Pricing Engine Pools Data to Help VSBs Spend Wisely

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verifone-logoWith legacy local media companies starting to scale marketing services products, startups now have an increasingly viable channel to manage and distribute marketing products for very small businesses (VSBs). Pricing Engine, a New York-based company that launched publicly last week, has built a paid search and display manager that uses collective knowledge to help the smallest businesses effectively buy ads online.

The company has blended a familiar marketing dashboard concept — where merchants can buy multiple digital advertising products through a single interface — with a novel analytics layer that pools performance data from campaigns run across its platform to help small business optimize ad spend. It rates a businesses campaign with a letter grade (A through F) based on performance data from similar campaigns run on the platform, and offers solutions based on similar data.

“The idea is that if one pizza place is spending $1,000 a month, I’m never going to have the money to do data testing,” said Jeremy Kagan, the company’s founder and chief executive, about the data collective model. “But a thousand of us together and we’re spending as much as Domino’s.”

The data, which businesses can access for free as long as they agree to share as well, is anonymized and presented in the aggregate as a peer benchmark. The company looks at customer spending, industry (florist, pizza shop, etc), and location to determine whether a merchant’s campaign is performing better or worse than those run  by “similar business.” Kagan says that the bulk of the small businesses currently turn to Google itself as an knowledge source for optimizing campaigns, leading many to buy more keywords and increase spend accordingly.

In order to keep customer acquisition costs at a level that could justify the startup’s “freemium” SaaS model (where customers can use analytics for free but pay a flat $30 rate to buy ads through the system), the company has turned to the growing ecosystem of media-companies-turned-digital-agencies to resell its product. That means fighting for its spot within the bundles that local media and marketing services companies like DexOne are increasingly looking to for revenue growth.

As of now, the company has inked partnerships with over 500 newspapers (though most are still inactive) to sell its product largely as an add-on to a print advertisement. A newspaper salesperson can upsell a print advertiser on a “search boost,” in which either Pricing Engine or the newspaper uses the startup’s platform to turn an advertisers existing print creative into a search ad, for a flat rate. But the big targets for Pricing Engine are the larger newspaper conglomerates like Gannett and Belo who could integrate the product as white-label “express” solution for their smallest advertisers.

Between local media, digital service providers, and small agencies and consultants, Kagan believes the company could reach over half a million small businesses with little to no direct sales force. That bundle, says Kagan, would include presence and retention services like SEO, website building, loyalty, and email packaged with an acquisition product like Pricing Engine.

Steven Jacobs is deputy editor at Street Fight.