CoolSavings, Inc. (CSAV)
Interview with: Matthew Moog, President & CEO
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CoolSavings - turning the corner in terms of growth and profitability and coming out a leader the Internet Marketing space

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Services
Advertising
(CSAV – NASD)

CoolSavings, Inc.

360 N. Michigan Avenue - 19th floor
Chicago, IL 60601
Phone: 312-224-5000

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Matthew Moog
President &
Chief Executive Officer

Interview conducted by:
Lynn Fosse, Editor

CEOCFOinterviews.com
April 2003

CEO Analysis:
CoolSavings, Inc. (NASD: CSAV) is an online direct marketing and media company that provides smarter solutions to connect marketers to their target consumers. Combining industry-leading analytics and incentive technology with superior customer service that emphasizes a consultative approach, they enable a wide variety of advertisers to identify their best customers among nearly 25 million registered shoppers and drive more effective campaign performance.  Mr. Matthew Moog, president and CEO of CoolSavings, Inc. tells us “The core of CoolSavings’ business today is our ability to collect huge amounts of information from our members -- self reported and behavioral data -- and use that data to target our members with special promotional offers from major manufacturers and retailers.  Since we launched in 1997, we have grown to over 25 million registered members and hundreds and hundreds of national advertisers and brands who rely on us day in and day out to help them reach their target consumers among our rapidly growing CoolSavings member database.”   Mr. Moog compares CoolSavings to their competition. “In respect to the competitive landscape, there are some areas where we are far and away the largest and most efficient provider of the services we provide -- particularly in the distribution of consumer coupons for consumer packaged goods manufactures and major retailers. We perform at a level that can literally be ten times greater than any other player on the Internet. In other areas like sampling and lead generation, we are typically the leader, but not necessarily by order of magnitude larger than anyone else. In other services areas where we provide a premium service, such as targeted email, you tend to see a very competitive market.” Addressing the issue of growth, Mr. Moog states, “We expect to continue the 20% plus growth rate that we have been posting for the last year. We will continue to provide additional target marketing services to large consumer packaged goods, retail, financial services, media and publishing and personal and professional services clients.  In addition, we expect to continue to scale the Marketing Network, our incentive distribution network and innovate in the area of offer distribution.” Asked what potential investors should understand about CoolSavings, Mr. Moog offers, “First, if an investor looks at our last several years of financial results, they won’t see an accurate picture of CoolSavings in terms of what we are and what our potential is going forward. We have turned the corner in terms of our growth and profitability metrics, and now the company has a much stronger balance sheet and a far more positive outlook in terms of cash flow and profitability going forward.”

Through their customized, integrated direct marketing solutions, advertisers can target a wide array of incentives -- including printed and electronic coupons, personalized e-mails, direct mail, samples, sales notices and gift certificates -- to promote sales of products or services and drive customers into brick-and-mortar stores or online sites. In addition, CoolSavings proprietary database technology tracks consumer response, shopping preferences and site behavior at the household and shopper level, to provide the Company’s clients with an unprecedented breadth of sophisticated consumer data from which to make smarter marketing decisions.

With CoolSavings members' permission, they collect detailed personal information from each individual, including demographics, shopping preferences and category interests. In addition, they track each member's site activity and redemption of incentives through sophisticated data mining technology. This combined information, which is compiled in a central database, provides CoolSavings with an unparalleled ability to help advertisers identify their most likely prospects and target the right offer to the right person at the right time.

BIO:

Matthew Moog has been President and CEO of CoolSavings, Inc. since August of 2001 and also serves as a director on the company's board. As one of CoolSavings' first employees, Mr. Moog has been instrumental in helping to establish the company's overall business model and direction. He joined the company in 1996 as Vice President of Sales and in 1998 was promoted to Executive Vice President of Sales, Marketing and Product Management. In 2001 Mr. Moog assumed the role of President and COO and took on managing the day-to-day operations of the company. Prior to CoolSavings, Mr. Moog worked for Microsoft Corporation in various marketing and business development roles. He was involved in a number of new product and program launches such as the introduction of Windows NT, MSN, and Microsoft's Internet technology platform. He holds a B.A. in Political Science from The George Washington University in Washington, D.C. Mr. Moog is the proud father of two young boys and resides in the Chicago area.

Company Profile:
CoolSavings, Inc. (NASD: CSAV) is an online direct marketing and media company that provides smarter solutions to connect marketers to their target consumers. Combining industry-leading analytics and incentive technology with superior customer service that emphasizes a consultative approach, they enable a wide variety of advertisers to identify their best customers among nearly 25 million registered shoppers and drive more effective campaign performance.

Through their customized, integrated direct marketing solutions, advertisers can target a wide array of incentives -- including printed and electronic coupons, personalized e-mails, direct mail, samples, sales notices and gift certificates -- to promote sales of products or services and drive customers into brick-and-mortar stores or online sites. In addition, CoolSavings proprietary database technology tracks consumer response, shopping preferences and site behavior at the household and shopper level, to provide the Company’s clients with an unprecedented breadth of sophisticated consumer data from which to make smarter marketing decisions.

