Research Notes: Cardlytics $CDLX (Qualitative #1)

Qualitative notes from researching, investigating, and thinking through Cardlytics.

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These are the CDLX Qualitative Research Notes #1. Use the following link to access the:

• CDLX Qualitative Research Notes: #1, #2, #3

• CDLX Quantitative Research Notes: #1, #2, #3

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Research Notes: Cardlytics $CDLX (Qualitative #1)

Subject

• Cardlytics ($CDLX)

• Qualitative Research Notes #1

Last Updated

• Updated as of 4.11.2023

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Table of Contents for Notes #1

These are the notes on this page (for the remained of the notes, see Qualitative Research Notes #2 and #3).

1. Cardlytics

   • Background¹

   • Financial Definitions²

   • Benefits for the Parties Involved³

   • Comparison to Other Ad Platforms⁴

   • Consumer Value Propositions⁵

   • Competitive Advantages⁶

   • Psychological Factors⁷

2. Dosh

   1. Dosh Information⁸

3. Bridg

   1. Background on Bridg⁹

   2. Product-Level Offers Update¹⁰

   3. New Ad Server (Reason, Timing, and Engagement Stats)¹¹

   4. Example Calculation of Lower Rev Share and Higher Gross Profit Margins¹²

   5. Panera Possibilities and the CDLX Flywheel¹³

   6. Solves the Attribution Problem¹⁴

4. Conferences / Presentations:

   1. March 2022 Digital Commerce Alliance Forum - Bitcoin and Cryptocurrency: How the Roles of Currency and Technology Are Evolving (Cardlytics, Augeo, and more presented)¹⁵

   2. January 2022 Needham Growth Conference¹⁶

   3. December 2021 Raymond James Conference¹⁷

   4. September 2021 Acceleration Partners Conference with Cardlytics and Affirm¹⁸

   5. June 2021 CDLX Investor Day Presentation¹⁹

5. Partnerships

   1. Dosh Neobank / Fintech Partners

      1. Existing, Confirmed, Suspected and Potential²⁰

         • Includes BNPL, Cryptocurrency platforms, Mobile wallets, etc.

      2. Affirm²¹

      3. Who is the Best to Partner with Next?²²

      4. Google Pay vs Samsung Pay vs Apple Pay²³

      5. Partnering with Apple²⁴

      6. Utilizing Apple without a Partnership²⁵

   2. CDLX Bank Partners

      1. Existing, Confirmed, and Potential²⁶

   3. CDLX Other Partners

      1. Existing, Confirmed, and Potential)²⁷

         • Local Offers, Third-Party Content Providers

   4. Bridg Partners and Clients

      1. Existing, Confirmed, and Potential²⁸

      2. Partnering with Olo²⁹

      3. Growth from Adding Smaller Clients³⁰

      4. Partnering with POS Systems for SMB Content³¹

      5. Cardlytics’ Plans for SMB Content³²

      6. Bridg Connects to Most POS Systems and Has Existing Partnerships³³

      7. Key to Unlocking a Significant Number of SMBs³⁴

      8. High Likelihood of a POS Vender Partnering³⁵

      9. Likelihood of POS Wanting to Partner³⁶

      10. How to Partner with POS Venders and Why It’s Required (about APIs and Costs)³⁷

      11. Everyone Benefits from a Partnership with POS Systems³⁸

      12. Summary of Why Partnering with POS Systems is Possible and Likely³⁹

Update Log

• 4.11.2023

  • Bridg Partners and Clients: Existing, Confirmed, and Potential

    • (#162): 4.11.2023: Potential Bridg Clients

• 3.23.2023

  • Company Risks: General Company Risks: PacWest Deposits and Line of Credit

• 1.10.2023

  • CDLX Bank Partners: Existing, Confirmed, and Potential

• 11.1.2022

  • Dosh Neobank / Fintech Partners: Existing, Confirmed, Suspected and Potential

• 10.16.2022, 10.20.2022

  • Company Risks: Chase Acquiring Figg

    • 10.20.2022: How Different Information Has Led to Different Conclusions and Actions by Investors

    • 10.16.2022: New Observations (Good or Bad?)

