A few years back, you couldn’t get people — including me — to shut up about the daily deals business.
LivingSocial was going to be the next Google. Groupon was going to be another Amazon.com. Daily deals, coupons, more daily deals. It was all the rage.
One of my buddies who had invested in a daily coupon company joked that when he cashed out, he would take me on the deep-sea fishing trip of a lifetime.
Well, LivingSocial laid off 200 employees earlier this month and is pursuing a new business model.
Groupon cut 1,100 jobs the month before.
But a locally based mom-niche deals site with the goofy name of CertifiKid is motoring along, serving more than 1 million daily subscribers in nine cities. CertifiKid expects to gross more than $5 million this year and earn a gross profit of more than $1 million.
I estimate that the company, which on any given day has about 300 deals going, will earn a net profit of more than $500,000.
Amazon.com, it’s not. But CertifiKid makes money that lifted its founders out of Bethesda and into Potomac. It is growing at 20 percent a year while many of its competitors are on a path toward becoming case studies at business schools.
Take a look.
●2011 (first full year) — $1 million in sales.
●2012 — $2.2 million.
●2013 — $3.4 million.
●2014 — $4.2 million.
●2015 — $5.3 million in projected sales.
So how has CertifiKid done it?
Avoiding mistakes, for one thing.
“Some of the best decisions we made were ultimately not to do things,” said Brian Ratner, a lawyer who serves as the unpaid president of CertifiKid.
And staying small.
“Everyone else is trying to scale up and get a quick return on this fad and get out,” Ratner said. “Our primary focus was to build a sustainable, locally focused business that had a brand and reputation and where our subscribers saw us as a resource.”
CertifiKid is less a deals site than it is a trusted resource for parents to find and buy family stuff, including tennis lessons, summer camp stays, water park admissions and ski packages. It began in May 2010 as the outgrowth of a family-oriented blog by Ratner’s wife, Jamie.
“We built relationships,” Brian Ratner said. “It’s not about getting in and out of the newest restaurant. It’s about building relationships with businesses desperate to find nontraditional ways to get their core markets.”
CertifiKid has sold nearly 400,000 vouchers on the 8,000 deals it has advertised over the years. The business works like this: CertifiKid runs an advertisement for a discount “coupon” from a company, such as a restaurant. The buyer pays $10 for a certificate that is good for a $20 meal at the restaurant. CertifiKid then splits the $10 sale with the restaurant, with the restaurant typically receiving 60 percent of the sale and CertifiKid getting the rest.
The company’s biggest coupon sale was for a Potomac River family cruise from Georgetown called the Boomerang Pirate Ship that sold more than $100,000 in coupons. Most of the pet market deals, on the other hand, have fallen flat.
“Parents may be more into their kids than their pets,” Jamie Ratner said.
About a third of CertifiKid’s revenue comes from deals for hundreds of summer camps throughout the nine markets where they advertise.
“We just slowly started doing it and it has taken off,” Jamie Ratner said of the summer camp business.
In addition to deals, a significant and growing source of revenue comes from advertising, which is now in the low six figures. Some companies pay up to $20,000 a month for access to CertifiKid’s subscriber base.
Chief executive Jamie Ratner, 38, founded CertifiKid with $5,000 in savings. She works at being a mother day in and day out, which keeps her kid credentials sharp.
Like Craigslist founder Craig Newmark, who is known for his ultra-hands-on attention to his free Web site, Jamie Ratner spends hours every day poring over hundreds of subscriber
“If I get an e-mail where this poor mother is stuck somewhere and in line at a water park and they can’t pull the voucher up on their cellphone, I am going to help her,” Jamie Ratner said.
She is up at 7 a.m. every day, getting her kids ready for school. She checks Facebook religiously to see what her friends and mom groups are talking about. She also checks LivingSocial and Groupon to see what the competition is up to.
She can tell you that trampoline parks are the latest craze. Sports is popular but doesn’t sell as well as anything that has to do with STEM, which stands for science, technology, engineering and math.
Each day she directs her staff and decides on what deals to post on the site in the various markets, being careful to mix genders, ages and locations to keep the site spontaneous.
She also checks with her sales team to approve every deal, making sure the sales terms are fair and that the pitch is interesting and legitimate. Someone submitted a getaway that had only one star with terrible reviews; she flagged it, and CertifiKid refused to run it.
“Any product we run, we always get a sample, which my kids enjoy,” Jamie Ratner said.
Afternoons are often reserved for contacting vendors she knows personally to see whether there are deals to run or rerun. She also stays in close touch with the tech team responsible for CertifiKid’s Web site.
The company pays attention to seasonal business. A “Peter Pan” show that came through last summer was spotted early, bringing in $25,000 in ticket sales — including free tickets for the Ratner kids.
Jamie Ratner keeps costs low. There are no offices. She and her five full-time employees work from their homes. She also has an external consultant to handle the Web site and several part-timers who work on sales.
Her father does the accounting. In return, she and her husband send him to baseball games — including a World Series trip.
In addition to its primary Washington-Baltimore market, CertifiKid also has a presence in Dallas/Fort Worth, Pittsburgh, Atlanta, Los Angeles, Chicago, Philadelphia and, most recently, New York City.
While LivingSocial and Groupon went big, Jamie Ratner was determined to maintain control and limit her growth rate. Her main acquisitions have been to build her database of families.
That said, the Ratners regret not going to New York City earlier. The company just began offering deals in the Big Apple in the past few weeks.
“Being in New York would have given us a sense of what was going to be the trend in the rest of the country,” Jamie Ratner said, adding that the higher prices in New York would have helped her bottom line. “Everything starts in New York.”
There were also a few overtures from venture capital firms, but many of the investors would have wanted a say in the business.
“Had we gotten venture financing or shifted the model or gotten acquired, we may have had a short-term financial benefit or become a big financial hit . . . but we would have lost control,” Brian Ratner said.
Where do they go from here?
“Hopefully, the name CertifiKid will be around in 10 years, and you won’t even remember Groupon or LivingSocial,” Jamie Ratner said.
We will check back in a decade.