Constant Contact (NASDAQ:CTCT) announced earnings for Q2 2012 when revenues increased to $62.1 million, up 18.2% year-over-year. The company was able to maintain its relatively high gross margin at around 70% and continued to add paying customers, adding nearly 45,000 gross new customers during the quarter excluding SinglePlatform customers.
Constant Contact offers a complete set of online marketing tools, including email, event, social media and mobile marketing, and competes with Groupon (NASDAQ:GRPN), Living Social, Eventbrite, iContact, Surveymonkey as well as Salesforce.com (NASDAQ:CRM).
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Customer growth through strategic moves to drive earnings
The company continues to perform well, adding nearly 45,000 gross customers last quarter. The customer base grew to 525,000 paying customers at the end of June 2012, which was in line with our expectations. The figure reported excludes Single Platform customers. We expect the average customer base to reach 533,000 in 2012 and continue to increase till the end of our forecast period.
Constant Contact announced the widespread roll-out 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. Before SaveLocal came along, the standard practice for daily deal sites was to ask the businesses to offer a 50% discount upfront. Additionally, the businesses 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. Constant Contact seems to be focused on volumes with this strategy, disrupting the existing daily deals model.
Constant Contact also acquired SinglePlatform, a startup that helps small businesses list their information online and be discovered through online searches. The service enables businesses to update their information and distribute content quickly on sites such as local review websites, search engines, online directories and social media networks. SinglePlatform will be integrated into Constant Contact’s online marketing tools.
We currently have a $30 Trefis price estimate for Constant Contact, which is nearly 60% above its market price. Online content marketing accounts for all of its value.