Spindle Acquires Yowza!! And Paves The Way For Advancing Mobile Commerce
Dec 12 2013 about: SPDL, includes: AMZN, EBAY
Disclosure: I am long OTCQB:SPDL. (More...)
Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.
This Thanksgiving, mobile purchases were up more than 173% from just a year ago as the mobile economy begins to take shape.
Spindle (OTCQB:SPDL) is a mobile commerce company that leverages its propriety platform for mobile marketing and payments to help other companies enter the mobile economy without the stress and confusion of mastering technology and trends. The company has been in the forefront of developing and distributing their technology for the past 18 months culminating with the launch of their MeNetwork 360 product at the Money2020 show in October in Las Vegas. Recently the company issued news that it had acquired Yowza!!, a supplier of mobile demand marketing services for consumers and merchants, thus paving the way for the next generation of shopper experience.
Seizing on the evolutionary, and formerly separate, disciplines of the mobile marketing and payments market, Spindle, from a 30,000 foot view has PayPal, Braintree (both now owned by eBay (EBAY)), Foursquare, and Groupon (GRPN) features and perhaps more. Spindle is not a daily deals or a display ad, but rather a merchant tool for consumers to discover merchants, allowing them to publish to consumers in real time, incentives and promotions. Their product website at themenetwork.com, positions the company as timely and relevant marketing which makes sense as their current target market is small merchants and retailers.
Adding their payment technology creates their concept of "brilliantly simple" commerce. Model companies such as eBay (EBAY), Amazon (AMZN), and others have been successful with online, but have struggled with from a mobile perspective along with Google (GOOG), ISIS, and others. These companies seem to be consistently evolving their go to market strategy based on large retail rollouts, while Spindle focuses on the largest business sector in the United States - small business. A small company such as Spindle can focus on the challenges of a small business and be agile to changing behaviors. Part of Spindle's positioning however is in its proprietary financial services platform architected and developed in house.
A recent article discussed eBay Inc. and its acquisition of Braintree, a global payment platform powering the next generation of online and mobile-first start-ups, for a total consideration of approximately $800 million in cash. The article set a valuation for technology driven companies within the payments industry. Braintree is a traditional gateway with incredible developer tools which are friendly to web and mobile companies who wish to accept credit card payments. Over the past few years, Braintree has leveraged their easy to use gateway to grow its merchant base and portfolio. Spindle also makes its technology available to developers and with these tools, it also gives revenue share to its channel partners by leveraging their financial services designation to deliver a more efficient and cost effective process. Spindle reports they are a Payment Services Provider, which is the new breed of merchant acquirer approved by Visa (V) and MasterCard (MA) and championed by Square. Not to be confused with the card swiper, Square is in the business of acquiring merchants and managing the risk, underwriting, and processing functions in house. A limited number of these designated companies exist due to the regulatory, compliance, and technology requirements. This configuration enhances Spindle's value add to its customers and delivers a simple platform for accepting payments.
Spindle is positioning to be a trusted commerce company accepted by both retailers and consumers very much like merchants and consumers view online giants such as eBay and Amazon today for retail and retail services. Spindle looks to do this to solve a merchant's mobile acquisition, retention, and processing needs for the physical world through mobile. With the acquisition of Yowza!!, and their current consumer base of approximately 350,000 and recent partnership with edo and their 27 million publishing card linked ends points, Spindle has a model for mobile economy.
Spindle brings technology, developer tools, and a substantial community of active consumers to their target audience which is small merchants who otherwise do not have a cost effective and simple solution, but want the ends points and connections of their larger competitors. Essentially, the Yowza!! deal advances Spindle as one of the largest players in the mobile commerce space. In a press release about the Yowza!! acquisition, Spindle's Chief Executive Officer, Bill Clark, offered more insight into those figures:
"It gives us an unprecedented platform to extend our reach to the tens of millions of consumers and businesses that are now embracing the convenience and flexibility of buying and selling goods and services through smartphones and tablets."
How does it all fit? Yowza!! delivers free real-time promotions to consumers through their Apple (AAPL) and Android devices. Merchants on the other hand, use the service as a low-cost, secure and reliable portal to build one-on-one relationships by sending valid and "relevant" offers to existing and potential customers. Spindle plans to integrate Yowza!! services into Spindle's MeNetwork platform that allows merchants to facilitate payment processing as well as manage customized marketing campaigns all through a single interface. It's a true win-win situation for both the merchant and the consumer. Through a single web, tablet, or connected device user interface, a merchant within 10 minutes or less can establish a mobile commerce strategy to easily solve specific discovery or payment technology initiatives.
Neither Braintree, PayPal, eBay, or Amazon currently deliver such a solution to their merchants, nor do the large CRM and financial services companies such as Intuit or Sage. It will be interesting to see how Spindle advances their strategy in 2014, the year for mobile, and how they fare in 2015 when mobile commerce reaches a projected $900B.
Indeed, in the press release about Yowza!!, Vikrant Gandhi, principal analyst for Frost & Sullivan, affirms that, "Spindle's tightly-woven mobile marketing and payments application is already a very compelling solution for the marketplace," to which he adds, "The addition of Yowza!!'s couponing technology will strengthen its position, and give it increased access to many more merchants and consumers."
While the acquisition of Yowza!! is clearly strategic and positions the company as an early leader in the space, helping them instantly achieve far greater scale, it should equally help foster both strong sequential quarterly and year over year growth. While the company did $700K in revenue for the first six months this did not cover any of the 400 recently signed merchants or the new addition of 95,000 merchants with this acquisition. Based only on the additions of many more merchants it would certainly seem very likely that revenues will ramp quickly over the next 6-12 months. It will be an exciting story to watch develop and it will be interesting to see what potential suitors they may attract.
