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Sandie Allen
Wednesday, December 2, 2009
InStream sees big bucks in targeted coupons on sales receipts
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The future of retail marketing technology company inStream Media Inc. is in your hands every time you walk away from a cash register.
We’re talking about the receipt — and the real estate for sale at the bottom of it — an area in which Newton-based inStream plans to apply its technology to deliver very targeted coupons.
The market for printing coupons on those receipts is vast, according to longtime retail finance executive Ann Raider, inStream’s CEO.
“Retail store sales represent about $2.5 trillion each year,” Raider said. “Just 50 percent of the top 100 retailers represent about 28 billion transactions from in-store sales only in the U.S. That’s a lot of transactions.”
Raider said inStream’s technology can target the right coupon to the right shopper with the precision of a Google Inc. Adwords placement. Its target customer is a retailer that spits out about 100 million to 150 million transactions per year. Advertisers are inStream’s customers, and the company provides incentives for retailers to use inStream to deliver the bottom-of-the-receipt print ads by sharing the revenue it generates from selling the coupon space on each receipt with them, and letting them use that space for their own marketing message at the same time. In a typical deal, the printer at the point of sale will print three coupons on the receipt, with one coming from the retailer itself, and two from inStream.
The companies looking to place their coupons on receipts of shoppers run the gamut from online data backup company Carbonite Inc. of Boston to beauty products seller Maybelline, Raider said. The retail areas where inStream has found the most traction include fast food chains such as Pizza Hut and specialty retailers like AJ Wright, a division of Framingham’s TJX Cos.
The secret sauce in inStream’s recipe is the ability to target very specific coupons to very specific purchases. For example, Raider said, the Pennsylvania-based maker of Alouette cheese products sought to have a coupon on receipts from cookbook sales at Barnes and Noble and Borders bookstores. InStream was able to do this because it keeps a database of every stock-keeping unit (SKU) from each of its client retailers, delivering a pre-made graphic coupon in real-time right to the register receipt whenever a particular SKU comes up.
Keeping up with that enormous amount of data is going to be the toughest nut to crack for inStream, according to Michael Libenson, senior vice president and general manager of grocery services at Newton neighbor uPromise Inc., who developed uPromise’s own online-only coupon-delivery program.
“In order to deliver their discounts at the point of sale, they need to develop relationships with individual retailers that will allow them to do that,” Libenson said. “They need to deliver that to the receipts.”
Raider agrees that the company’s biggest challenge is implementation of its product and integration with the retailer. That’s why the company’s aggressive growth plans primarily includes salespeople and implementation staffers. With six full-time employees and three part-timers, Raider plans to double that count early in 2010.
Advertisers and retailers aren’t the only ones interested in inStream: Investors, led by StageOne Ventures and Common-Angels, have pumped $3.6 million into the company in three tranches of its Series A round, including the latest, which brought in $2.8 million in September. A Series B round is in the works, Raider said, and the company hopes to close on $5 million or so by the end of January.
Maybe one of the reasons the investors like the company is Raider herself. In 1991, she cofounded Consumer Card Marketing Inc., which handles loyalty card programs. The company, after changing its name to SmartSource Direct, was acquired by News Corp. Raider served as a senior vice president there until taking a chief strategy officer role at Vertis Corp. in 2005. Raider came on board inStream in 2008, two years after the company was founded in New Jersey. She joined with the understanding that inStream’s headquarters would be based in Newton.
Raider is connected, having the ear of top officials at Dunkin’ Brands Inc. and Staples Inc. and is using those connections to promote inStream. “I have had a conversation with 33 percent of the top 100 retailers,” Raider said.
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