After spending much of last year coping with growing pains,
e-mail marketing firmConstant Contact (
) has returned to the kind of robust financial performance it
used to crank out with regularity.
The company provides on-demand email marketing, social media
marketing, event marketing and online survey products to small
businesses and other organizations. Roughly 70% of its customers
have fewer than 10 employees.
Constant Contact 's tools are used in a variety of ways, all
with the purpose of helping customers raise brand awareness and
collect and analyze information.
Its email marketing products let customers create, send and
track email marketing campaigns, while its social media products
let customers create, publish, promote and run campaigns
Customers can use Constant Contact's event-marketing product
to promote and manage events, track event registrations and
collect online payments. With its online survey product, they can
make and send surveys and analyze the responses. Constant Contact
also offers SaveLocal, a product designed to help customers
create, run and manage local deals.
Features Vs. Focus
It wasn't so long ago that the company focused almost
exclusively on email marketing products. But last year it
expanded its suite with the purpose of becoming a multiproduct
The initiative broadened Constant Contact's customer base and
helped the company become more competitive against rivals such as
MailChimp, MyEmma andVocus ' (
But it also took Constant Contact's focus off its core email
products, which in turn hurt the company's financial returns.
Constant Contact reported lower earnings four quarters in a
row from June 2012 through March 2013. It reported a 21% dip in
full-year profit in 2012 -- the first time it has reported lower
yearly earnings since going public in October 2007.
"They lost focus on their flagship product," said Jeff
Houston, an analyst at Barrington Research. "Their customer
retention rates fell and their conversion rates fell, too. They
had too much going on."
But Constant Contact has righted its ship this year. The
company posted year-over-year earnings growth of 9% during the
second quarter and 45% during the third.
On an Oct. 24 conference call with analysts to discuss the Q3
results, Constant Contact Chief Executive Gail Goodman said the
company's decision to expand its product suite was necessary to
meet market demands.
"Small businesses, much like larger organizations, are
starting to realize there is no one campaign type or channel to
reach all of their customers and prospects," she said. "They're
increasingly turning to multiple marketing campaigns launched to
all channels to reach and engage them. Email, social media and
mobile are no longer separate ideas."
Constant Contact continues to add new products this year,
although on a smaller level.
Marketing Goes Mobile
Through the third quarter, it had launched six new mobile
applications in 2013 to help customers use its EventSpot,
SaveLocal and MyLibrary products from their smartphones and
tablets. Each app is available for devices runningGoogle 's (
) Android operating system as well asApple 's (
"We've also been working in the last few months on
improvements to our QuickView mobile email marketing app, adding
in new templates that help customers create and send newsletters
right from their iPhone or iPad," Goodman said.
Meanwhile, Constant Contact has worked to get its name in
front of more people by signing strategic partnerships with
high-profile firms. During the third quarter it struck a deal
with office retailerStaples (SPLS) to host online marketing
workshops in select Staples stores, for example.
In October, Constant Contact announced the launch of a new
program withMicrosoft (MSFT) to provide best practices in online
marketing in Microsoft retail stores across North America.
Financially, Constant Contact is coming off its best quarter
in a year-and-a-half. It logged Q3 earnings of 29 cents a share,
up from 20 cents a year earlier and a nickel above consensus
Revenue for the quarter gained 13% to $72 million, in line
with estimates. The company's average monthly revenue per user
(ARPU) climbed 4% to $42.13. Constant Contact also recorded a
drop in its cost to acquire customers and an increase in its
average customer life.
It was the second straight quarter that Constant Contact's
customer lifetime value metrics improved, analyst Houston said.
These metrics include ARPU, retention rates, growth margins and
cost of acquiring customers.
"Prior to last quarter its customer lifetime value declined
for two years," Houston said.
Constant Contact shares touched an 18-month high of 29.71 on
Oct. 25 and currently trade near 28. Analysts expect the company
to grow full-year earnings 30% in 2013 and 29% in 2014.
One wild card for Constant Contact is how long it will stay an
independent firm. It is frequently mentioned as prime bait for a
"There have been a lot of acquisitions of other marketing
technology companies, so they're certainly an acquisition
candidate," Houston said.
One potential suitor is business and financial software
makerIntuit (INTU), he says.Salesforce.com (CRM), which might
have been a logical candidate earlier in the year, is no longer
considered a likely suitor because of its buyout this summer of
ExactTarget, a cloud marketing platform.