A Conversation With ZiXXo: Part II

Today I had the chance to sit down with Mike Hogan, CEO of online coupon platform provider ZiXXo, to follow up on a discussion we had at DDC. We previously wrote about the company here. ZiXXo is working on a few different fronts to make its platform more attractive to Yellow Pages companies, newspapers and mobile carriers, among others.

Most notable is the opportunity to tap into the SME market, which is currently under addressed by coupons providers. This is simply because it isn’t cost effective from a channel perspective to offer coupons to a fragmented base of privately owned small businesses. Many SMEs also don’t know quite what to do when it comes to creating a coupon ("how much do I offer?").

For the sales channel issue, ZiXXo’s API can be used by directory publishers to input data (business name, address, heading and e-mail address) and automatically generate customized coupons that can be blasted out to thousands of businesses.

A restaurant, for example, will have five or so coupons automatically generated and delivered in an e-mail push, each containing different restaurant-appropriate offers (such as specials during non-peak hours or days). There is also a map automatically generated on the coupon, and offers can be modified by any business that bites. This can be an effective onramp for many small businesses to start using coupons because it takes the first step for them and eliminates some of the confusion that can be a barrier to adoption. But there remain questions about a Yellow Pages company’s willingness to launch such a push marketing campaign on its customers and how this will resonate with SMEs in e-mail form.

For companies that don’t know quite what their coupon should say, an automated tool generates recommendations based on the category and selected options of business objectives (e.g., fill empty seats, move remnant retail inventory, sell more blue widgets). ZiXXo charges SMEs when a coupon is printed (this gets closer to an actual conversion than charging for a click does), and it shares the revenues with its distribution partners.

Building this network of distribution partners is the other vital component of its business model that the company is working on. Hogan couldn’t give me any names but says he is talking to major newspaper publishers, directory publishers, local search players and companies in the mobile space (a whole separate discussion) to integrate ZiXXo’s coupons with local listings.

The 15 percent it offers to these affiliates is considerably less than paid search rates (Google shares upwards of 50 percent with AdSense publishers). But, as Hogan pointed out, conversion rates will be higher for a coupon that a user takes the time to search for and print, than for the average text ad — for which conversions are traditionally more nebulous. This makes sense, but we’ll have to wait and see if this proves to be an attractive value proposition for publishers. In the meantime, the company continues to build up its content library of SME coupons.

There is a lot more to the company's model, which we'll get into at another date — especially the mobile possibilities. Keep watching this space as online coupons will become an increasingly important part of local search.