2. Contents
Executive Summary
Market Overview
Evolution of Mobile Coupons
Who’s Using Mobile Coupons?
Why Use Mobile Coupons?
Key Players
Comparison of Key Players
Recent VC Investments
Trends
Risks
Recommendations
Appendix of Interviews
2
3. Executive Summary
Technology is no longer a hurdle for the proliferation of mobile
coupons
Today’s mobile coupons are targeted marketing tools
leveraging social and location profiles, that tie into POS
systems through loyalty programs and barcodes displayed on
devices
66% of young adults are likely to try a mobile coupon, but only
15% of mobile users have actually used a mobile coupon
Mobile couponing is expected to be a $1B industry by
2011, $6B by 2014
Redemption difficulties have been mitigated by “save to card”
programs
Far more national brand trials are required before the masses
adopt mobile couponing
Payment and transaction processing is the next feature to be
added to end-to-end mobile couponing solutions
3
4. Market Overview
Google expects mobile coupon
spending to reach $1B by 2011
(Mobile Marketer, 10/2010)
Juniper Research says mobile
coupons will reach $6B in global
redemption value by 2014
(11/2009)
For the 12 months ending
06/2010, coupons distributed via
FSI’s (free standing inserts) grew
at 8.4%, while digital coupons
(including mobile) grew at 100%
(coupons.com, 07/2010)
FSI’s still represent 89% of all
coupon distribution
(Inmar, 02/2010)
4
5. Market Overview
Redemption rates for paper coupons have historically been
close to 1%, while mobile coupons demonstrate between 5%
and 20% redemption (Cellfire, 02/2010)
“The Holy Grail for local advertising is location-targeted
coupons, and we’re building Google Offers to enable that…” –
Mike Steib, Dir. of Emerging Platforms
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6. Evolution of Mobile Coupons
‘05: Text messaged promotions and discount codes
’07 – ’09: Searchable coupon wallets in mobile
apps, redemption by sharing screen with cashier
‘10: Targeted marketing tool leveraging social and
location profiles, tied into POS systems through loyalty
programs and barcodes displayed on devices
‘11: Aggregated feeds of national brand
promotions, locationally and socially targeted, POS
integration a must
‘13 and beyond: Local business adoption starts
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7. Who’s Using Mobile Coupons?
Consumers who print digital coupons have an estimated
average household income of $96,000
(coupons.com, 07/2010)
46% of US adults who own a mobile phone are somewhat
likely to try out mobile coupons (BizReport, 02/2010)
66% of US young adults likely to try out mobile coupons
(BizReport, 02/2010)
Only 15% of mobile users
have used a mobile coupon
(eMarketer, 11/2010)
7
8. Why do Consumers Use Mobile Coupons?
Accessibility in an increasingly wireless world
Convenience, especially given loyalty card integration
Relevance using social and location based profiling
Economic conditions requiring cost cutting
8
9. Why do Marketers Use Mobile Coupons?
Detailed viewing and usage data, including individual
user, time, place, frequency, and other related and unrelated
contextual data
On demand delivery and deployment to always on, always
with you devices
Low cost – high impact due to their viral nature
— $49/ month for 3 dynamically
changeable coupons
(getyowza.com)
— 5% to 20% redemption rates
(vs <1% via traditional print)
10 to 12% basket lift
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10. Key Players
Companies
— Coupons.com: founded 1998, unknown funding
— CellFire: founded 2005, $26MM funding
— ScanBuy: founded 2006, $22MM funding
— Gowalla: founded 2007, $10MM funding
— CardStar: founded 2009, $1.5MM funding
— Armadealo: founded 2009, self financed
— Foursquare: founded 2009, $21MM funding
Most Active VCs (by approximate investment size)
— Andreessen
Horowitz, Menlo, Storm, Masthead, Greylock, Union
Square, Shasta, Founders Fund, Verizon Ventures, Acta
Wireless, Ron Conway,
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11. Comparison of Key Players
Overarching Strategy
Company Redemption Mechanism Source of Deals Target Niche Key Differentiator
(in my own words)
Promo codes, show your To become an ad network, Clothing and retail in malls, not
Armadealo Aggregation from the web Focused on aggregation
screen similar to AdMob hip urbanites
To provide the end to end
Direct relationships, Aggregators and affiliates
Promo codes, show your tools and infrastructure for Focused solely on
Clip Mobile affiliates (eg newspapers) having existing relationships
screen creation, distribution, Canada
who upsell the service with local businesses
discovery, and analytics
To help brands recognize,
Promo codes, show your Direct relationships with Brands that appeal to teens
Foursquare reach, and reward their Sticky game mechanics
screen, save to card national brands and young adults.
