Constant Contact Continues to Confuse

by Kris_Tuttle on June 13, 2012

We know the insides and outs of email mar­ket­ing and even online social net­work­ing for busi­ness but have always failed to grasp Con­stant Con­tact (CTCT — $16).

Even after meet­ing with the com­pany man­age­ment we only came away with “we do what we do very sim­ply with lots of hand hold­ing for one and two per­son com­pa­nies with­out any tech­nol­ogy skills.” This was enough to describe the com­pany but hardly an excit­ing investment.

By way of con­text we first talked about the stock as a short back in Octo­ber of 2007 at $24 and pub­lished a fuller note on the com­pany with a $14 IV esti­mate in Feb­ru­ary of 2008. Most of what we put for­ward in that research report remains true but acqui­si­tions, espe­cially the recent pur­chase of Sin­gle­Plat­form, have blurred the pic­ture more. We’ve uploaded the report and here is the link (PDF): Con­stant Con­tact CTCT Update Feb­ru­ary 2008

Con­stant Con­tact has tried to move into more areas like event man­age­ment and social net­work­ing to pro­vide addi­tional offer­ings to their exist­ing base of users. They’ve made some acqui­si­tions to accom­plish this but have not made any trac­tion at all out­side of their exist­ing base of users. These acqui­si­tions may not have moved the nee­dle much (like Nut­Shell­Mail) but they were fairly harmless.

Spend­ing $100M for an also-ran in the online restau­rant menu and pro­mo­tion space is not good. (It’s true they are work­ing to gen­er­al­ize their prod­uct but it’s mostly shown in the mar­ket­ing and not the mar­ket. The num­ber of employ­ees is rather small and only about $5M has been invested in the com­pany. That’s one hell of a pre­mium. If CTCT had acquired this com­pany for $15-20M I think we’d all give man­age­ment the ben­e­fit of the doubt and at least give them credit for being a dis­ci­plined buyer. But that’s not the case here.

We also note that there are larger and more suc­cess­ful pri­vate com­pa­nies (like in this space.

Not every­one out there fol­lows our Twit­ter stream so may have missed a quote we took from an online forum on email mar­ket­ing where experts expressed the fact that “you prob­a­bly won’t go wrong in choos­ing any lead­ing plat­form from Mailchimp to Awe­ber as long as you don’t end up with Con­stant Contact.”

Their mes­sage is still that they are not try­ing to impress any­one who is tech­ni­cally savvy but in this world of “con­sumer dri­ven IT” that strat­egy is not work­ing. Con­sumers and their gen­er­ally avail­able tech­nolo­gies just keep get­ting better.

And along­side it all CTCT keeps look­ing clunkier.

[No invest­ment position.]

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