Prospectus Summary
PROSPECTUS SUMMARY This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, the terms “Coupons,” “the company,” “we,” “us” and “our” in this prospectus refer to Coupons.com Incorporated and its consolidated subsidiaries.Overview
We operate a leading digital promotion platform that connects great brands and retailers with consumers. Over 2,000 brands from more than 700 consumer packaged goods companies, or CPGs, and many of the leading grocery, drug and mass merchandise retailers use our promotion platform to engage consumers at the critical moments when they are choosing which products they will buy and where they will shop. We deliver digital coupons to consumers, including coupons and coupon codes, and display advertising through our platform which includes our web, mobile and social channels, as well as those of our CPGs, retailers, and our extensive network of approximately 30,000 third-party websites, or publishers, that display our coupon and advertising offerings on their websites. During the nine months ended September 30, 2013, we generated revenue from over 940 million transactions in which consumers selected a digital coupon or redeemed a coupon code offered through our platform, an increase of 49% over the same period in 2012.
In 2012, 305 billion total coupons were distributed, representing an aggregate discount value of $467 billion, with 2.9 billion redeemed representing an aggregate discount value of $3.7 billion, according to an annual industry report by NCH Marketing Services, Inc., or NCH, a provider of coupon audit and settlement services. Increasingly, CPGs and retailers are directing a greater proportion of their spending to digital promotions.
Our platform serves three key constituencies:
The combination of our CPGs, retailers, publishers and consumers, all served by our promotion platform, has resulted in powerful network effects, which we believe to be a significant competitive advantage. Our large and growing base of retailers integrated into our platform has allowed us to attract, retain and grow the digital promotion spending of leading CPGs. The breadth of our offerings from these leading brands enables us to attract and retain a growing and more diverse range of retailers, publishers and consumers. Additional offerings on our platform, in particular point of sale solutions, increase consumer engagement and retailer integration, which enhance the value offered to CPGs.
We generate revenues primarily from digital promotion transactions. Each time a consumer selects a digital coupon on our platform by either printing it for physical redemption at a retailer or saving it to a retailer online account for automatic digital redemption, we are paid a fee which is not dependent on the digital coupon being redeemed. For coupon codes, we are paid a fee when a consumer makes a purchase using a coupon code from our platform. If we deliver a digital coupon or coupon code on a retailer’s website or through its loyalty reward program, or the website of a publisher, we generally pay a distribution fee to the retailer or publisher which is included in our cost of revenues. We also generate advertising revenues through the placement of online advertisements from CPGs and retailers which are displayed with our coupon offerings on our websites and those of our publishers. We are paid a fee for the display of advertisements on a per impression or a per click basis. Advertising placements are generally sold as part of insertion orders for coupons as an integrated sale and not as a separate transaction.
Our CPG customers include many of the leading food, beverage, drug, personal and household product manufacturers. We primarily generate revenue from CPGs through coupons offered through our platform and to a lesser degree, through the sale of advertising. Our retailers include leading grocery, drug and mass market retailers which distribute and accept coupons offered through our platform. Our retailers also include a broad range of specialty stores, including clothing, electronics, home improvement and many others which offer codes through our platform.
In 2012, we generated revenues of $112.1 million, representing 23% growth over 2011, a net loss of $59.2 million, representing an increase of 158% over 2011, and an Adjusted EBITDA loss of $47.3 million, representing an increase of 233% over 2011. During the nine months ended September 30, 2013, we generated revenues of $115.3 million, representing 51% growth over the same period in 2012, a net loss of $12.8 million, representing a decrease of 75% over the same period in 2012, and an Adjusted EBITDA loss of $3.5 million, representing a decrease of 91% over the same period in 2012. For information on how we define and calculate Adjusted EBITDA, and a reconciliation of net loss to Adjusted EBITDA, see the section titled “—Summary Consolidated Financial and Other Data—Non-GAAP Financial Measures” below.