• 10.7.2022

  • Bridg Partners and Clients: Existing, Confirmed, and Potential

• 9.6.2022, 9.20.2022, 9.23.2022, 9.26.2022

  • Company Risks: Chase Acquiring Figg

    • 9.26.2022: Figg Tech (Comment by a Figg Employee, BofA Info and Comment, Comment by a Separate Party)

    • 9.23.2022: Clues of Chase’s Intentions with Figg

      • New Chase Platform for SMBs + 1st Party Transactional Data + Advertising

    • 9.20.2022: Clue of Chase Testing Figg’s Local Offers? Or a Sign of Chase Moving to the New Ad Server?

    • 9.6.2022: Two Chase Job Listings for Chase Offers

• 9.1.2022

  • Dosh Neobank / Fintech Partners: Existing, Confirmed, Suspected and Potential

• 8.22.2022

  • Company Risks: General Company Risks

• 8.10.2022

  • Dosh Neobank / Fintech Partners: Existing, Confirmed, Suspected and Potential

• 7.31.2022 - 8.1.2022

  • Company Risks: Chase Acquiring Figg

• 7.21.2022

  • Company Risks: Update on BofA Renewal and Terms

• 7.17.2022

  • Company Risks: Chase Acquiring Figg

• 7.16.2022

  • Company Risks: Chase Acquiring Figg

  • Company Risks: Update on BofA Renewal and Terms

• 7.13.2022 - 7.14.2022

  • Company Risks: Update on BofA Renewal and Terms

• 7.8.2022 - 7.12.2022

  • Company Risks: Chase Acquiring Figg

• 7.1.2022

  • General Company Risks

  • Bridg: Product-Level Offers Update

• 6.26.2022

  • General Company Risks: Includes Extreme Risks regarding PII, Bridg, and Open Banking

• 6.17.2022, 6.20.2022 - 6.21.2022

  • Dosh Neobank / Fintech Partners: Existing, Confirmed, Suspected and Potential

• 6.8.2022

  • Dosh Neobank / Fintech Partners: Existing, Confirmed, Suspected and Potential

• 5.19.2022

  • Dosh Neobank / Fintech Partners: Existing, Confirmed, Suspected and Potential

• 5.18.2022

  • Cardlytics: Competitive Advantages

• 5.16.2022

  • Dosh Neobank / Fintech Partners: Existing, Confirmed, Suspected and Potential

  • Same update added to both of the following sections:

    • Company Risks: Update on BofA Renewal and Terms

    • Notes on Competitors: Figg

• 5.10.2022

  • Company Risk: Inflation and Recessions

• 5.3.2022

  • Dosh Neobank / Fintech Partners: Existing, Confirmed, Suspected and Potential

• 4.28.2022

  • Notes on Competitors: Groupon (and How CDLX is Different)

  • Company Risks: Inflation

  • Company Risks: Current Negative Cash Flow

• 4.18.2022

  • Dosh Neobank / Fintech Partners: Existing, Confirmed, Suspected and Potential

• 4.5.2022

  • General Company Risks: Includes Extreme Risks regarding PII, Bridg, and Open Banking

  • Dosh Neobank / Fintech Partners: Existing, Confirmed, Suspected and Potential

• 3.31.2022

  • Dosh Neobank / Fintech Partners: Existing, Confirmed, Suspected and Potential

  • March 2022 Digital Commerce Alliance Forum - Update with New Crypto.com Partnership

• 3.23.2022

  • March 2022 Digital Commerce Alliance Forum - Bitcoin and Cryptocurrency: How the Roles of Currency and Technology Are Evolving (Cardlytics, Augeo, and more presented)

• 3.13.2022

  • Dosh Neobank / Fintech Partners: Existing, Confirmed, Suspected and Potential

• 3.2.2022

  • Dosh Neobank / Fintech Partners: Existing, Confirmed, Suspected and Potential

• 2.26.2022

  • Investor Day Presentation - Follow-Up

• 2.25.2022

  • Investor Day Presentation - Follow-Up

• 2.24.2022

  • Dosh Neobank / Fintech Partners: Existing, Confirmed, Suspected and Potential

• 2.20.2022

  • Bridg Partners: Existing, Confirmed, and Potential

  • Dosh Neobank / Fintech Partners: Existing, Confirmed, and Potential

  • CDLX Bank Partners: Existing, Confirmed, and Potential

• 2.18.2022

  • Bridg Partners: Partnering with Olo

• 2.10.2022

  • Investor Day Presentation - Follow-Up

• 2.8.2022:

