This Two-Year-Old Startup Is Already Generating $80 Million Off … Coupons?

Cotter Cunningham whaleshark

[credit provider=”Whaleshark Media”]

Whaleshark Media, a giant conglomeration of sites that offer free deals to shoppers, has raised a whopping $300 million and it’s bringing in more than $80 million in revenue each year.It’s not like a Groupon through — this company specialises in sites that have coupon codes and promotional codes for sites like and Whaleshark Media focuses on huge retailers instead of coupons for services like Groupon.

(An example of a Whaleshark site:

How does a site like this, which is basically just a big collection of coupon codes, actually succeed?

We sat down with Whaleshark Media

Cotter Cunningham to find out. Here’s what we learned:

  • Whaleshark Media has more than 300 million visits each year. Each of its users contribute around 20 to 40 cents each, compared to some other companies that focus on higher revenue per user. Whaleshark Media just tries to bring in a ton.
  • Commission from some of its partners generates more than all of its advertising revenue. Only around 10 per cent of the sites Whaleshark Media works with actually contribute revenue. 
  • Half of the coupons on Whaleshark Media’s sites come from users. Users find a coupon code on their own, then share them.
  • Whaleshark Media is bringing in more than $80 million in revenue each year. Cunningham wouldn’t say how much of that was profit. But the company was planning to spend a ton of money on advertising.

And here’s the full transcript of the interview:BUSINESS INSIDER: So how does Whaleshark Media work?

COTTER CUNNINGHAM: I’d call it kind of a roll-up of coupon sites. Coupon defined here as online coupons — if you’re going to your favourite merchant and you check out and see that little promo box, that’s what we did. It’s different from a Groupon and a daily deal, those tend to be bigger discounts on service industry things like massages and hot air balloons. Our stuff tends to be more free shipping, $5 off at Walmart. Big national retailers online with smaller discounts.

BI: Do you think there’s a bigger audience for that than say, a Groupon?

CC: Clearly they’re killing it with their audience size and they’ve captured the imagination of people, so kudos to them. But that said there’s a bunch of people very interested in saving money these days.  Of 110 million families in the US, probably about 60 or 70 million of them use our kinds of products.

BI: When did you guys get it off the ground?

CC: We bought three small sites in November of 2009, we ran that business for about a year. We used that first year to build a team, learn the business, figure out what’s going on. We then went out and bought our largest competitor, RetailMeNot, from two guys in Melbourne, Australia. We raised around $100 million for that effort and ran that business for six months and bought the biggest coupon site in the U.K. last August. Then we closed our round with JPMorgan and IVP at the same time.

BI: Is it a coincidence that you guys got it off the ground right as the recession was hitting?

CC: I think it’s safe to say that the recession has forced people to think about saving money in ways they didn’t before. As far as our timing, the reason we started the business when we did frankly had less to do with the macro issues of the world and more about the industry itself. We felt the business had matured, the owners were ready to try something else, so it was a good time.

BI: How quickly have you guys grown? How long did it take you to hit that critical mass?

CC: The first couple sites we bought did about $10 million, $11 million in revenue. With RetailMeNot, we were able to accelerate dramatically. We did over $80 million in 2011. 

retailmenot coupons
A screenshot of RetailMeNot, one of Whaleshark Media’s top sites.

BI: Do you guys have a sense of how many users you have? CC: Company-wide, it’s about 300 million visits annually. We tend to think in terms of visits more than visitors. Typically people who focus on unique visits are lead-gen businesses — they’re buying a mortgage or a car. You paint your house one time every 7 years. Here you’re going to buy at the GAP today, Target tomorrow, it’s less about the uniques and more about their actual visits to the site. We do tend to focus more on visits than uniques. The typical person comes a couple times a month. 

BI: How does the revenue model work?

CC: We make money two ways. We make money off advertising — it’s a very valuable consumer. You’ve held up your hand and said you’re going to buy something today. That in-market consumer has enormous value and advertisers are willing to pay for that. For about 10% of the merchants on our site, we have a small commission. Commission is actually a bit bigger in revenue, it’s funny because when I originally got in the business I thought advertising would be bigger. Maybe over time, that’ll change.

BI: Do you guys have a sense of how much revenue you get per user? Is it high compared to a Groupon? 

