The launch of Groupon just over two years ago sparked a remarkable, if sometimes overhyped, trend for group buying. Now, even companies such as Yahoo! want some of the action. What’s more, the group-buying model is changing and evolving as players such as Deal Current become part of the mix. Deal Current is a white-label platform for media companies to manage daily deal advertising on behalf of brands, assuming the management of deals for clients and making it easier for them to establish a social commerce presence.
The San Diego–based company was founded in 2008 by Jimmy Hendricks. Prior to founding Deal Current, Hendricks was an industry executive for Active.com, an online registration company with over $300 million in annual revenue. He received a master’s in accounting from the University of Missouri and has ten years of experience in sales strategy, product development, advertising sales, and team building.
Deal Current sells daily deals software to brands. It provides marketing, operations, and sales training; customer service and support; the technology behind the platform; merchant payment; and, if requested, application and website design. The client provides marketing, sales (the deal scheduling), and copywriting and images for the deals. Deal Current charges setup fees and then makes 6%–10% on each transaction based on volume. The aim is to help media companies have their own revenue-generating deals platform up in 30 days or less.
The company believes that there are over 2,000 ideal media and Internet publishers on the Web. It estimates each client to be worth on average $100,000 in annual revenue to a software provider, creating a $2 billion U.S. market. Deal Current expects to be able to secure 200 U.S. clients in 2011 and 400–500 in 2012. Internationally, this number is at least ten fold. The top target segments are TV stations, radio stations, newspapers, magazines, e-mail marketing agencies, and online communities. The company has achieved market penetration in 66 cities, serving media companies and properties including American Consolidated Media, Journal Broadcast Group, Buffalo News, and the Pittsburgh Post-Gazette. A new channel parter deal just signed and to be announced next week is for 700 radio station clients that the channel partner will be reselling Deal Current’s platform into.
The brand leaders in group buying are Groupon, which recently rejected a $6 billion offer from Google, and serves about 300 markets, Living Social, which just took a $183 million investment from Amazon and serves about 150 markets. Both are aggressively pursing expansion. Direct competitors include Nimble Commerce (25 clients), Tippr (30), Shoutback (80), and Analog Analytics (unreported).
Revenues are over $1 million, with $3 million to $4 million projected in 2011. Hendricks financed the business through friends and family seed money (about $400,00) and straight up sales. The company is now looking at strategic Series A rounds. The ideal investor is the investment arm of a major media company.
New clients remain the primary focus for growth. Hendricks and his business partner are also actively looking for a COO and CTO. In 2011, Deal Current expects to expand internationally and roll out new products. Management says it is not thinking about an exit right now; rather, it wants to build a profitable business.
Deal Current presented at the roundtable on December 16. Jimmy asked if he should be raising money at this point. My advice was to not raise money if he didn’t need to. Jimmy has already managed the most complex part of the bootstrapping phase with very little outside investment. At this point, he can grow organically, and leverage channel partners and other creative modes of non-equity financing, and preserve equity as much as possible. This also makes it much more lucrative for him in the event there is an acquisition in the medium term.
This segment is a part in the series : 1Mby1M Deal Radar 2010