  • Dosh Information

• 2.7.2022:

  • Bridg Partners (Existing, Confirmed, and Potential)

• 2.6.2022

  • Google/FB vs Cardlytics

  • Dosh Neobank / Fintech Partners (Existing, Confirmed, and Potential)

  • CDLX Bank Partners (Existing, Confirmed, and Potential)

  • CDLX Other Partners Existing, Confirmed, and Potential)

  • Bridg Partners (Existing, Confirmed, and Potential)

• 1.19.2022

  • Culture (Glassdoor Ratings)

• 1.16.2022

  • CDLX / Industry Insights

  • Figg

  • Bridg Needs the New Ad Server (Reason, Timing, and Engagement Stats)

  • Example Calculation of Lower Rev Share and Higher Gross Profit Margins

  • Panera Possibilities and the CDLX Flywheel

  • Solves the Attribution Problem

• 1.11.2022

  • January 2022 Needham Growth Conference

• 1.5.2022

  • Update on BofA Renewal and Terms

• 12.28.2021

  • Product-Level Offers Update

• 12.26.2021

  • Losing BofA / BofA Non-renewal

• 12.16.2021

  • Figg

• 12.15.2021

  • Dosh Neobank / Fintech Partners (Existing, Confirmed, and Potential)

• 12.14.2021

  • Visa / Mastercard

• 12.6.2021

  • December 2021 Raymond James Conference

• 12.1.2021

  • Dosh Neobank / Fintech Partners (Existing, Confirmed, and Potential)

• 12.5.201

  • Affirm

• 12.1.2021

  • General Company Risks

• 11.8.2021

  • Insider Selling

• 10.25.2021

  • Facebook Advertising

• 10.11.2021

  • Miscellaneous Notes

• 10.10.2021

  • General Company Risks

• 10.8.2021

  • CDLX / Industry Insights

• 10.7.2021

  • Amazon Advertising

• 10.5.2021

  • Figg

• 9.20.2021 (this is the approx. date of the conference)

  • September 2021 Acceleration Partners Conference with Cardlytics and Affirm

• 9.17.2021

  • Dosh Neobank / Fintech Partners (Existing, Confirmed, and Potential)

  • Who is the Best to Partner with Next?

  • Google Pay vs Samsung Pay vs Apple Pay

  • Partnering with Apple

  • Utilizing Apple without a Partnership

• 6.11.2021

  • June 2021 CDLX Investor Day Presentation

• 4.29.2021:

  • General Company Risks

  • Background

    Financial Definitions

    Benefits for the Parties Involved

    Comparison to Other Ad Platforms

    Consumer Value Propositions

    Competitive Advantages

    Psychological Factors

  • Dosh Information

  • Bridg Information

• 3/1/2021

  • Culture (Glassdoor Ratings)

• May - End of 2020, 10/7/2020, 12/9/2020, 1/5/2021, 1/20/2021, 1/21/2021

  • Miscellaneous Notes

Disclaimer for Research Notes

• There may be incorrect information, outdated information, or errors in the following contents, as the following are notes that I wrote down while researching. I include dates where I have them, making it easier to know when the notes / thoughts were written down. The older the notes, the more likely I have changed my mind or found new information.

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Background

1. Cardlytics is an advertising platform that allows marketers to place offers in the banking channel.

From the March 2021 acquisition of Dosh, marketers can place offers in the neobank and fintech space. This acquisition came along with a much improved user interface, and dramatically reduced the risk of one day primary transactions occurring outside of the traditional banking channel and in neobanks and fintechs.

The April 2021 acquisition of Bridg gives Cardlytics the ability to complete their data by adding SKU level data, which via integration of Bridg into the banking channel should allow for product level offers.

