Constant Contact (NASDAQ:CTCT) will announce its earnings on July 26th. In addition to the company’s primary business of content marketing which includes email marketing, event marketing and online survey tools, Constant Contact has also ventured into social media marketing lately with offerings like Social Campaigns. Recently it has focused on its mobile marketing and daily deals space and continues to improve its email marketing offering with new features. The company now offers a complete set of online marketing tools, including email, event, social media and mobile marketing, and competes with the likes of Groupon (NASDAQ:GRPN), Living Social, Eventbrite, iContact, Surveymonkey as well as Salesforce.com (NASDAQ:CRM).
We currently have a $27.80 Trefis price estimate for Constant Contact, which stands nearly 50% above its market price.
Constant Contact acquired SinglePlatform, a start-up which helps small businesses list their information online and be discovered through online searches. It enables businesses to update their business information and distribute content quickly on sites like local review websites, search engines, online directories and social media networks. SinglePlatform will be integrated into Constant Contact’s online marketing tools.
Constant Contact also 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 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. By shifting the equation in favor of businesses, Constant Contact is trying to turn the model on its head, probably betting on making money through volumes rather than margins.
What we will be watching
In this earnings release, here’s what we’ll primarily be watching:
1) Customer growth expected to continue:
Constant Contact’s customer base grew to 510,000 paying customers by the end of Q1 2012, and is expected to continue to grow in the coming years, as more small businesses sign up for its complete array of online marketing offerings, including the new ones.
You can check the impact of any change in its user base on its Trefis value estimate using this chart:
2) Average Revenue Per User expected to increase:
Constant Contact has managed to generate increasing amounts of revenue per user in the past by offering additional services and up-selling them to its existing user base. It now offers a complete set of online marketing tools, including email, event, social media and mobile marketing, as well as daily deals, and is expected to roll out even more. We expect it to continue to generate increasing amounts of revenue per user.
You can check out the impact of any changes in its ARPU growth on its Trefis price estimate using this chart:
3) Social and Mobile Marketing to drive revenue growth:
Constant Contact has been focusing on social media marketing and mobile marketing. We expect Social Campaigns- which enables customers to market their products on Facebook and Twitter, and CardStar- a mobile loyalty based marketing start-up acquired sometime back, to drive customer growth as well as ARPU growth for Constant Contact as social network and mobile usage explodes in the coming years.
Constant Contact’s various content marketing offerings generate almost all of its revenue, and account for more than 80% of its $27.80 Trefis price estimate.