Amid Groupon’s IPO Frenzy, Analog Analytics Offers Old Media a White-Label Life Ring
Much has been blogged about social couponing in recent weeks, from Chicago-based Groupon’s planned IPO, which values the company somewhere between $2 billion and the moon, to the debut of Google Offers in Portland, OR.
Yet for all the lip service paid to the phenomenon that includes LivingSocial, BuyWithMe, Tippr, and perhaps hundreds of others with “Daily Deal” offerings, hardly a word has been buzzed about Analog Analytics, a two-year-old startup based near San Diego, in Solana Beach, CA. Analog Analytics has followed a white label business model, staying behind the scenes by providing its Web-based social coupon platform as a service to more than 850 “old media” publishers and broadcasters nationwide.
Analog Analytics provides a Web-based technology platform that enables newspapers like The Orange County Register, New York Newsday, and NBC TV to offer daily deal coupons to their respective subscribers as well as an intra-media network that includes 850 radio, TV, daily and weekly newspapers, cable TV, and alternative publications. The company’s reach will be extended further when Analog Analytics finalizes its partnership with a yet-to-be-named cable network, according to Ken Kalb, the company’s co-founder and CEO.
“We’re growing very rapidly,” says Kalb, who estimates revenue has been growing at a monthly compounded rate of roughly 50 percent. Kalb says the company counted 1,898,263 page views for all its sites from May 8 to June 7, and its workforce also is on a strong growth curve. The corporate and accounting managers are based at the company’s headquarters in Solana Beach, while software development is based in Portland, OR. The total headcount has more than doubled since March, from 25 employees to 55.
Kalb says he started the company in 2008 with co-founder Tom Buscher partly out of frustration with the lack of accountability in old media advertising. Kalb may be best known as the founder of Continuous Computing, a software developer for the wireless industry, and Buscher was the company’s software architect. Continuous Computing agreed last month to a buyout offer from Hillsboro, OR-based RadiSys (NASDAQ:RSYS) in a deal that could ultimately be worth $120 million—and provide a windfall to Kalb.
During his tenure as CEO (Kalb left Continuous Computing in 2005), he says, “One of the things that drove me crazy was that there was no accountability with advertising. I knew to the penny how much it cost to operate my business,” but publishers had no way of measuring exactly how many people actually saw a magazine ad or were prompted to buy something because of it.
After leaving Continuous Computing, Kalb saw what could be achieved with online marketing when he took over as the CEO of SearchRev, a Silicon Valley company that manages large-scale search engine marketing campaigns for such clients as Yahoo, Shutterfly and Coca-Cola. Kalb says that while he was there, SearchRev increased its revenue 500 percent over 15 months, leading to SearchRev’s 2007 acquisition by the interactive marketing firm AKQA and General Atlantic, the private equity firm.
With fresh insights into online advertising and search engine marketing, Kalb says, “I had this notion of trying to make traditional advertising accountable in a digital marketplace.” With Analog Analytics, he saw an opportunity to bring digital analytics to an analog world. “Our focus is on this intersection between traditional media and interactive media,” Kalb says, “turning risk-free advertising solutions into enormous opportunities.”
Unlike Groupon, which bypasses traditional publishers by marketing its daily deals directly to consumers, Kalb and Buscher developed their software specifically for newspaper publishers and other traditional media. “Groupon disintermediates the marketplace,” Kalb says. “Analog Analytics tries to empower publishers and broadcasters by enabling them to do their own daily deals, using a software-as-a-service model.”
He calls the business model “a godsend” for both publishers and merchants, chiefly because a consumer pays for the product or service first, enabling publishers and merchants to get paid up front before they have to deliver anything. Still, Kalb says direct, “consumer-based revenue” is like a foreign language to publishers and broadcasters because ads were sold business-to-business under the traditional media model. “Now newspapers are trying to figure out consumer-based revenue.”
To combat old media’s antediluvian thinking, Kalb says Analog Analytics developed a “best business practices” program that helps its media partners focus on consumer-based revenue. The company also provides traffic analytics and techniques for search engine optimization.
The company’s technology also enables a publisher to provide a daily deal offered by a local merchant or advertiser, or to syndicate deals—enabling far greater distribution. In a frequently cited example, Analog Analytics says one of its publishers, The Orange County Register, offered a heavily discounted deal in March—$34 for a round-trip excursion from Newport Beach, CA, to Catalina Island. The offer set a single-day record, selling 5,457 round-trip tickets in 24 hours and generating $188,000 in sales. By syndicating the deal, however, Kalb says the offer generated an additional $32,000 in sales outside the region.
Such extraordinary consumer response has not become commonplace for Analog Analytics, Kalb concedes. But he says, “we are getting more and more deals like that,” and he views the company’s media partners as an advantage as the number of competitors proliferate. By some estimates, 500 companies now offer Groupon-type deals.
“It’s relatively easy to start a social coupon company,” Kalb says. “But it’s much harder to build a massively scalable platform that can provide social coupons to millions of consumers across hundreds of websites. At the end of the day it’s a cloud-based service, and the guys who have scale will be the ones who survive.”
And what are the implications of Groupon’s IPO?
“It says to the world that there’s a lot of money to be had with daily deals,” Kalb says.