M&A Alert—January 25, 2012
Constant Contact Acquires CardStar
Transaction Size: $5.75mm
CardStar develops a mobile application that allows consumers to consolidate membership and rewards cards and mobile coupons within a single application in their smartphone. Consumers scan their cards and their information is then imported into the application. Merchants can also use CardStar to tailor mobile deals and offers to their customers as well as track purchase behaviors to reward loyalty. The CardStar application is available on iPhone, Android and Blackberry and CardStar claims over two million users. Competitors include KeyRing, Stampt, Cartera Commerce and Chatterfly. CardStar’s employees will join the Constant Contact team, including CEO and Founder Andy Miller and CTO and Founder Danny Espinoza. Miller will serve as Director of Mobile Products, reporting to Joel Hughes, Constant Contact’s senior vice president of strategy and corporate development. CardStar was founded in 2008 and is headquartered in Boston, MA. CardStar has raised $2.3 million in funding from Launch Capital (Bill McCullen), Verizon Ventures, Acta Capital and Amplifier Venture Partners.
Constant Contact provides online marketing services including email marketing, social media and online surveys to 450,00 small and medium size businesses. Last year, Constant Contact bought social CRM startup Bantam Live for $15 million in cash, and social email startup Nutshell Mail.
Constant Contact is all about allowing SMB’s to deliver marketing messages to well targeted consumers. Their legacy is using email as the delivery mechanism, which remains their core channel. Email, while still an effective, is practically limited to a one way exchange (outbound to the consumer), partially suffers from it’s association with spam and is increasingly perceived to be overloaded by consumers.
Constant Contact, consistent with other email marketing providers, is seeking fresh ways in which it can help SMBs deliver their marketing messages to existing and new customers. CardStar allows consumers a way to effectively manage the multitude of loyalty/reward programs in which they have membership, using their phone as the “card”. This provides Constant Contact with several new assets to enhance its business. These include 1) CardStar’s current users, who are technology savvy with an attractive demographic to marketers, 2) access to valuable behavioral, location and purchase data associated with these customers to help improve targeting, 3) a frequently used mobile application where selected marketing messages and offers can be presented to the consumer optimized for time, location and circumstances and 4) a clear opportunity to provide SMB merchant customers with other loyalty related programs.
Architect Partners’ Observations
While undoubtably small in size, we highlight this transaction as it represents a great example of the importance of establishing a persistent, reciprocal relationship with customers. While outbound marketing efforts such as email, display advertising, print ads, … will continue to play an important role in attracting and retaining customers, applications such as customer loyalty provide the opportunity for businesses to build a persistent, one-on one, personalized, two-way relationship with their customers.