As of 4/29/2021:

(The following notes in this section were used to make this official post, the first post I ever did)

Cardlytics is an advertising platform, where advertisers/marketers can offer discounts to customers, primarily through the digital banking channels. Advertisers can target customers based on their anonymized purchase history, with information similar to what you could find on a bank statement. This gives advertisers a way to target customers that are not currently customers, but likely could be, based on their transaction history.

For instance, if someone frequently goes to a BP gas station, with a Conoco nearby, Conoco can see those transactions and incentivize the consumer to get gas at their pumps instead. The consumer sees the offer in their bank app and activates the offer by clicking it (green check top right-hand corner of offer). They use that card to complete the purchase. Once they complete the transaction, they will get a notification the offer was used (if turned on). After a period of time, a credit will be applied to their bank statement based on the offer amount.

Offers can vary by percentage (if they need to incentivize a certain customer more, the offer amount can be increased), dollar amount, and by total spend (i.e., an offer will say “get 10% on all purchases until a $10 maximum is reached”).

Financial Definitions

2. Within Cardlytics’ financial statements, and based on their 10-K, they define:

Revenue = Billings - Consumer Incentives

Gross Profit = Revenue - FI Share and other third-party costs - Delivery costs

where:

Billings: “Billings represents the gross amount billed to marketers for advertising campaigns in order to generate revenue. Billings is reported gross of both Consumer Incentives and FI Share” and as stated in their Q3 2021 earnings presentation, “Total in aggregate paid by marketers”

Therefore, I assume “ad spend” = “billings”, since the amount an advertiser would spend would be the aggregate amount paid

FI Share and Other Third-Party Costs: “FI Share and other third-party costs consist primarily of the FI Share that we pay our FI partners, media and data costs, deferred implementation costs incurred pursuant to our agreements with certain FI partners and a $2.5 million non-cash expense in 2018 related to the vesting of warrants issued to an FI partner that accelerated upon the consummation of our IPO. To the extent that we use a specific FI customer’s anonymized purchase data in the delivery of our solutions, we pay the applicable FI partner an FI Share calculated based on the relative contribution of the data provided by the FI partner to the overall delivery of the services. We expect that our FI Share and other third-party costs will increase in absolute dollars as a result of our revenue growth.”

FI Share = Rev Share

I believe the bolded section above is very important, as it likely explains why Cardlytics rev share they pay the banks will decrease. In the write-up, I will discuss this idea more in depth.

Delivery Costs: “Delivery costs consist primarily of personnel costs of our campaign, data operations and production support teams, including salaries, benefits, bonuses, stock-based compensation and payroll taxes. Delivery costs also include hosting facility costs, purchased or licensed software costs, outsourcing costs and professional services costs. As we add data center capacity and support personnel in advance of anticipated growth, our delivery costs will increase in absolute dollars and if such anticipated revenue growth does not occur, our delivery costs as a percentage of revenue will be adversely affected. Over time, we expect delivery costs will decline as a percentage of revenue.”

Benefits for the Parties Involved

As of 4/29/2021:

3. (The following notes in this section were used to make this official post, the first post I ever did)

Advertisers

• Advertisers or marketers are the source of the offers.

• The benefit to them is being able to place ads in a brand safe environment. There is no risk of placing an ad next to or on the same page as content that hurts the advertiser’s brand. We have seen this with Facebook and YouTube. A couple years ago, many large advertisers had to pulls ads off YouTube, as the creators were posting content that was hurtful to their brand. It is difficult when advertisers are placing ads on channels that they do not control the content. That is not a risk when placing an ad within the bank channel.

• Another benefit is the ability to target ads based on prior transactions. What people are currently buying is a good indication for what they are willing to buy or will be buying in the future.

• Companies can target individuals who shop in their category, but not at their stores.

• Advertisers can send offers to customers outside of their loyalty members or outside of those who have provided an email.

• Benefits from direct feedback loop, of seeing the effectiveness of the ads. Also, can now advertise on Dosh first, see the success of the ads, and then rollout a larger and longer ad campaign on the bank channel.     

Consumers

• Customer, cardholder, consumer. These are the individuals targeted, who activate and use the offers (consumer incentives).