With CoolSavings members' permission, they collect detailed personal information from each individual, including demographics, shopping preferences and category interests. In addition, they track each member's site activity and redemption of incentives through sophisticated data mining technology. This combined information, which is compiled in a central database, provides CoolSavings with an unparalleled ability to help advertisers identify their most likely prospects and target the right offer to the right person at the right time.

CEOCFOinterviews. Mr. Moog, what was the original vision for CoolSavings and where are you today?

Mr. Moog: “The original vision behind CoolSavings when it was founded in 1995 and ultimately launched in 1997 was to offer promotional incentives, coupons, samples, rebates and sales notices to consumers via interactive services like the Internet and other online services. It is a way that is very convenient, fast and personalized for the consumer while being very cost effective, targeted, and valuable for the advertiser. By leveraging the low cost distribution value inherent in interactive technologies, as well as the ability to collect extensive amounts of information about individual consumers, interactive services are unparalleled in traditional offline channels.  Even six years later, the CoolSavings business has really stayed true to that original vision.

The core of our business today is collecting huge amounts of information from our members, such as self-reported and behavioral data, and using that data to target these members with promotional offers from manufacturers and major retailers.  From our original vision, we have since grown to over 25 million registered CoolSavings members and hundreds and hundreds of national advertisers and brands who rely on us day in and day out to help them target their special promotional offers and incentives to CoolSavings members.

In the last year CoolSavings has launched new initiatives, which are complimentary to our core vision. We’ve licensed some of the proprietary technology we’ve developed, we’ve launched direct mail services, and most recently we’ve launched a syndication network that allows us to leverage all of the technology and expertise we have developed beyond the coolsavings.com Web site to other sites around the Internet, including major newspapers and contest sites such as allrecipes.com, Yahoo! and Knight-Ridder newspapers.”

CEOCFOinterviews: How much company revenue is from the non-core segments?

Mr. Moog: “Last year we did 26.4 million dollars in revenue and a few percentage points from that came from the non-base business.  This year we would expect some of the newer lines of business, the technology licensing and the direct mail, etc., to grow substantially, but the core business will continue to represent the majority of CoolSavings’ revenue.”

CEOCFOinterviews: Why are people willing to give you so much of their personal information?

Mr. Moog: “That is a very common question we get from our advertisers. How do we get so many consumers to give personal data? The easy answer to that question, proven over time, is that when you present consumers with a value proposition that offers them something in return for providing their personal information, AND you guarantee to protect their privacy, it’s a very good combination for a return of value.  So, by registering at CoolSavings, telling us where you live, who else lives in your home, what things you plan on buying, you then become eligible to receive hundreds of dollars in coupons, samples and rebates from major manufacturers and retailers. That has proven to be a very compelling value proposition for consumers.”

CEOCFOinterviews: What kind of savings do people experience with CoolSavings offers?

Mr. Moog: “Well, it’s obviously very dependent upon the type of product that we are promoting. For typical consumer product goods like cereal, toothpaste, etc., the value will typically be about 30% of the cost for the product, which from my point of view is a very generous discount.  It can be as much as $1.00 to $1.50 off an item that costs say $3 or $4 dollars. When it is a larger product like consumer electronics or apparel, the offers tend to be in the neighborhood of $5 to $10 off the value of the purchase. So, typically, at the end of the day a consumer can save about 20% of their savings by using CoolSavings.”

CEOCFOinterviews: What are the demographics of the people using your service?

Mr. Moog: “Typical CoolSavings members skew very heavily toward married women with children who are homeowners and pet owners. Our member is a typical ‘soccer mom.’   Over 70% of our database is female, and in fact, we have a greater percentage of women visiting CoolSavings than any other Internet site. We have a very high presence of children in the household, and that is reflected in the categories that are most successful and prominent on CoolSavings. These categories are groceries, apparel, household items, health and beauty, and other items like that.”

CEOCFOinterviews: Are advertisers using this as a supplemental way of reaching people or are they doing it instead of different forms?

Mr. Moog: “The most typical way that advertisers use CoolSavings is as a complement to their existing marketing campaigns where they are developing a model to enable them to combine several media together in order to get the best possible effect. We get a small number of cases where advertisers choose to completely replace other forms of marketing and advertising with CoolSavings.”

CEOCFOinterviews: I know you are all over the Internet because I’ve seen you’re your ads repeatedly.   How are you positioned against competitors?

Mr. Moog: “For the last couple of months, CoolSavings has been ranked among the top ten advertisers on the Internet, and last month we were ranked the fifth largest. We have annual commitments and strategic relationships with virtually every major portal on the Internet and serve over two billion impressions on a monthly basis. It’s obviously a very extensive effort.