Industry Overview
Since Coca-Cola introduced a coupon in the late 1800s, CPGs and retailers have used coupons and other promotions as a core tool to increase sales and drive awareness of their products. Newspapers and direct mail have traditionally been the primary channels for distributing coupons, but particularly with the decline in newspaper readership, the effectiveness of traditional channels has declined. In contrast to traditional promotions, digital coupons are redeemed at higher rates and are more effective. According to an annual industry report by NCH, in 2012, digital coupons (including print-at-home and paperless coupons) represented less than 1% of total U.S. CPG coupon distribution volume, but accounted for almost 7% of total U.S. CPG coupon redemptions, illustrating the greater effectiveness of digital coupons. We believe that the simplicity of digital coupons is broadening the demographic reach and driving the increased use of digital coupons. According to a study by eMarketer, Inc., a market research company, 97 million U.S. adults will use digital coupons in 2013. Many of the digital coupons are offered through grocery store loyalty programs. According to the 2013 Colloquy Loyalty Census from LoyaltyOne, a provider of loyalty program services, total memberships in grocery-store loyalty programs totaled approximately 172.4 million in 2012.
The combination of continued CPG and retailer promotion spending, strong consumer demand for digital coupons and the greater effectiveness of digital coupons will offer significant opportunities for a solution that can effectively bring together CPGs, retailers and consumers on a digital promotion platform that addresses the challenges that each face, further accelerating the shift from traditional to digital promotions.
Challenges for CPGs and Brands
Challenges for Retailers
Challenges for Consumers
Our Solution
We offer a comprehensive digital promotion platform that allows us to connect CPGs and retailers with consumers.
Why CPGs and their Brands Choose Us
Our platform’s increasing effectiveness has driven growth in the use of our platform by CPGs. The cohort of all CPGs that used our platform during the nine months ended September 30, 2011 increased their promotion spending with us two years later during the nine months ended September 30, 2013 by 44% over the amount spent by such cohort during the nine months ended September 30, 2011. Such revenue represented 75% of our total revenues in the nine months ended September 30, 2013 as compared to 91% of our total revenues in the nine months ended September 30, 2011. During the nine months ended September 30, 2013, we generated 25% of our revenue, or $28.8 million, from customers who were not CPGs which had used our platform during the nine months ended September 30, 2011.
Broad and effective reach. We generated revenue from over 940 million transactions pursuant to which consumers selected a coupon or redeemed a code offered through our platform during the nine months ended September 30, 2013.
Multi-channel engagement with consumers at key purchasing decision moments. Our platform allows CPGs to better engage with consumers by enabling multiple touchpoints during a consumer’s shopping experience. For example, a consumer can use our mobile app while they are walking through the aisle of a retailer, find a coupon for their favorite detergent, save the coupon directly to the retailer’s loyalty program and receive the discount automatically at the point of sale without the need to present a physical coupon.
Advertising solutions integrated with digital promotions. Because consumers are focused on engaging with brands and products when they visit our websites, mobile applications and other consumer touchpoints, integrated advertising solutions enable CPGs to promote their brand and drive consumer loyalty at each decision point.
Ability to quickly deploy focused promotion spending for the benefit of specific brands. Our ability to deploy promotions in days rather than weeks or months provides brands the ability to strategically allocate promotion spending to drive increased sales of their products.
Data-driven optimization of promotions. We offer integrated measurement tools for campaign planning, and pre-campaign and post-campaign development and analysis. Through our Campaign iQ product, CPGs are able to track and analyze activations, inventory levels, redemption rates and volumes, distribution methods, buying rates, aggregated buyer demographics, and campaign effectiveness statistics.
Proven and secure technology. We have proven technology, systems and processes that enable us to securely manage promotions within our CPGs’ objectives. The risk of counterfeiting is a potential barrier to CPGs’ adoption and use of digital coupons. Our proprietary security technology differentiates our solution for CPGs who want to prevent fraudulent use of coupons.
Why Retailers Choose Us
We enable retailers to effectively capture the benefits of promotion spending.
Use CPG promotion content to increase retailer sales. Retailers can integrate promotions from our platform into their point of sale systems, retailer-branded websites, retailer loyalty/rewards programs, mobile applications and social media programs. By offering CPG promotions from our platform through their own digital channels, retailers are able to increase sales of the CPG promoted product at their locations and increase consumer loyalty.