• Benefits from personalized offers and will benefit more from additional ads and as targeting increases.

• Enjoys using offers to save money, without having to physically give a coupon to cashier (all on card).

• Saves money on transactions they were already going to buy.

• Centralized location of many offers, to help decide where to eat, shop, travel, etc.

Banks

• Able to earn additional revenue from monetizing data and serving the ads.

• Benefits from increased use of their app or online banking platform.

• Benefits from increased use of their cards, over others in a customer’s wallet. If one card has a great offer, the customer will likely use this card over others when making a purchase. Beyond the financial component, this is another reason banks would prefer Cardlytics over something like Google Pay, where the offer can apply to any card the customer chooses. (More info on Google Pay below).

Cardlytics

• Benefits from earning revenue. Revenue is the portion of billings paid by advertisers after the consumer incentive or offer is funded.

  • I.e., Cardlytics Revenue = Billings - Consumer Incentive.

Comparison to Other Ad Platforms

As of 4/29/2021:

4. (The following notes in this section were used to make this official post, the first post I ever did)

Solicited vs Unsolicited

• The most important comparison, that is rarely discussed, is how the advertisements (offers) on Cardlytics are welcomed and solicited. Consumers must decide to look at the offers. In other advertising channels, advertising is done where the eyes are at, and typically, if not always, the consumer is not viewing that channel for the purpose of ads.

• It is true that consumers may see the offers on their banking app when they are viewing it for purposes of checking their bank statement. However, to view the larger selection of offers, a consumer must click on this option.

• In all other ad platforms, advertisers have the headwind of consumers not wanting to see the ad, and either mute the channel, turn the channel, skip the ad, use Ad Block, or other alternatives to avoid it. This is not the case with Cardlytics. Consumers choose and enjoy looking at the advertisements.

Source: Personally Created

Consumer Value Propositions

As of 4/29/2021:

5. (The following notes in this section were used to make this official post, the first post I ever did)

Selection Size

• Currently, there are not many offers, which is one reason many consumers do not use the offers (less offers and also less relevant offers). As the number of offers increases, the likelihood of offers being applicable to the consumer increases.

• As the number of offers increases, the value to monthly active users (MAUs) will increase, as they will enjoy looking at the different offers available and can use this to decide where to shop, eat, or travel.

Price

• Free for the consumer to use with their existing credit and debit cards.

• The offers lower the prices you pay, so consumers are saving money.

Convenience

• By having all the possible offers in one central place, you can compare what the best deals are at that time, swaying your decision on things such as where to eat. Why go to Subway when you have 25% off Jimmy Johns? I have found myself checking the offers first before deciding where to eat or which hotel to stay at for a trip.

Service / Experience

• Better than coupons, since offer is linked to your card, and the discount will be applied without the cashier knowing. May be a small point, but there are some negative stigmas around using coupons, so if Cardlytics is able to avoid that, all the better.

• Extremely easy to activate and use offers.

Competitive Advantages

5.18.2022

Access to Purchase Data from Banks

6. I believe CDLX has a very strong competitive advantage with being the only advertiser with access to the purchase data with the banks they partner with, and has a growing moat that continues to make it even more difficult for others to gain access (both from growing social proof of more banks and others trusting CDLX with their data, and a growing track record of no data leaks with CDLX).

While competitors may be able to place offers along side CDLX offers, I do not believe we will see those competitors get access to the purchase data, which is where the most benefit comes from.

While myself and others have discussed this idea before, I just learned yesterday how long it took to get BofA comfortable with sharing their data with Cardlytics. Before, I only knew the time it took for Chase. This made me realize it was not a one off case with taking a long time with Chase, but likely all banks.

This gives another reason why CDLX is the only one with access to the data with the banks they partner with, as I will discuss below.

Why CDLX is the Only One with Access

According to a Tegus interview on 5/26/2021 with the Former Chief Revenue Officer at Cardlytics, it took CDLX 4 years to get BofA comfortable with giving access to the data for advertising:

“Like it took Cardlytics four years to get Bank of America's legal risk and compliance to even agree to have a rewards program to allow a secondary party, i.e., Cardlytics, to even have access to this data for the purpose of what they're doing. So you're dealing with an institution that the very first sentence is do no harm, protect PII at all costs.”