patrons
To improve and ultimately own Companies, brands, and
Direct relationships with Great at technology,
the interface between the affiliates who understand
CardStar Barcode scan, save to card national brands, third party partnering and
shopper and the merchant / mobile and have significant
use of CardStar's platform integration
the merhcan't loyalty program distribution channels
Provide end-to-end mobile Marketers who seek to drive Working with the digital
Third party (coupons.com)
ScanBuy Coupons.com barcode creation, usage, and transactions through the use couponing industry
- save to card
analytics tools and solutions of barcodes leader
Promo codes, show your Direct relationships with To be the Sunday paper of Mature adults, women, Mobile couponing
CellFire
screen, save to card national brands mobile coupons mothers incumbant
Direct relationships with To create a socially curated Young adults, hipsters, User generated
Gowalla Show your screen
national brands guidebook urbanites database of locations
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12. Recent VC Investments
Recent
Company Amount Raised Series Announced Investors Location
($MM)
Andreessen Horowitz, Union Square, O'Reilly
Foursquare 20 B Jun-10 New York, NY
Alpha Tech
Amplifier, Acta Wireless, LaunchCapital,
Cardstar 1.5 A Mar-10 Boston, MA
Verizon
ScanBuy 16 B Feb-10 Masthead, Hudson, Longworth, Motorola New York, NY
Greylock, Shasta, Maples Investments, Kevin
Gowalla 8.5 B Dec-09 Rose, Chris Sacca, Jason Calacanis, Shervin Austin, TX
Pishevar, Gary Vaynerchuk, Ron Conway
CellFire 12 C Feb-08 Silver Creek, Menlo, Storm San Jose, CA
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13. Recent Trends
Technology has ceased to be the issue holding back the
proliferation of mobile couponing
Problems with mobile coupon redemption are being
resolved through integration with loyalty cards – the
“save to card” model
Delivery platforms are leveraging location information to
better match consumers and merchants
Targeting engines are incorporating Facebook Connect for
the social information needed to keep promotions
relevant
National brands are doing trials with multiple solutions
providers, despite a lack of baseline evaluation metrics
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14. Future Trends
Most companies who do not integrate their coupon
redemption process with loyalty programs or directly with
the POS will slowly go extinct over 12 to 18 months
Payment processing will become part of the end-to-end
solution offerings of mobile couponing companies
— Consumers will be able to redeem coupons from their
phones, including purchasing goods for shipment to their
doorsteps
14
15. Future Trends
Trials by 500+ national brands will bring mobile
couponing to the masses within 18 to 24 months
— Only two or three mobile companies will achieve financial
success working with these brands
Local merchants will adopt mobile couponing after the
national brands, no sooner than 2 years from now
— Successful solutions providers will partner with companies
having existing relationships with local merchants, e.g.
newspapers, Yelp, print coupon distributors
15
16. Future Trends
Mobile couponing players will divide into two groups
— Offering a database of mobile coupons users will search to
find what they are looking for (CPM/CPC business model)
— Offering context based alerts, informing users that a coupon
they may be interested in is available (CPA/CPC business
model)
Distribution reach, user engagement, content
relevance, and user experience will be the new criteria for
success
— Several current competitors have three
— All four are needed to “win” the industry
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17. Future Technology Innovation
Coupons.com, Catalina Marketing, or a similar company
will develop and sell a platform for integrating digital
coupons across all POS systems
— Already have relationships with national and local retailers
— Already have required access to diverse POS systems and
technical expertise to link into them
— Necessary in order to capture those customers not using and
those merchants not offering loyalty cards
NFC will be become an alternative to the barcode
redemption model for mobile coupons
— Will take 2 to 4 years before the infrastructure is in place in
the US to transact using NFC
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18. Risk Factors and Concerns
Coupons must be available
— First time users who cannot find coupons in their areas will
not return to the service
Coupons must be redeemable
— Cashiers and clerks must be trained
— Technology integration must be flawless
— Consumers will not tolerate not receiving a discount they
believe they are entitled to
Apps distributing mobile coupons must be sticky
— Solutions must keep users engaged by offering something
unique, incorporating social elements, employing game
mechanics, etc.
