Quant5 Rolls Out Marketing Analytics Software for Big Data Wannabes

10/22/12Follow @gthuang

The problem for Doug Levin is the noise.

The noise is around “big data,” the increasingly nebulous field of technology that involves businesses managing huge amounts of information and trying to glean insights from things like customer transactions, browsing habits, and behavioral trends.

For all of the companies calling themselves big data, Levin asks, are they really about big data? Or are they about analytics? Or are they big data and analytics?

The distinction lies in whether companies are developing new kinds of databases and other systems to store and manage data, or whether they’re developing software and algorithms to make sense of the data. Levin’s latest startup, Cambridge, MA-based Quant5, is clearly focused on the latter. (You can catch Levin at Xconomy’s “Future of Big Data” conference in Boston this Wednesday, where he’ll be moderating an investor chat.)

But there’s still plenty of noise in the analytics sector. Quant5 aims to start cutting through that noise today, with the general rollout of its marketing analytics software. The basic idea is to help companies make better use of their marketing data and records, so they can streamline efforts, target the right customers, and ultimately make more money. Quant5 is starting out by selling to brick-and-mortar retail stores, e-commerce companies, and high-tech firms and app stores.

Here’s how it works. Say you’re a mid-size e-commerce firm looking to improve your marketing processes. You can buy Quant5’s software-as-a-service and get access to five modules, Levin says: The “targeted offers” module tells you which products to recommend to specific customers via e-mail and other channels (sort of like what Netflix does with DVDs); “customer segmentation” stratifies your consumers and separates what they’re buying into distinctly targetable groups; “customer behavior” identifies customers that could become key advocates for brands, as well as those that are likely to purchase products from a competitor; “product profitability” predicts product revenue and profitability based on sales predictions; and “product relationships” analyzes which items tend to be bought together (at once or over time) by a given customer.

“We believe there’s a whole group of companies less than $1 billion [in revenue] that are Netflix and Zynga wannabes, Google and Amazon wannabes,” says Levin, Quant5’s CEO. “These are end-user companies interested in catapulting themselves into advanced analytics. That’s where Quant5 comes in.”

The startup’s software accesses companies’ sales and marketing data, but it also incorporates public information from social networks and broader sources like weather and economic data. Using what Levin describes as proprietary agents and crawlers, algorithms, and machine learning—all built on top of an open-source infrastructure—the software outputs recommendations of which products to market to whom. A key part of Quant5’s offering is visualization of the data analysis (see image, below, of product relationships for a home-goods retailer).

Of course, any software like this will have tons of competition, and the proof is in the pudding. Levin says a ballpark metric is that companies using Quant5 could potentially see their direct marketing campaign hit rates go from 1-3 percent to 20-30 percent. “We can show them [return on investment] on the first sales call,” he says. “We show them where they can generate new revenue, and also where to reduce churn.”

Quant5 has about 11 full-time employees and has been testing its software with 14 beta customers. The company was founded last year by Levin and Marcelo Ballestiero (they met at MIT) and has been mostly self-funded, with some help from outside investors. It sounds like Quant5 is in the midst of raising a financing round, and will go for a bigger venture round in the future.

As for the bigger picture, Levin sees Quant5 as the “great grandson of SAS,” the business analytics giant, and part of a trend of startups offering business intelligence services while being more accessible and less expensive than existing enterprises (see IBM/Unica as well). More recent companies in that vein include Marketo and Eloqua in the field of marketing automation.

But Quant5 is positioning itself differently from all of those. “We’re a marriage of software-as-a-service and the most advanced analytics. That’s a new type of company,” Levin says. “It’s a disruptive force in the marketplace. But potentially a force for good.”

I asked Levin for the applicable lessons from his previous companies, including Black Duck Software, LucidWorks, and Ayeah Games (which folded last year). From Black Duck and LucidWorks, his takeaway is “open source is great … it’s so effective these days.”

As for Ayeah, a data-driven gaming startup, Levin says he’s learned from his mistakes. “We couldn’t get costs to meet the revenue curve,” he says. A big factor was timing: “Facebook was changing its attitude toward Facebook games,” he says. So Ayeah “would have been much more successful” had it started a year earlier, he says, and it also would be cheaper to run today.

Levin hopes he has the timing right this time. “Quant5 is in an industry that’s growing like crazy. Hopefully we will emerge as one of the leaders in predictive analytics,” he says. “There’s a huge market available to us in the United States and internationally. We will go after more markets and more software applications. We want to build a company that’s around for years.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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