From the January 2022 conference, I learned it took nearly 10 years to get Chase comfortable with Cardlytics:

“But I do not believe the banks are in the business of giving their data to anyone else. It took us years to get them comfortable, and to get them where they are. And in some cases, like with Chase, it took us a decade. And the things we had to go through and the things we had to prove; I don’t think investors appreciate how big our moat is.”

Originally I didn’t know if the 10 years it took to get Chase comfortable with sharing data was a one off case, and maybe it didn’t take years with other banks. That is why I liked finding out yesterday that it was also the case with BofA taking years (4) to build the trust. Given it was not quick with two of the large banks, it was likely not quick with any of the big banks.

Knowing that it actually took years with multiple banks, and knowing approximately how many years it took, strengthens this competitive advantage in my mind, rather than simply saying “you have to gain the bank’s trust” or even “it took a long time to get banks comfortable”. Having actual data points of many years is a much stronger case.

It may be that we can say if it took this long for CDLX, it would take around the same amount of time for a competitor to gain trust. Meaning, if a new competitor comes along, it may take 4-10 years or so to gain the trust of the banks to share that data. It also could take even longer, given not only did CDLX build that trust over years, Cardlytics has then continued to build on that trust after, by having a long track record of no data leaks. Therefore there could even be a higher bar for competitors now.

However, I think that the length it took to get comfortable with CDLX is likely not something the banks are looking to do again. Why would a bank spend all that time again trying to figure out if they can trust someone else to do something similar, when you already have someone who can do it and you trust? (Especially given it involves something as important as consumer purchase data and protecting PII.)

Where a bank would want to work with someone else is if that competitor offered something different. The best example is Figg with local content from Rewards Network. While CDLX could do the same (Dosh was already using Rewards Network, and now CDLX is using Rewards Network in another bank), CDLX wanted to wait for the new UI to better organize the content. However, it sounds and looks like BofA did not want to wait.

While the banks may add additional content and work with other parties, that does not mean the banks will want to go through the same years of building trust first to give them access to the purchase data. That takes time and resources, and therefore money. Rather, there is a much simpler, quicker, and cheaper solution for the banks. They can either add the content directly without purchase data, or they can run it through CDLX on their rails to add in the purchase data. This still leads to CDLX being the only one with access to the purchase data.

This is not just a theory. It is both in the contracts with the banks, and what we have actually seen in practice.

In that same 5/26/2021 interview, they discuss the current contract with the banks related to the non-exclusivity of the channel. The more important piece is why CDLX would need to manage this other party’s content, which is “because they don't trust anybody else to do that. Banks don't trust anybody else other than Cardlytics to run that business and protect the PII.”

“And by the way, the way the contract reads Cardlytics has to manage that for them. They still have to manage the platform that all those offers run on. And so instead of Dosh getting into a contract with Bank of America and Cardlytics is getting nothing out of having to manage it, let's just buy them and see if we can, like I said earlier, get the banks off our back a little bit about this issue of some content that they'd like to see that we are bringing in.” - Former Chief Revenue Officer at Cardlytics, Inc.

‘Just to understand that you're saying, Cardlytics is managing all of this data aggregation, warehousing, clean room behind the firewall. And if someone else comes with a source of advertising dollars, they have to be allowed to plug into Cardlytics' platform behind the bank firewall to serve those offers to people.” - Tegus Client

“Yes, because they don't trust anybody else to do that. Banks don't trust anybody else other than Cardlytics to run that business and protect the PII.” - Former Chief Revenue Officer at Cardlytics, Inc.

While others like Figg have been able to place offers within a CDLX-partner bank, it does not sound like they have received data. Not only was the reiterated this week by CDLX with investors, but it was also discussed in the January 2022 conference when discussing the data moat:

“To the best of my knowledge, and I believe this to be highly accurate, we are the only provider that actually gets the data. Which is what the advertisers want. So there are definitely lots…not lots…but there are I’m sure the Ibotta’s of the world, and the Figg’s of the world are talking to the banks, because they recognize what a massive channel this is.”

