Tippr’s Martin Tobias: Groupon Clones Done, ‘Arms Dealer’ Approach Paying Off

10/24/11Follow @curtwoodward

Updated 10:45 am Pacific
After Groupon’s season of woe, a truckload of me-too disappearing acts, and last week’s mass-layoff meltdown at third-place competitor BuyWithMe, it sure isn’t looking like a very bullish time to be operating a daily deals startup.

Martin Tobias would disagree. The Seattle entrepreneur, who been through some notable ups and downs in digital and cleantech ventures over the years, still sees a huge upside in the group-buying dynamic that daily deals services have unleashed. He’s chasing that opportunity with Tippr, a roughly 90-person startup headquartered in Seattle’s University District. [Changed headcount number from 120 to about 90---Tippr halved the number of people working in its marketplace division after this interview.]

The trick, Tobias says, is aiming at the white-label side of the market—providing deals services to other publishers, rather than trying to build a standalone consumer brand, as market leaders Groupon and Living Social have done. Cut out the huge marketing and sales expenses, spread the technology and other costs across a pool of customers, and blammo—you’ve potentially got yourself a pretty nice business.

Tippr CEO Martin Tobias

It also doesn’t hurt to be armed with a trove of patents. Tippr’s were acquired from former Paul Allen company Mercata, and Tobias has not been shy about using the portfolio, employing it in a licensing program, using it to gain at least one acquisition, and more recently opening up a broad federal patent lawsuit that, as we reported last month, has now been quietly settled.

Interestingly, Tippr has thus far gone after other middle-tier or small group-buying companies in the courts, but not market leaders Groupon or Living Social—when asked about that in our interview, Tobias declined to comment.

Tippr is backed by $9 million in venture financing, led by New York-based RRE Ventures (Vulcan Capital also acquired a stake in parent company Kashless in the patent deal). The startup debuted in February 2010, but by that November had announced the white-label provider service that is now the company’s major focus.

That software platform, called PoweredbyTippr, runs daily-deals offerings for other website publishers around the country. A prominent example is Yollar, the daily-deals offering from TV station owner Belo (NYSE: BLC). Tippr provides the technology back-end for the Yollar service, but the local TV stations keep their own branding on the group discounts that are offered to subscribers.

That strategy appears to be paying off. Tobias wouldn’t talk revenue specifics, of course, but left plenty of bread crumbs that point toward a possible multi-million-dollar revenue stream for the startup.

The overall daily deals sector in North America is pegged at $2 billion-$3 billion by such observers as research firm BIA/Kelsey and daily deals aggregator and data provider Yipit.

Yipit also estimates that white-label operators only make up about 10 percent of the daily deals market right now. But white-label providers should have success “working with media companies as a way to monetize existing subscriber bases rather than having to build entire bases from scratch, which is the plight of most smaller daily deal sites,” said Unaiz Kabani, a Yipit data analyst.

Tobias pegs the white-label slice at 5-10 percent of the overall market. And he says Tippr’s the leader of that white-label subsector, with about 35 percent market share. That leads me to a back-of-the-envelope figure of maybe $44 million-$88 million in possible annual revenue.

Tobias says Tippr’s annual revenue growth is “comparable to a Groupon. We are growing at hundreds of percent year over year.”

“Our numbers aren’t the size that they are. But if you actually look at our quarterly growth rate versus the first couple quarters of Groupon, we’re growing faster than they did when they came out,” Tobias says. “I haven’t raised a lot of money and I’ve got 120 guys, so do the math. I’m doing OK. I’ve raised $9 million. Groupon’s raised a billion and a half.”

Continuing that growth, of course, depends on more publishers jumping on the daily deals bandwagon with gusto. That’s a potentially dicey proposition, since a lot of … Next Page »

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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