Social and Mobile Marketing to Drive Constant Contact Earnings

Constant Contact (NASDAQ:CTCT) reported its earnings for Q4 and FY2011, recording a healthy 23% growth in yearly revenue, which was up to $214 million. ((Constant Contact Announces Fourth Quarter and Full Year 2011 Financial Results, SEC)) It also managed to improve its gross profit margin marginally to 71.3%. Constant Contact’s primary business is content marketing which is comprised of email marketing, event marketing and online survey tools. It has also ventured into social media marketing lately with offerings like Social Campaigns. It recently acquired a mobile loyalty card startup, CardStar, which it may use to roll out a new mobile marketing service. Constant Contact competes with Eventbrite, iContact and Surveymonkey as well as digital marketing offerings by Adobe (NASDAQ:ADBE) and Salesforce.com (NASDAQ:CRM).

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Customer Growth Meets Expectations

Constant Contact’s customer base grew to 500,000 customers by the end of 2011, exactly as we predicted in our Constant Contact Q4 2011 earnings preview. Its average customer base strength was 468,000 in 2011, up 20% from 2010. We expect its customer base to continue growing at a moderate rate, reaching almost 800,000 users by the end of the forecast period.

You can check the impact of any increase or decrease in its user base on its Trefis value estimate using this chart:

Average Revenue Per User Expected to Grow

Constant Contact has managed to generate increasing amounts of revenue per user in the past. Its average monthly ARPU increased to $38.2 in 2011. We expect it to continue to grow at a moderate rate, reaching almost $42 by the end of the forecast period.

You can check out the impact of any changes in its ARPU growth on its Trefis price estimate using this chart:

Social Media and Mobile Marketing to drive growth

Constant Contact has been focusing on social media marketing and mobile marketing. It recently launched Social Campaigns, which enables customers to market their products on Facebook and Twitter, and acquired CardStar, a mobile loyalty based marketing startup. As social network and mobile usage explodes in the coming years, we expect these two businesses to drive customer growth as well as ARPU growth for Constant Contact.

We currently have a $27 Trefis price estimate for Constant Contact, which stands nearly 5% above its market price.