Constant Contact had a great IPO debut today — 73% increase in one day. Wow!
Constant Contact is an email marketing provider targeting small businesses. They have been at it for a number of years and have developed a strong base of over 130,000 small business customers. With that large of a customer base, we could not have helped but compete with them at Bronto. We compete with them less now that we’ve moved more upmarket but still show up fairly often with our small business customers.
So, what are they going to do with their new found $100mm in cash? The obvious and stated play for them is to extend their strength in email marketing with small businesses into other avenues — online surveys are natural choice, which they added in June. I would expect them to use some of their new found cash to acquire someone with a stronger position in that space — Zoomerrang or SurveyMonkey. If it happens, you heard it here first. I can also see acquisitions of other companies with like products geared toward small businesses. I don’t see them purchasing other small business focused email marketing companies. Acquiring companies with complementary products is definitely the way to go.
The strong showing is exciting and validating for Bronto, but I cannot help but find this IPO reminiscent on ones from the tech bubble six years back. 73% one day rise for a company with about $40mm in revenue this year, unprofitable and high customer acquisition costs. There’s something positive there but I would suspect their stock has a bit of a roller coaster ride in front of it.
As they say, “rising tides raises all boats” so congratulations Constant Contact with a strong IPO. We look forward to seeing what you do.