Wednesday, July 6, 2011

Ping4Deals launching with location-based tech

By Rodney H. Brown

What do you do if your 2010 senate campaign in New Hampshire didn’t turn out the way you hoped? If you are Jim Bender, you take up your friends on their offer to get into one of the hottest new spaces in the mobile business world — location-based deals.

Bender, who was a newbie to the world of politics, is no stranger to the tech startup world. He launched and exited a handful of companies, including IDEA Associates and Aware Inc. But while he was running his latest company, Nashua, N.H.-based network server company Logicraft, a handful of Bender’s former management team members had been working at startup 1stWorks Corp. of Norfolk on the technology behind Ping4Deals, one of the offerings of the company Ping4 Group LLC.

The idea behind Ping4Deals is that a retailer offers deals that appear on your mobile device only when you come within a certain distance of their stores. The phone is aware that a store is nearby either by detecting an open wi-fi network — say at a Starbucks — or by using the phone’s location data  and merchant data from Google maps, Bender said.

A retailer can set the distance in which the deal can be triggered, anywhere from 50 feet to 5 miles. Large retail chains such as Wal-Mart or CVS are the initial target for Ping4Deals, Bender said. The company’s monetization strategy works best at a large scale, because Ping4Deal’s charges a small amount based on total sales volume. So a CVS store  — one of 7,200 — bringing in an average of $9 million in annual sales would only pay about $500 a year to license the software that offers up the deals.

“At $500 times 7,200, you’ve got a $3.6 million annual revenue stream,” Bender said. And targeting retail giants isn’t a problem when it comes to deployment, he said, “We can put up every Wal-Mart or every Subway as fast as we can put in their IP addresses,” he said.

Competition is already heating up, Bender said, but he is confident Ping4Deals is different enough to gain traction, and not just because of its easy scalability. While there are plenty of players in the location-based deals space, most require some activity on the part of the user. Cambridge-based company Scvngr Inc., for example, requires users to play a game to trigger deals. Foursquare requires users to check in at the location before a deal is offered. In contrast, Ping4Deals simply needs the user to allow the company to send them deal notices when they are close to a store with a deal.

The $25 billion gorilla in the room, however, is Groupon, which expects to be worth that much after its IPO. Groupon earlier this spring announced a deal with Loopt for push notification of when a Groupon user is near a store that has a deal.

As a startup, Ping4Deals finds itself in a sort of chicken or the egg situation. It needs to get the deals to offer end users by signing up retailers, and it needs to get customers to take advantage of deals.

“We are going to be part of a technology upgrade for Simon Properties,” Bender said. “Simon owns 380 shopping malls around the world.”

The Simon Property deal calls for as many as 10 malls per month to come online, beginning some time this summer. By the holiday shopping season, Ping4Deals should have many dozens of stores offering deals to its users, Bender said.

Ping4Deals, which has just north of 30 employees at this point, is backed solely by the starting management team, Bender said, who declined to give a specific number to their investment, but did describe it as “in the millions.” Bender is hoping to close an investment round by the fourth quarter of this year, ideally through a private placement with high net worth individuals, or a strategic partner such as a carrier like Verizon.

Right now, Ping4Deals is a virtual company, with officers spread out from Hollis, N.H., (Bender) through North Falmouth (COO Nigel Spicer) to Plantation, Fla., (chairman and CTO Dick Gorgens). Bender said that once it lands its planned financing, the company will settle somewhere along the New Hampshire-Massachusetts border.