Digital-coupon player SavingStar has raised $9 million in Series C financing less than a year after its launch as it looks to build on its lead in the still-small effort to replace paper coupons.
The financing was led by venture-capital firm DCM, joined by previous investors Flybridge Capital Partners; First Round Capital; IA Venture; Loyalty Management Group founder Keith Mills; and Buddy Media CEO Michael Lazerow, a member of SavingStar's board.
Launched last April, SavingStar has surpassed such players as Cellfire and AOL's Shortcuts, which rolled out five to seven years ago, in retailer participation and consumer usage. With 24,000 participating stores and 1.5 million registered users, SavingStar bills itself as the first fully national digital coupon service. As of January, SavingStar.com had 1.3 million unique monthly visitors, according to Compete.com, more than double those of Shortcuts and eight times Cellfire.com.
SavingStar lets consumers load brand discount offers from its website to their shopper cards and redeem them instantly at checkout. So far, 150 brands have run offers on the service. Brands from PepsiCo and Kellogg Co.also have used the "One or Many" program, through which shoppers sign up using SavingStar.com or Facebook brand pages to get high-value rewards for multiple purchases.
For example, a current Kellogg offer ending March 21 gives shoppers $5 back when they spend $20 on Special K products over a month. Those rewards are deposited into users' SavingStar accounts and can be transferred to their bank or PayPal accounts, converted to an Amazon gift card or donated to conservation program American Forests.
The digital-coupon space remains in its infancy, even compared with print-at-home internet coupons, where leading player Coupons.com had more than 10 million unique visitors in April.
Despite the decline of Sunday newspaper circulation and the cost of printing and distributing paper coupons, online coupons, including print-at-home, still account for less than 2% of distribution, according to NCH Marketing, a unit of Valassis Communications.
The biggest coupon distributor, Procter & Gamble Co., has resisted print-at-home internet coupons because of concerns about fraud, but P&G's biggest brand, Pampers, recently distributed such a coupon via Coupons.com. Last year, P&G launched a pilot program with startup Mobeam to redeem coupons for products straight from their phones, rather than loading deals to shopper cards, which big retailers such as Walmart Stores and Target don't offer.
SavingStar sees particular promise in One or Many, which offers larger, Groupon-style rewards. "We really want to make that a mainstream product many manufacturers can use," said SavingStar CEO David Rochon.
The new round of funding will also help SavingStar move such offers beyond CPG into online banking, airlines or other specialty retailers, all of which can offer rewards in their own loyalty currencies, Mr. Rochon said.
One key to One or Many is helping follow the purchase activity of SavingStar members to track long-term payoff from promotional deals, Mr. Rochon said. SavingStar is also preparing to launch a partnership with Triad Retail Media, which sells advertising on retailer website, to track the effect of such ads on purchases.
Previous all-digital coupon offerings have focused on working through individual retailers, according to Mr. Rochon. "We ultimately want to aggregate and drive consumer choice," he said. "Our consumers now average 2.3 loyalty cards per household, and we are serving value so they can choose where they want to go."