The reason for these other parties not getting access to the data was explained next:

“The banks are not in the business of giving access to their data to anyone. In fact, quite frankly, one of our large banks, one of the reasons we’re running third party content through them, on behalf of them, we’re working with a partner on their behalf, to run it through, is so they don’t have to give them the data, because we already have it, and we are using the data to better target.

So I don’t want to minimize, we’re very aware of things that are going on. We’re very aware, that even though our stock is way down right now, people have seen us be successful, so people are kind of nipping out our heals a little bit.

But I do not believe the banks are in the business of giving their data to anyone else. It took us years to get them comfortable, and to get them where they are. And in some cases, like with Chase, it took us a decade. And the things we had to go through and the things we had to prove; I don’t think investors appreciate how big our moat is.”

Therefore, you have Figg not getting access to the BofA purchase data given how long it takes to gain trust. And in the case of the other bank, you have CDLX running the Rewards Network content for them to be able to use the purchase data and target better.

We know it was Rewards Network content from the following (and was also confirmed this week by CDLX):

“In Q4, for the first time ever, we took third party local content, and ingested it, and started displaying it to one of our largest banks in the network, through third party content provider called Rewards Network. So that happened in I think December of Q4 with frankly one of our largest banks.” -Lynne Laube, Co-Founder and CEO, Cardlytics, January 2022 Needham Growth Conference

Additionally, giving access to the data to more parties increases the risk of a data leak. The more parties with access, the more likely at least one experiences the low probability event.

For an extreme example, if we assume each independent party that the bank works with has a 1% probability of a data leak, and there are 100 parties with access to the bank data, then the probability of no data leaks is 99%^100 = 36.6%, which means the probability of at least one data leak is 63.4%. So while the probability is very small of the scenario of a data leak occurring with any one party, it becomes more likely with each additional party the bank adds that at least one of them experiences that unlikely scenario. To make it even more clear, if you had 1000 parties, it simply becomes even more likely, with 1-99%^1000 ~ 100%, though not exactly 100%, since it is still possible all 1000 do not have a data leak, just very unlikely. There simply becomes too many chances for at least one or more party to experience that 1% scenario.

The banks are looking to minimize their risk, and the way to do that is with less parties, and only with those that took years to first gain that trust, and then years to continue to keep that trust.

Another reason outside of trust of having CDLX run the other party data is to save time and money for the banks. The banks do not want to manage multiple relationships for the sake of accomplishing the same goal. Therefore, let CDLX do this on their time, and get the added benefit of them already having access to the purchase data to make it better.

Why the Purchase Data from the Banks is Important

Purchase data is extremely powerful for targeting and measurement with advertising.

For targeting, what better indicator of what someone will buy than what they are already buying or have bought over time? Additionally, most stores only have access to the purchase data of their own store. By partnering with the banks, CDLX has insights into where and how much their customers are spending with competitors, allowing them to target those existing customers and shift some of their wallet to them and away from competitors.

For measurement, combining the actual purchases with randomized control trials gives a level of certainty in the results.

Why the Moat is Growing

CDLX has a growing moat that continues to make it even more difficult for others to gain access, both from growing social proof of more banks and others trusting CDLX with their data, and a growing track record of no data leaks with CDLX.

CDLX already has many of the largest banks. This creates social proof to smaller banks, neobanks and fintechs, and Open Banking partners. If the largest banks trust CDLX, then it is likely so can they (the opposite does not occur, where if you only gain trust of small banks, it does not make it easier to gain the trust of the largest banks). This leads to more and more of them trusting CDLX with their purchase data. For instance, it was likely easier to convince Sainsbury’s to use CDLX with Nectar Connect, given CDLX’s experience with purchase data, their trust with the largest banks, and history of no data leaks. The large size and success of this partnership leads to further Open Banking partnerships, which we have already heard is occurring, making it harder for others to compete and get this access in the Open Banking area. Why risk your data with anyone else?

The difficult part is getting the first partner. With the banks it was BofA. With Dosh it was Venmo. With Open Banking, it was Nectar Connect.