In respect to the competitive landscape, there are some areas where we are far and away the largest and most efficient provider of the services we provide -- particularly in the distribution of consumer coupons for consumer packaged goods manufactures and major retailers. We perform at a level that can literally be ten times greater than any other player on the Internet. In other areas like sampling and lead generation, we are typically the leader, but not necessarily by order of magnitude larger than anyone else. In other services areas where we provide a premium service, such as targeted email, you tend to see a very competitive market.”

CEOCFOinterviews: What is required for the infrastructure to handle your operations?

Mr. Moog: “It’s taken approximately a $25 million dollar investment in a technology infrastructure and hundreds of developers over the years to get us to where we are today. CoolSavings currently has more than 110 employees; approximately 40% of those are focused full time on our technology infrastructure. We have a huge online data warehouse with literally five billion data points on our twenty five million registered members, of which every data point could be used for dynamic targeting of promotional offers the instant a consumer logs on and uses the CoolSavings service.   It’s a very robust and scalable propriety technology infrastructure, which that enables a very fine degree of targeting at a number of different levels.”

CEOCFOinterviews: Are you typically in the US or is there an international level to your company?

Mr. Moog: “Today, we are a 100% United States based company.”

CEOCFOinterviews: Do you see that changing?

Mr. Moog: “We have had some very good discussions with some international companies. However, at least for the next year we don’t expect to do anything outside of the US. We will however, always explore other areas outside of the US.”

CEOCFOinterviews: How do you increase business?

Mr. Moog: “Well, hopefully we perform well for our clients and meet their expectations and take those references and show other potential clients what we can do for them. We have an extremely high client retention rate, over 90% year over year with very significant growth rates for some of our biggest brand clients. We have a staff of over 30 dedicated sales people who are out every day meeting with customers, understanding their business needs and helping them to find the right solution to meet their needs.”

CEOCFOinterviews: Has the downturn in tech had an effect on CoolSavings?

Mr. Moog: “We grew 20% last year and we expect to grow 20% this year. We were EBITDA positive in 2002 and expect to do substantially better in 2003. So generally, I would say CoolSavings is outperforming the rest of the Internet advertising market.”

CEOCFOinterviews: Please tell us about your new product, Profit Select.

Mr. Moog: “Profit Select is a very sophisticated approach to helping direct marketers generate qualified leads via the Internet. Essentially, Profit Select allows us to not only collect a lead for a company such as a magazine publisher, but it allows us to use historical conversion data to determine the profile of the advertiser’s most likely and profitable customer. We then model our own targeting so that we only provide leads for those people who fit that very desirable customer profile. This ultimately leads to higher conversion rates and lower total costs of acquiring customers.”

CEOCFOinterviews: Where do you see yourself a year or two from now?

Mr. Moog: “Well, we expect to continue the 20% plus growth rate that we have been posting for the last year. We will continue to provide additional target marketing services to large consumer packaged goods, retail, financial services, media and publishing and personal and professional services clients.  In addition, we expect to continue to scale the Marketing Network, our incentive distribution network and innovate in the area of offer distribution.”

CEOCFOinterviews: You made a substantial stock purchase back in December. Why?

Mr. Moog: “I’ve worked for the company for more than six years. I believe very strongly that we have a very compelling service for both consumers and advertisers.  I believe that our stock is of very good value and that we have a very long potential.”

CEOCFOinterviews: What are the challenges that you see ahead and how are you ready?

Mr. Moog: “There are some broad industry challenges like unsolicited email and bulk email, there are also some challenges in persuading the traditional marketing community that the Internet is a medium which they should be investing in and spending a substantial amount of their marketing dollars on. Solving those issues is a matter of time and a matter of the industry working together to present data to the advertising and marketing community that will demonstrate to them conclusively the value of the Internet as a marketing vehicle.”

CEOCFOinterviews: Are there still that many people who ‘don’t get it’?

Mr. Moog: “Sure, the total spend from online advertising is about six billion dollars out of the $250 billion dollars spent every year in other forms of advertising. So that means that just above 2% of marketing dollars are being spent online. When you compare that to the media and time spent online by US consumers, who spend about 6% of their time online relative to other types of media, there is roughly a 6 billion dollar gap between the amount of time consumers spend online vs. the amount of money advertisers spend online to reach those consumers.”

CEOCFOinterviews: In closing, what should shareholders and potential investors know about CoolSavings?

Mr. Moogs: “First, if an investor looks at our last several years of financial results, they won’t see an accurate picture of CoolSavings in terms of what we are and what our potential is going forward. We have turned the corner in terms of our growth and profitability metrics, and now the company has a much stronger balance sheet and a far more positive outlook in terms of cash flow and profitability going forward. I would encourage investors to look at those trends for the last four quarters as opposed to looking at full year results or going back several years. They should also make sure they pay particular attention to our 10K, which was just released because it has all of the updated information reflecting our year-end results. I would also suggest that they understand the overall trends in direct marketing and how the Internet is making direct marketing more strategic by adding timeliness, efficiency and interactivity to the overall benefits of direct marketing.”

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