Everyone seems to know the pink pig with the cool shades. So why then is CoolSavings.com being treated like leftover bacon?
After squeaking out a $23 million public offering back in May, shares of the battered direct e-marketer are now languishing in the $2 dollar range. This looks like a dotcom zombie stock if I’ve ever seen one.
But is CoolSavings really doing anything wrong? Not really. The biggest knock against this e-marketer seems to be “guilt by association.” The sharp pull back in online advertising spending among startups and many e-tailers has left the entire e-marketing sector in a rut.
To complicate matters, CoolSavings has so far been unable to show a suddenly “profit hungry” Wall St. real profits. However, the company was able to report significantly lower customer acquisition costs, while reporting record revenue, last quarter.
In other words, there still may be light at the end of this tunnel. This is one pink pig that isn’t ready yet to be turned into pork loins and pork chops at the local deli.
We recently sat down with Steve Golden, the chairman and CEO of CoolSavings, to more clearly understand his company’s long term potential and path to profitability.
ISR: Why don’t we start off with an overview of CoolSavings? Take us through the business model.
Golden: Well, CoolSavings does several different things. We offer the consumer one place to go to save money prior to shopping both at traditional bricks-and-mortar retailers, be it a small dry cleaner, up to national retailers. At the same time, we’re driving traffic to online retailers. Where we’re different than all these other promotional sites is that beyond all the various content, it’s the various promotional incentives that we offer the consumer. We’ve built an infrastructure here where we offer coupons and e-coupons, of course. We control 51% of that market. We also offer today “points” like MyPoints . We offer samples, free stuff and lead generation like FreeShop.com
. We offer category newsletters now like LifeMinders.com
. We offer savings notices. We offer contests and games. We offer it all. We have a total infrastructure.
ISR: That brings up a question that some investors have had about your focus. You seem to have your hands in so many different areas. Is that really a good thing?
Golden: The reason why that’s a good thing is because our site is built for advertisers to build a one-to-one relationship with the consumer and to take someone from acquisition to loyalty and reduce their cost along the way. So once I attract you maybe with five dollars off on a coupon or “X” amount of points, I have all these other tools now to build a relationship with you.
ISR: So you’re saying that you provide the full tool chest from customer acquisition to retention and beyond?
Golden: Exactly. That’s the key to the industry because if I acquire you for $10 dollars or whatever, I want to put you in a separate bucket. Maybe I want to first do coupons and then maybe reward points, but eventually I may just want to sponsor a category newsletter where I’m providing you with information or just regular sales notices. The other key thing with this is that if you own a reward points site and I own a coupon site, and we’re both interested in a shirt and you take it for points and I take it for a coupon, a manufacturer has to pay twice to get to that database. By being in CoolSavings, it’s all there in one database. We don’t care if the customer is just motivated by points. But we’ll mine the data to find out if he is.
ISR: Let’s talk about Wall Street’s perception of e-marketers right now. Obviously, your company and many of your competitors are trading near 52-week lows.
Golden: If you look at our valuation, we’re under the radar screen. When we came out, we came out in the worst period in time. We came out in M
ay. I was paddling all the way upstream to get this off. We had to cut the offering. We only had a couple of institutions participate. We’re under the radar screen. As CoolSavings executes its model – and we are executing our model – Wall St. will pay attention to us.
ISR: Isn’t one of the big issues, though, that with $26 million in cash on hand last quarter that investors are questioning if this is enough capital for you to reach profitability?
Golden: I think that Wall St. can look at that but Wall St. also has to realize that if we are executing on our model than there is no problem raising money. The problem a company has in raising money is if they’re not executing their model. We knew coming out that we had cut our offering. At the same time, CoolSavings has not varied from the business model that it established when we went to the public forum. We are executing against that model. It shows you a lot.
ISR: With valuations so depressed for e-marketers, what do you feel the possibilities are for an acquisition or sale of CoolSavings in the future?
Golden: I think that CoolSavings will start getting recognition in the market. I feel like I’m the Rodney Dangerfield of the Internet sometime. I’m not getting the respect. But as we get the respect, I think there is a huge advantage for things consolidating under the CoolSavings brand. Some of these companies might have a larger market cap right now, but that brand awareness and brand credibility where the consumer can identify with something and the infrastructure that we’ve built is huge.