CC: We’ve only owned these businesses for a few years we’re working on the lifetime value. My own experience, I came from Bankrate as COO for 8 years and there, the per-visit value of a user is significantly higher — you get a mortgage. Here we’re talking pennies. You can do the maths, 20 to 40 cents per visit in value. It’s much more of a numbers game, but they can buy literally every day. My wife goes to Target once a week, so…

BI: What are some of the more popular retailers?

CC: It literally is everyone. Almost all of the top retailers use coupons to drive people to the site. If you come to our site you’ll see every big brand you can think of — Lands End, GAP, it really is just across the board.

BI: How do you get the coupons?

CC: Works two ways. About half of our coupons come from the retailers — they provide them to us directly. About half of RetailMeNot’s coupons come from users. You go out and you see a fantastic coupon and you go ‘this is great, I gotta share it with my members,’ we don’t pay for that. You’re doing a community service, but it’s a great service at scale. You’ll find coupons for smaller stores and boutique stores, because you the user cared enough to upload the coupon. We might not even have a financial relationship with that boutique. 

BI: How do you get new users?

CC: Right now, we get traffic primarily from natural search, search engine optimization, email and paid search like Google and Yahoo advertising. We’re testing all the traditional aspects of advertising — TV, radio, print, you name it. It’s in the plan, just to get the word out. One of the things we’ve found is that awareness is low — so many people still don’t know there are coupons out there and available.

BI: How do you get someone to stick to the site, after they come for the first time?

CC: The first way to do that is to give them great coupons. Beyond that, I think one of the greatest services we have is a thing called an alert on a per-store basis. “Tell me when you guys get coupons for the stores I love,” and we send them an email. We have over a million people who subscribe to those.

BI: Is it pretty even between Bing and Google for search?

CC: It’s pretty representative to internet traffic as a whole, dominated by Google. It’s 70/30. 

BI: Do you think the social changes Google is making to their search engine is going to change things?

CC: If anything, we feel like couponing is a bit of a mindset, you have it or you don’t. Once you have it, you’re in. Having friends share that stuff on Google+ is just going to make us do better. We’ve gone through pretty strong efforts to help you share those coupons with your friends. The blogs I’ve read, the Google blog, have said they’re gonna start using pluses as an indicator in search. If you said you liked something, it’s gonna force it higher.

This is totally anecdotal, stuff I hear from our SEO guys, but it feels like they’re starting to use more and more of your personal information. If you use gmail and you search for these five things, it factors that into your search results. This is just another aspect of that.

whaleshark SEO
Search-engine optimization!

BI: I know you guys have raised a ton of money. Why?CC: We’ve raised about $300 million to date. We have a bunch of cash, almost $100 million in cash, and the rest we’ve used to pay down debt and on acquisitions. On the whole, it’s exactly what you’d think. We use the money to buy stuff. One of the reasons we raised so much money last time, we simultaneously raised about $90 to $100 million and used that money to buy RetailMeNot. That’s hard, raising money and doing an acquisition simultaneously is brutal. The VCs say when you get the deal, let us know, the guys you’re buying say let us know when you have the money.

We’re really active in the mobile space, it’s a much more solid conversation I can have with an entrepreneur when I say, ‘we can pay this much for your business and I have the cash.’ Having that dry powder is a good thing.

BI: Is mobile a big strategy moving forward, then? 

CC: Mobile’s huge. It currently represents the iPad and other tablets, it represents low teens in terms of percentage of our traffic. It’s growing 500 per cent year over year, incredible triple digit growth. It’s amazing. You see that kind of growth and we feel like that’s where the consumer is gonna be. We have to be there. 

In 2012 we’re doing a couple things. We’re continuing to expand internationally, we’re gonna have another announcement for an acquisition in the EU. We’re trying to grow our brand domestically and putting a ton of money into advertising and testing that. The cool thing about the online space is that you can quickly tell what’s working and what’s not. It’s so much harder if you’re selling something that’s in the channel and you’re relying on your distributors to pass data to you.

We are looking at companies in the mobile space and are aggressively pursuing some of the opportunities there. We did announce this week that we’ve launched a mobile-enabled web version of RetailMeNot. It’s different than our core experience because we’ve found two types of use. One is time-shifting: You’re on the bus, and you’re not gonna buy a TV but you’re looking around, and you can email yourself coupon codes. The other use case we see a lot of is in-store: You’re in a big box and wondering if there’s a better deal for a shirt online. Companies are very smart about that now, but it’s always worth checking. Is there a coupon on the register where I can check out? That kind of stuff.

I think we really believe you’re gonna see that triple-digit growth in mobile, enormous increases in revenue.