an offers platform.

As the Twitter Commerce Web page notes, “The goal for all our commerce initiatives on Twitter is simple: make it as easy as possible for businesses to connect directly with, and sell to, customers on Twitter.”

Realistically, to survive amidst the downsizing, all these efforts must be tightly integrated with Twitter’s advertising and marketing efforts – many of which already overlap with analytics, etc. That’s what the company is hoping to acomplish in its Collections pages, which are meant to make it easier for users to find useful information and go shopping. They must also hone in on better sales channels that bring them more local and vertical depth.

Will they get a chance to do it? We’ll see. As returning CEO Jack Dorsey said in his note annoucing the deep layoffs, “The roadmap is focused on the experiences which will have the greatest impact.”

TSYS Survey: Mobile Apps Drive The New Payments Environment

Mobile apps geared towards wallets and collections of offers – but not necessarily making purchases –are a major driver of the new payments environment, according to TSYS’ 5th Annual U.S. consumer payment survey of 1,000 U.S. consumers who have both debit and credit cards. TSYS is a leading payments processor.

It is a grouping that probably favors the over-banked compared to the under-banked. Yet we look to the TSYS survey for signs of new influences on marketing and the relative clout of players such as Apple, Amazon, Google, Microsoft and eBay in a new payments environment that will impact shopping and buying behaviors for both local services and retail goods.

According to the survey, Amazon has the most downloaded mobile app, with 57 percent of respondents downloading. It is the second most used app, with 38 percent using it at least several times a month. Banking apps have been downloaded by 50 percent of respondent, and are used the most frequently by this survey’s respondents at 39 percent. Paypal follows at 52 percent downloaded/32 percent frequently used; eBay comes in at 48 percent/22 percent and Starbucks is at 29 percent/15 percent. As a category, Daily deal apps such as Groupon and Living Social are also widely disseminated, with 37 percent/19 percent.

Most Downloaded Financially Oriented Mobile Apps (Selection)
1. Amazon (38%)
2. Banking Apps (35%)
3. PayPal (32%)
4. eBay (22%)
6. Daily Deal Apps (19%)
12. Starbucks (15%)

A free report summarizing the survey notes that consumers typically look for an incentive when choosing one payment option over another. Fifty-eight percent said that they have a rewards program attached to their most preferred payment type.