Constant Contact (NASDAQ:CTCT) announced the general availability of SaveLocal, its online marketing tool that helps small businesses run profitable, effective local deals. It was previously restricted to Constant Contact’s customer base. SaveLocal competes primarily with Groupon (NASDAQ:GRPN), LivingSocial, which is backed by Amazon (NASDAQ:AMZN) and Yelp (NYSE:YELP), which also run deals for SMBs, and other small players in the daily deals space. ((Constant Contact Ventures into Daily Deals with SaveLocal))
When SaveLocal was introduced a few months back, Constant Contact had sought to change the game by turning the daily deals business model on its head. SaveLocal gives the merchants complete control of the deal: they control the discount amount, the terms of the deal, timing, and how many coupons to sell- as opposed to competitors who retain control over all these aspects.
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Before SaveLocal came along, the standard practice for daily deal sites was to ask the businesses to offer a 50% discount upfront. Not just that, they were required to hand over 50% of whatever they made on the deal. With SaveLocal, merchants pay just $1, $2, or $3 when someone buys the deal, depending on the value of the deal. And no upfront discounts are mandatory. A lot of customers seem to have benefited by being able to craft their own terms and incentives, as reported by the company in a press release. ((Constant Contact Announces General Availability of SaveLocal(TM)))
In light of the above, we believe that Constant Contact is trying to play the volume game with its new move. If indeed a lot of customers are benefiting from SaveLocal’s business model, it is bound to attract a large number of Small & Medium Businesses (SMBs) to the site.
For every deal that materializes, Constant Contact stands to make a small profit. So if the volume strategy works, we are looking at a handsome revenue stream. It not likely to provide much upside to the stock though, given that SaveLocal is just a 3 month old business and other revenue streams are much more significant. It will also be interesting to see how competition responds to this move.
Constant Contact’s online content marketing business accounts for more than 80% of the $27 Trefis price estimate for Constant Contact. Our price estimate stands nearly 60% above the current market price. It offers a complete set of online marketing tools, including email, event, social media and mobile marketing.