Digital promotion distribution fee. Retailers receive a distribution fee from us when we generate revenues from a digital promotion transaction on the retailer’s website or through its loyalty reward program. Retailers benefit from an additional source of revenues not available with traditional coupons, in addition to driving purchases of the CPG products at their stores. We believe this is one of the reasons why retailer partners have directed their CPG partners to increase their use of our platform or to begin using our platform.
Integration with retailer point of sale systems. By enabling automatic redemption of coupons at the point of sale without requiring the consumer to present a physical coupon, our integration promotes consumer purchase of the promoted product at the retailer, strengthens consumer loyalty to the retailer, enables faster and more efficient check-out, improves the consumer’s experience in using promotions and simplifies the processing of coupons with the CPG issuer.
Platform offering manufacturer and retailer specific promotions. We enable retailers to offer coupon codes on our website and mobile app and those of our publisher network which bring consumers directly to retailers’ websites. Our solution simplifies the shopping process for consumers, increases engagement and allows a retailer to directly drive additional traffic to its stores.
Why Consumers Choose Us
We provide consumers with a robust platform of digital promotions.
Widely available. Our digital coupons are widely available to consumers and delivered or redeemed through the point of sale and through our web, mobile and social channels and those of our CPGs, retailers and extensive network of publishers.
Easy to use in their preferred format. Through our website and mobile applications and those of our publishers, consumers can browse or search for coupons, create shopping lists, download coupons to retailer loyalty cards, print coupons for use in-store, or use a coupon code for web and mobile commerce.
Broad selection of quality coupons. We generated revenue from over 940 million transactions pursuant to which consumers selected a coupon or redeemed a code offered through our platform in the nine months ended September 30, 2013. These transactions represent a broad selection of product categories and variety within each category.
Personalized promotions. Our point of sale solutions and mobile applications help consumers save time and money by optimizing and personalizing the presentation of promotions. A consumer using these products will be presented with a set of optimized promotions based on their prior coupon selections, geography and other demographic and behavioral attributes.
Our Strengths
Growth Strategy
We intend to grow our platform and our business through the following key strategies:
Increase revenues from CPGs already on our platform. Based on our experience to date, we believe we have opportunities to continue increasing revenues from our existing CPG customer base through:
Deepen integration of retailers with our platforms. We intend to continue to invest in technologies and product offerings that further integrate digital promotions into retailers’ in-store and point of sale systems.
Grow our current core CPG and retailer customer base and add new manufacturers and retailers from additional industry segments. We believe we can significantly grow the number of CPGs and retailers that we serve. In addition, we intend to continue growing our business with other manufacturers and retailers in new industry segments.
Continue to grow consumer use of our digital promotion offerings. We plan to continue to invest in our point of sale and mobile solutions. We believe that CPG spending on digital promotions will continue to grow as point of sale and mobile channels offer new opportunities to engage consumers from intent to purchase of their products.
Grow international operations. We believe that we can opportunistically grow our operations and offerings in existing international markets and partner with our existing clients to enter new geographies in which they operate.
Selectively pursue strategic acquisitions. We may expand our business through selective acquisitions.
Risks Associated with Our Business
Our business is subject to a number of risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this prospectus summary. Some of these risks include:
In addition, we are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, enacted in April 2012, and therefore we may take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. We may take advantage of these exemptions for up to five years after our initial public offering or until we are no longer an “emerging growth company.”
Corporate Information
Coupons was incorporated in California in May 1998 and reincorporated in Delaware in June 2009. Our principal executive offices are located at 400 Logue Avenue, Mountain View, California 94043, and our telephone number is (650) 605-4600. Our corporate website address is www.couponsinc.com. Information contained on, or that can be accessed through, our website does not constitute part of this prospectus and inclusions of our website address in this prospectus are inactive textual references only.
The Coupons logo and our other registered or common law trademarks, service marks or trade names appearing in this prospectus are the property of Coupons. Other trademarks and trade names referred to in this prospectus are the property of their respective owners.