Online Coupon Codes Are Hot, and Investors Are Cashing In

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www.coupons.com
Here's a tip that every seasoned Internet user knows all too well: The next time that you find yourself looking at a checkout screen with a blank box begging for a coupon code, open a new tab or window and find one. It doesn't matter if you're shopping for a Michael Kors handbag or squaring away a delivery order for a large pizza. If there's an active online code out there to be had, you can probably find it at one of the many aggregation websites.

The awkwardly titled RetailMeNot (SALE) operates the world's largest marketplace for digital offers. It attracted 155.2 million visits during the first three months of the year, with a growing number of those users checking in on mobile devices.

Coupons.com (COUP) is no slouch, either. It's a leading promotion platform that connects brands and retailers with shoppers through its digital coupons. Coupons.com distributed 407.8 million digital printable and paperless coupons during the first quarter.

Using the Internet to scour for bargains is growing more popular with every quarter. That's good news for savers, but it's also potentially better news for investors.

A Close Save

RetailMeNot and Coupons.com posted strong growth in their latest quarterly results last week. The spurts were impressive.

The 155.2 million visits that RetailMeNot attracted is a 26 percent advance over the past year, and it revenue surged 51 percent to $61.3 million.

Investors saw the same trend at Coupons.com. The 407.8 million digital coupons it distributed during the first quarter made a healthy 30 percent year-over-year improvement, and revenue clocked in 41 percent higher to hit $51.5 million.

Celebrating the Rookie Class

RetailMeNot and Coupons.com are growing in popularity as destinations for thrifty consumers, but you're not alone if you didn't know that one or both trade publicly.

That wasn't the case a year ago, as RetailMeNot went public at $21 this past July. Coupons.com went public at $16 just two months ago.

RetailMeNot has lived up to the hype. It has now beaten Wall Street's profit targets in each of its first four quarters as a public company. The stock has corrected sharply since peaking three months ago, but it's still trading well above last summer's initial public offering. Coupons.com naturally only has last week's report on its post-IPO track record, but it impressed the market by posting a small profit when analysts were bracing for a quarterly deficit.

Success should continue for both companies. Consumers are getting more Web-savvy, and RetailMeNot and Coupons.com are benefiting form the network effect that claims that shoppers will go where buyers go and vice versa. We're seeing it at Coupons.com with its publishing network that is now 30,000 publishers strong. We're also seeing it at RetailMeNot, where the number of global subscribers to either its newsletter or a store alert has more than doubled to 20.4 million over the past year. Its apps across several countries were downloaded 16.3 million times during the quarter.

These numbers attract savers and the companies looking to sell to them. As an aggregator, RetailMeNot relies on its growing user base to validate posted coupon codes and companies paying up to play a part in the deal promotion process. Coupons.com generally works with the brands to spread the word.

Coupons.com sees revenue clocking in between $217 million and $223 million this year. That's at least 29 percent growth off of the $167.9 million that it recorded last year. Analysts see RetailMeNot's top line climbing 35 percent this year to $282.4 million.

There are savings to be had, and for investors this means that there are stock gains to be generated.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends RetailMeNot.


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