1Mby1M Deal Radar 2011: HasOffers, Seattle, Washington

HasOffers is an affiliate tracking platform that enables brands to create and manage their own affiliate programs. Affiliate marketing, a growing segment in performance advertising, is when online advertisers (merchants) and online publishers (salespeople) share revenue. The publisher, or affiliate, is rewarded by the merchant for bringing in new customers or visitors to the merchant’s site; Amazon.com Associates is a famous example. An overview of how affiliate marking works is here.

Seattle-based HasOffers was founded in 2009 by twin brothers Lucas and Lee Brown, who recognized a huge need in the online advertising world. Performance marketing was on the rise after falling somewhat out of favor in the early part of the decade, but there was no clear solution for tracking and managing affiliate programs. Many affiliate programs and networks depended on legacy tracking software that was slow, unreliable, and costly to maintain. The Brown brothers wanted to use the cloud and SaaS models to create a new way of managing advertising and create a solution that was built on a centralized platform.

The Interactive Advertising Bureau reports that performance-based pricing models contributed to online ad seller revenues of $22 billion in 2009, despite the depressed economy. Performance-based pricing, the most prevalent pricing model since 2006, accounts for 58% of ad revenue and is followed by CPM/impression-based pricing, accounting for 38%. In the United States alone, performance advertising spending is expected to reach over $4 billion a year by 2014, according to Jupiter Research. Its compound annual growth rate of 16% makes it one of the fastest-growing areas of advertising spending online.

The HasOffers platform is designed to help brands create and manage their affiliate programs in a scalable way. It comes in three editions: Basic ($99/month), Pro ($279/month), and Enterprise ($799/month) with progressively greater numbers of offers, users, and clicks/month able to be managed. The more powerful versions also have features such as conversion management and network API.

The HasOffers platform is used by four target customers: advertisers, affiliates, agencies, and networks. Advertisers managing their own affiliate programs account for 35% of HasOffers’ clients, affiliates tracking their affiliate marketing campaigns and activities 20%, agencies managing affiliate programs for their clients 15%, and networks connecting advertisers and affiliates with their own network the remaining 30%. HasOffers has 7,000 account holders and tracks 700,000 in affiliate payouts per day, a number that increased 500% in 2010. Clients include FlyCell, Living Social, Tipper, SEOmoz, Tapjoy, BuyWithMe, AdsRoute, Domino’s Pizza, Zynga, and adsimilis.

Commission Junction and Google Affiliate Network are two well-known networks. HasOffers wants to reduce dependence on these players, and strengthen its own business, by enabling clients to build their own networks on its platform. Other established companies that provide performance tracking software for affiliate programs are Direct Response Technologies, creator of the well-respected DirectTrack, which, like HasOffers, is available in an SaaS model, and LinkTrust, which offers licensed-based solutions. HasOffers aims to compete by being more scalable and affordable. Its ad serving technology is built in C, enabling it to support 500% more requests per ad server than ad servers built in PHP or ASP.NET, which require servers to load 15 megabytes of data or more into memory in order to complete each request. HasOffers’ product requires 215 kilobytes of memory per request. The company says that when it was founded, competing tracking platforms sent potential clients that were “too small” for them to support to HasOffers because these other platforms were better adapted to large companies. In this way, HasOffers started from the ground up by providing affiliate programs to small brands.

HasOffers has been entirely bootstrapped. Says the team, “We worked really hard to work scale at a rate that we could manage, in terms of cash flow and it paid off. We really had to take a leap and believe in the company we were building.” Revenues are $3 million–$5 million, and the company reached profitability in August 2010.

The company is transitioning its product entirely to the cloud to accommodate scalability, and they are always looking for new engineers and programs. Management is also considering VC opportunities to help HasOffers scale even more quickly in the market. There are no plans for an exit right now; building cash flow is the primary goal.

In the 1M/1M Deal Radar series, we celebrate entrepreneurs who have reached at least $1 million in annual revenue. It is part of the One Million by One Million (1M/1M) global initiative.

Recommended Readings
Affiliate(Tip), a blog by Shawn Collins
The 1M/1M Incubation Radar: ShopSocially
Deal Radar 2010: Balihoo

This segment is a part in the series : 1Mby1M Deal Radar 2011