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19. Investment Recommendations
Invest in mobile couponing companies that:
— Solve the redemption problem by integrating directly with the POS,
versus loyalty card systems
— Allow you to continue the purchase process and complete the
transaction right from your mobile device
— Generate revenues from brands and merchants on a cost per
acquisition basis
— Aggregate digital deals already found around the web and through
other mobile coupon providers
— Capture the local business opportunity through partnerships,
rather than one-to-one acquisition
— Use location as a means to target coupon recipients as well as find
merchants offering deals
— Incorporate the social graph through Facebook Connect to make
coupons viral as well as to keep coupons relevant
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21. Armadealo
Spoke with Matt Greer, CEO
Trying to create an ad network
— The AdMob or Millenial Media of mobile coupons
— A platform to get any deal to any mobile user
Interested in clothing and retail, mothers and teens, not hip
urbanites
Aggregate deals from the web
Regarding redemption, believes the retail industry favors promotion
codes over loyalty program integration that competitors are
pursuing
Needs to gain an audience to achieve success, something that
Gowalla and ShopKick have done well
— Consumer acceptance is still 2 years away
Ultimately successful company will have an SDK to plug any
promotion into any mobile network
— Similar to Third Screen Media
21
22. Clip Mobile
Spoke with David Ofierski, CEO
Only focused on the Canadian market at present
Unlike the US, Canada has a handful of loyalty points umbrella programs, making “save to
card” programs easier to implement
Where the US is regionalized and fragmented, Canada is dominated by a few key players
across the country in every industry
— Shell and Petrol Canada in gas
— Shoppers in drug stores
— Easier for Clip Mobile to get scale in Canada
Partnering with newspapers and business affiliate groups for access to local businesses –
people with access to the people who write checks
Mobile coupon discovery, distribution, and sharing must all be social and viral
Pros of the brand / app
— does not interfere with customers’ brand (eg Quiznos)
— 12 to 18% retention rates
Cons – not sticky enough
— Foursquare is sticky, but people use it for location sharing, not couponing
Coupons themselves must be attractive, else even if consumers find them, they won’t use
them – avoid CPA model and avoid this risk
Traditional media is the biggest threat to mobile couponers trying to establish their own
relationships with brands and local merchants
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23. Foursquare
Spoke with Eric Friedman, Director of Client Services
Smartphone adoption is still holding back mobile
couponing from reaching its tipping point and becoming
mainstream
The biggest industry success with regards to mobile
couponing has been the ability to target consumers
where they shop and WHEN they shop
The biggest challenge facing mobile couponing is
coordinating logistics on the merchant side
The product with the best user experience will emerge
victorious in this space
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24. CardStar
Spoke with Stuart Hilger, Director of Business Development
Focused on capturing consumer loyalty first, then additional content to present
Make it simple to extend loyalty and other programs to mobile
Create a technology platform for third parties, with functions like save to card, real
time analytics, and coupon clearing
Major merchants don’t have a clue about what to do with mobile – barely
understand text based
— Loyalty card programs do not require change of behavior or new learning
Too many solution providers are in the merchants’ kitchens
— Education becomes complicated
— Sales cycles are lengthened
— No effective due diligence to evaluate competing technologies translates to difficulty
getting merchants to take action
Try to align with companies who “get it” and have distribution channels
Solution must be viral to become a household name, like the Sunday paper
Technology is not a hurdle for mobile couponing adoption
Need to tie in mobile payments piece
— NFC will take too long to achieve critical mass because no infrastructure exists
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25. ScanBuy
Spoke with David Javitch, VP of Marketing
Not a focus or competency to get into mobile couponing ourselves
Partnered with coupons.com
— Relevant content for users after they scan a barcode for information
using ScanBuy
— Coupons keeps consumers engaged with ScanBuy
Scanning directly off the phone at the POS is difficult because of
lingering technical issues between laser and optical scanners
Integrating Facebook Connect to enable sharing content
Current promotion with Target
— Phase 1 is to launch a product video
— Phase 2 is to offer a coupon and allow click to buy
Location data may be the next big trend to get mobile promotions
going, but consumers will have to opt in to drive it
— Only 50% of ScanBuy’s consumers provide location data
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26. ValPak (Philadelphia Franchise)
Spoke with Paul Berman, Founder and President
Local businesses are starting to ask questions
ValPak nationally has been talking about mobile coupons for a
while, but doesn’t seem to have taken much action
We have long standing relationships with the local
community, they trust us and seek our guidance for their
marketing needs
— We typically have to do all of the heavy lifting
Local businesses will wait to see what the Walmart’s of the
world do, and then say “I want that”
Need to keep local merchants educated about mobile
Mobile couponing solutions must be simple to administer and
track, and must provide quality and reliable usage and
redemption data
Mobile couponing companies will have to work with us to get
to local businesses, and we want to work with them
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27. Mobignite
Spoke with Nic Lumpp, Co-Founder
Coupons alone are not fun
Saving money is fun, or at least pleasant and rewarding
You can make saving money (vs coupons) sticky with even simple
game mechanics
— Shake your phone to reveal
— Scratch your screen like a game card to reveal
Coupons are used for one of two purposes
— Acquire new customers
— Keep existing customers
College campuses are an open market and huge opportunity
— Audience wants and needs to save money
— Local businesses face fierce competition and need to continually
attract consumers
— Perfect base for viral growth – like Facebook
— Need to partner, door-to-door doesn’t scale
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28. 8coupons.com
Spoke with Landy Ung, Co-founder
Have been facing coupon redemption issues since launch in 2007
Key to mobile coupons is content – the right content to right people
at right time
We work with aggregators to get the best deals –
Valpak, Groupon, etc
Allow people to post their own deal to help coupons grow virally
Valpak has it’s own mobile strategy, which makes it hard for others
to compete
Mobile payments / NFC will come first (2 to 3 years from
now), before we close the mobile coupon redemption gap
Need education to get mobile coupons to the masses – eg cashiers
Much easier to work with national brands vs local small and medium
size businesses
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