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Investment Overview for Constant Contact (NASDAQ:CTCT)
WHAT HAS CHANGED
Constant Contact delivered solid growth in 2014. For 2014, Constant Contact experienced year-on-year revenue growth of 16.2%, to $331.7 million, exceeding management expectation of $331.4 million. The introduction of Toolkit as an “integrated online marketing suite” in April 2014, coupled with SinglePlatform’s (Constant Contact’s digital listing service) display of 100% year-on-year top line growth, are the primary reasons for Constant Contact’s revenue growth. The healthy top-line growth trickled down to the bottom line too, with Constant Contact registering a robust 98% year on year growth of net income to $14.3 million. However, Constant Contact's main attraction, Toolkit, undermined the company's appeal in 2015, when Constant Contact tried repositioning its brand image from an email marketing company to a provider of an integrated online marketing suite. The new brand image created confusion in the minds of prospective users who primarily viewed it as an email marketing company. As a rectifying measure, in Q2 2015, advertisements were made to focus on the email marketing aspect of the company.
- Changed focus from Toolkit to Galileo in 2015
- In a drastic move, the company decided not to use the Toolkit naming convention on its marketing material and to replace it simply with Constant Contact. While Constant Contact’s focus of being an integrated marketing platform still remains, the Toolkit brand name will cease to exist going forward.
- The company has instead introduced a next-generation offering platform, internally code-named Galileo. Currently, 50,000 customers and free trialers are using it, and it has received positive feedback, so far.
- Global expansion plans: Mexico in focus
- Constant Contact plans to expand its efforts in Mexico towards the second half of 2015, and start its full operations in the country by 2016. It considers Mexico to be a crucial market for growth.
Below are key drivers of Constant Contact's value that present opportunities for upside or downside to the current Trefis price estimate for Constant Contact:
: Constant Contact's average customer base has increased from approximately 210,000 in 2008, to 595,000 in 2014, as a result of growth in business and enhanced product offerings like email marketing, social media marketing, event management, and group buying. Growing demand for content marketing has been the key driver of Constant Contact's success. We currently forecast the number of customers to cross 1 million by the end of our review period. If the firm is able to grow its customer base by 10% each year to reach 1.1 million customers during the Trefis forecast period, there could be a 20% upside to our price estimate. If, however, growth slows down and Constant Contact is able to only expand its customer base to 800,000 customers, then there could be an approximate 10% downside to the Trefis price estimate for Constant Contact.
Constant Contact is a leading provider of on-demand email marketing, social media marketing, event marketing, and online survey solutions for small businesses, associations, and non-profits. The firm provides internet-based services to facilitate email deliverability, including bulk and transaction sending, reputation management, compliance auditing, abuse processing, and diagnostics. These services provide customers the ability to increase deliverability of email with less time, cost, and complexity than handling it themselves.
Engagement marketing creates a dialog that shares information and encourages interaction. Constant Contact's Engagement Marketing platform enables its customers to launch and monitor customer engagement campaigns across multiple channels, including email, social media, events, and online surveys.
The email marketing product enables small organizations to effectively and efficiently create, send, and track professional and affordable permission-based email marketing campaigns. Through these campaigns, customers can build stronger relationships with their customers, clients, and members, as well as increase sales and expand membership.
The event marketing product enables customers to promote and manage events and create event homepages, track event registrations, and collect online payments.
The online survey product enables customers to easily create and send surveys and receive immediate and actionable feedback.
The social media marketing product enables customers to leverage the power of social networks like Facebook and Twitter and market their products on those platforms.
Constant Contact offers a variety of different products to its customers which include email marketing, event marketing, surveys, social media marketing, and others. Based on the available data we have categorized their operations as Content Marketing and reported results as an aggregate of all services offered.
Transitioning into a multi-product company represents a key goal for Constant Contact
While Constant Contact is highly dependent on email marketing, which contributes to around 85% of its total revenues, the company is undergoing a transition to evolve into a multi-product company. The company is undertaking various efforts to accomplish this goal, such as bundling its products on an integrated platform and merging its different sales forces. Recently, the company introduced a new enhanced contact management system.
Integration of social media
Businesses are understanding the value of social media these days, and are increasingly trying to make their content shareable across a variety of social platforms such as Facebook and Twitter. Companies in the content marketing space are adding social media as part of their product lines.
Growth in mobile and video marketing
Email marketing providers such as Constant Contact are increasing their marketing services for customers through video and mobile means. In late 2009, Constant Contact had launched the Constant Contact Quick View for the iPhone to enable small businesses to manage their contacts and view its campaigns while on the go.
How Does Trefis Modelling Work?
How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.
Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.
How does my dragging the trendline on the chart impact the stock price?
- We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
- We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.
See more on: DCF Methodology
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