Mommy Bloggers Spur Web-Coupon IPOs Amid Digital Bargains
Every month, 1.75 million visitors flock to her site for grocery coupons, magazine deals and restaurant discounts. When a reader prints an offer or clicks through to make a purchase, Paine gets 30 cents to $25 from a Web-coupon purveyor. Those referrals happen 3,000 to 5,000 times a day.
Paine and bloggers like her are fueling a surge in demand for digital coupons and the speedy growth of many deal suppliers, including Coupons.com Inc. (COUP), which is slated to debut on the New York Stock Exchange today. With EMarketer Inc. predicting that more than 110 million American adults will cash in Web coupons this year, RetailMeNot Inc. (SALE), Ebates Inc. and Prodege LLC’s Swagbucks are also racking up sales.
“When you don’t know how you’re going to pay rent, you get creative,” said Paine, 32, who started searching for digital coupons in 2004 when her husband was in law school and whose endeavors now generate sales worth at least six figures a year. “I’ve used all the sites for earning and saving money and now have been able to help readers save hundreds of thousands, probably millions, of dollars.”
While digital promotions have been around since the dawn of the Internet, the market has taken off in recent years as traditional media like newspapers and magazines lost subscribers and the proliferation of smartphones enabled consumers to find discounts on the move. The number of adults using coupons on mobile devices is projected to jump 26 percent this year to 76.7 million, compared to total digital coupon growth of 8.1 percent to 110.8 million, EMarketer said.
Unlike daily-deal sites Groupon Inc. (GRPN) and LivingSocial Inc. that gained popularity by offering deep cuts -- half off or more -- at restaurants, spas and hotels, Coupons.com and others offer the types of discounts found in newspaper inserts, such as 5 percent off at a retailer or $1 off an item at grocery store.
Coupons.com, based in Mountain View, California, was founded in 1998, six years before Mark Zuckerberg began Facebook Inc. It took until 2009 for the company to surpass $40 million in annual sales, and only four more years to quadruple that, with revenue reaching $167.9 million in 2013. Coupons.com is led by Chief Executive Officer Steven Boal, who started the company and owns 9.3 percent of the outstanding stock.
Coupons.com, whose ticker symbol is COUP, raised $168 million in its initial public offering yesterday, selling 10.5 million shares at $16 each. The stock soared 88 percent to $30 at the close today in New York, valuing the company at $2.18 billion.
To expand across the Web, Coupons.com introduced its Brandcaster product in 2008, letting other sites such as mommy blogs promote coupons and make money, similar to Google Inc.’s affiliate program for showing text ads. The company now has about 30,000 affiliate publishers, the prospectus said.
“They can be up and running within five minutes on their own properties, earning money distributing coupons,” Boal said in the online IPO roadshow. Affiliates include television stations and recipe sites, he said. Paul Sloan, a spokesman at Coupons.com, declined to comment because of the pre-IPO quiet period.
Ebates, which offers cash back at retail stores when users shop on the site, was also founded in 1998. The San Francisco-based company picked JPMorgan Chase & Co. to lead its IPO with help from Bank of America Corp., people with knowledge of the transaction said in December. Priti Khare, a spokeswoman for Ebates, declined to comment.
MoneySavingMom.com’s Paine spends about six hours a day on her site and four hours teaching her kids -- ages 4, 6 and 9. With a 13-person staff, Paine scours the Web for deals relevant to her audience of moms and posts them on the blog throughout the day.
Yesterday, she posted a slew of deals from Coupons.com, including $1 off a 59-ounce bottle of Minute Maid orange juice. Clicking on the promotion sent the reader to Coupons.com’s site, which gets a commission when the deal gets printed. Coupons.com then pays Paine a referral fee.
Paine, whose husband is now an attorney, said 10 percent to 20 percent of her daily income comes from Coupons.com, with as much as 5 percent from Ebates and Swagbucks. She has relationships with hundreds of companies, and promotes everything from a free one-year subscription to Better Homes & Gardens magazine to $10 worth of food for $5 at Whole Foods Market Inc. with a Groupon coupon.
Coupons.com and others can’t get too comfortable as they compete to lure virtual coupon clippers with enticing offers. In a Feb. 19 note on RetailMeNot, Blueshift Research said the market “is considered to be a commodity business,” and that entrants like Groupon pose a competitive threat.
Both RetailMeNot and Coupons.com, in their prospectuses, cite big Internet companies like Google and Facebook as potential competitors. Coupons.com recorded a net loss of $11.3 million in 2013, spending $61.8 million on sales and marketing. Net income at RetailMeNot increased 21 percent to $31.5 million.
Even with more entrants, the online upstarts see plenty of room for growth, as digital deals represented less than 1 percent of total coupons distributed last year in the consumer packaged goods market, according to NCH Marketing Services Inc.
Brian Hoyt, a spokesman for RetailMeNot, said competition drives the company to develop new products and reach out to users to “fight for their loyalty every day.” Unlike other services, RetailMeNot doesn’t pay bloggers to promote deals.
Swagbucks co-founder Josef Gorowitz said his El Segundo, California-based company is pioneering a different model. It rewards consumers for trying its services, such as taking an online survey, playing casual games on the site or using its search engine. Rewards can be redeemed for gift cards to Amazon.com Inc., Starbucks Corp. (SBUX) and Target Corp.
Revenue at Swagbucks climbed 51 percent last year to $53 million, said Gorowitz, who was studying to be a rabbi before starting Prodege in 2005. Swagbucks, which Prodege launched three years later, has more than 1,000 bloggers promoting the service and encouraging readers to sign up, Gorowitz said, calling money-saving moms the “anchor of our business.”
Heather Hernandez is among them. The 37-year-old mother of two in Houston turned to blogging full time in 2008 and now makes more money staying at home with her kids than she ever did as a civil engineer. She attracts 31,000 viewers a month to her site, Freebies4Mom.com.
Hernandez, who gets about 30 percent of her revenue from affiliate relationships with companies like Swagbucks and Coupons.com and the rest from advertising and other sources, said she uses Swagbucks to get Amazon (AMZN) gift cards and encourages her readers to do the same.
“My goal was to help other moms,” Hernandez said. “It’s a great way for readers to do something every day that helps them earn a free gift card.”
One reader is Lee Digiovanni, a professor and mother of two teenagers. She doesn’t have time to search the Web for deals, so counts on sites like MoneySavingMom.com and CouponMom.com, using an automated news feed that alerts her to relevant content on subjects including budgeting.
“I’m just looking for ways to make ends meet,” said Digiovanni, who teaches in the education department at Kennesaw State University north of Atlanta. “If things come across that are interesting, I go to the sites to check them out.”
To contact the editors responsible for this story: Pui-Wing Tam at email@example.com Jillian Ward