In the rush toward the daily deals space, it seems like there is at least one, new, daily deals site created every day. It's an incredibly crowded industry, which not only includes giants like Groupon and LivingSocial, but countless smaller sites, newspapers, and others all looking for a piece of the action. However, San Diego-based Deal Current (www.dealcurrent.com) appears to have found a sustainable niche in the industry--not providing daily deals, but powering those multiplying deal sites, including a number of major newspaper groups. We spoke with CEO and co-founder Jimmy Hendricks about where Deal Current fits into the industry, and how the company grew out of a need of a client.
What is Deal Current?
Jimmy Hendricks: Our lead product is a white label, daily deal product. It's the biggest portion of our revenues at our company, and our clients include the Buffalo News, Pittsburgh Post Gazette, JDate, Spark network, and many entrepreneurs. We also have a partnership with Triton Digital Media, which is one of the largest content providers to the radio industry. They are using DealCurrent as the deal platform for all of their clients. We're also focused on expanding beyond deals, and recently re-launched our white label, contest engine under the brand ArtistHub. We actually built that about a year and a half ago, and are bringing that back due to overwhelming demand. We've got three core product centers; the online contests that drive traffic, the daily deals that drive revenue, and then we are also looking at a marketplace product for online communities that want to sell deals, but don't want them as daily deals. We see those three products working together, as features of one platform which both can be used independently, as well as together.
What's the story behind Deal Current?
Jimmy Hendricks: We actually started two and a half years ago. Our original company was Collar Free, kind of a Threadless for fashion. We were crowd sourcing artists and design. There were all of these artists selling clothing and apparel on our store. But, with the economy turning south in 2008, lots of those customers went out of business. So, we took that contest and crowdsourcing platform, and started ArtisticHub. We were getting clients like Sports Illustrated Kids, the Oakland Raiders, and media clients like local newspapers, who were using our platform for photo contests and the like--things like the "cutest pet" and "cutest baby" contests. In the meantime, Groupon came along, and our media customers started to lose advertising. One of our clients, a San Diego newspaper, asked us to build a daily deal platform for them. That's where Deal Current was born. It ended up becoming our breakout product. There was also the opportunity to use our contest engine as a tool, because the challenge in daily deals is to build members and drive traffic. That tool is being used to drive traffic and acquire emails, which is why it's a part of Deal Current.
So it sounds like your move into daily deals it was really driven by a client request?
Jimmy Hendricks: One of the things we learned, is to ask clients what they want. We learned that Groupon was taking their advertisers. Our media clients were telling us that they were losing revenues to Groupon. We realized that no one had built a Groupon-like platform, so we built one because our customer asked for it. In April of 2010, we put up Dealcurent.com, and we started indexing number one on Google for daily deals software. People were calling us every week, and started getting probably 300 to 400 inbound requests a month for the software. That one client, plus a need in the market really drove the product.
When did you figure out this was the part of the business you wanted to focus on?
Jimmy Hendricks: We launched in April of 2010, and within 90 days we realized that it was much, much bigger than our contest software. We had our contest software, ArtisticHub, driving some revenue. But, we had so many inbound requests for the deal software, we decided to focus on Deal Current and build a good core around the product. So we completely refocused. By August of last year, we had everyone completely focused on Deal Current, and nothing else.
How do clients license your software?
Jimmy Hendricks: We make a percentage of every sale. We provide the software platform, and if a client needs some custom design we can quote them on creative and setup, or they can handle it on their own. We then give them the platform, and we also provide the accounting and customer support on the back end. For example, if a customer has a question on a purchase, we answer that. We also mail checks to the advertisers every day, to make sure people get paid.
It looks like a lot of your execs have background at Active Network?
Jimmy Hendricks: My background is I spent a year at Active.com in 2007 and 2008. I was hired to run their tennis division, and I built our the sales division for their tennis team. As part of that, I built a ton of relationships at Active. Our project manager, a couple of our advisors, and a couple of our sales people, our head of business development--we're all from Active. We didn't recruit from Active, it just that there were lots of great people who had already left Active, who saw we'd built a good reputation and wanted to come on. Also, Active has a very similar model--we have a platform, provide customer support, and provide accounting. That's what Active did for marathons, tennis tournaments, and Little Leagues. So, it's been very easy for them to come on to our team. Before that, I ran direct sales for companies in college, including selling print advertising that went into about 80 markets.
It seems like there are only so many daily deals sites that could possibly survive in this market. How do you think the industry will shake out?
Jimmy Hendricks: What we really see, is lots of small entrepreneurs who will build lifestyle businesses. It's a lot like direct mail companies. You see lots of them selling small business advertising, neighborhood magazines, and the like. Those entrepreneurs might make a six figure income, but never more than that. Then, there are a handful of players---online communities, agencies, newspapers--who will figure it out. I think daily deals are really going to take the role of display advertising for them. It will become an advertising product. There will be a few software vendors like us who end up serving the industry, but only a couple. And, I think there will only be one or two Groupons or LivingSocials, and maybe a couple of other medium sized companies. It will still be a big industry, but even for Deal Current, I think the key is not to just provide a daily deals platform, but a suite of products. In our case, that includes contests, marketplaces, and other social commerce products, that allow us to be diversified and allow us to serve the industry. There are some customer who will want to run daily deals, some that might need contests, some that might want a marketplace--that's how we are looking to diversify and build a bigger business.
What do those daily deals site find the most appealing about your platform?
Jimmy Hendricks: One, is we were one of the first to market. The second, is we provide Deal Current University. Our clients who work with us, have access to about 15 hours of webinar-based, daily deals training. What we found, is the key to success--like in most businesses--is following the program. It's similar to a franchise. We make that available to our clients, including sales training, how to compete against Groupon and LivingSocial, affiliate training, copyright training, how to write up good deals, marketing, and promotions. We provide all of this training, because what our clients are finding out is although there are many good technology platforms, what makes the difference is execution. By working with us, we give them the training to execute better.
Finally, where do you see your direction going?
Jimmy Hendricks: We want Deal Current to be a brand name as a social commerce suite. We have three or four products that can work in conjunction, all focused on two basics, which is driving traffic so that you can drive revenue from your local offers. It's very block and tackle. Lots of businesses want to run contests, and daily deals is a big industry. Merchants want not only to run daily deals, they also want to run offers 30 days long, which is why we plan to offer a marketplace that media companies or local directories can use. We want to be the technology tool kit for social commerce.