This moat continues to grow every year that CDLX has no data leaks. If that occurs, CDLX will lose that trust. For more information on this risk, see the section in these Research Notes “General Company Risks: Includes Extreme Risks regarding PII, Bridg, and Open Banking”

As discussed before, we know CDLX has been attempting to partner with AmEx, who was open to a partnership, but not with sharing their data, which CDLX needs. The plan is to give AmEx access to CDLX’s now exclusive local offers from their Entertainment acquisition, and possibly also the third party local content of Rewards Network, but start without the data. CDLX will likely attempt to sell AmEx on getting access to the purchase data to make the local offers better, using their own before and after results of using the local content before and after targeting with purchase data. Then with trust, the partnership could expand into a full partnership, giving AmEx access to a better UI, product-level offers, offers from more ad agencies, and more.

Signing AmEx would not only be a big deal in terms of:

• Higher revenue potential with adding significantly more MAUs

• Larger combined advertising reach leading to more interest and use by advertisers, which increases the number of offers and engagement by users, leading to more interest for small banks, neobanks and fintechs, and Open Banking partners

• Showing even the best in-house programs still want to use CDLX or rather CDLX can provide them with solutions they have not been able to obtain, making it even more unlikely a bank will try to do this again on their own

But it would also be a big deal in growing the moat around trust. AmEx has been someone CDLX has trying to get for years, but needs to get them comfortable with sharing their data.

“Certainly the one we would love to have is AmEx, which is a home-grown program. Not sure we’ll ever get them quite frankly, because they have this religious thing, as they should, about they don’t want to give their data to anyone. And we need data. So we’ll see.”

-Lynne Laube, Co-Founder and CEO, Cardlytics, January 2022 Needham Growth Conference

Therefore if CDLX can get them over the data hurdle (such as through CDLX’s mentioned “trojan horse method” with local offers) it would increase CDLX’s social proof even more in terms of trust.

In some sense, you have the banks knowing they need to aggregate their reach for advertising purposes, but you also have this effect of everyone only using CDLX given their existing and growing level of trust.

I’m not sure though the business survives, at least not with the banks, if CDLX has a data leak. Losing that track record of trust kills the business. It is not like the banks don’t have another option and must only use CDLX. The banks will be fine without having these cashback solutions, doing something internally, or using competitors but likely without giving access to the purchase data.

Therefore CDLX has a very unique and powerful business where likely CDLX themselves is their biggest risk, in terms of causing a data leak. As discussed more in the risks section, the risk of a data leak with PII is very low with the banks, since CDLX does not pull out any of this PII data. However, Bridg and Open Banking partners may have access to additional data that could increase the risk of leaking personal data, depending how they are handled. A leak outside of the banks may still hurt the trust with the banks, and therefore CDLX must ensure they are doing everything possible to decrease this risk.

As of 4/29/2021:

(The following notes in this section were used to make this official post, the first post I ever did)

Advertisers

• From an advertiser's standpoint: CDLX vs Radio/TV/Print

  • Better to target based on customers that are more likely to buy, such as customers who have a history of buying similar items, rather than based on demographics of the channel. In addition, CDLX allows for better ability to see if they actually bought due to your ad (possible with radio/tv/print, but more difficult or not as concrete of data to track results).

• From an advertiser's standpoint: CDLX vs internal discounts sent out via email or through app.

  • Targeting customers outside of your store may be better than sending offers to people who are already customers. With tracking your website, using email addresses of existing shoppers, and a loyalty system, marketers are limited to their internal store data, and not external stores / competitors. They may not know to target a customer that shops next door to them every day, since they do not have the information, while CDLX does. Also, more likely to see and use that discount from a central place, like the Chase app, rather than having 10 different loyalty apps.

  • Some push back has been companies have sufficient capabilities with their own apps, to not need what CDLX offers. However, these companies, such as Starbucks, still advertisers on Cardlytics, to get customers who are not on their app or who do not go to Starbucks. This is proven by the fact that their Cardlytics advertisement description mentions to download and use their app.

• From an advertiser's standpoint: CDLX vs online ads like Google, Facebook, YouTube.

  • CDLX is more brand safe (advertising in a bank setting, rather than where you do not control all the content on Facebook / YouTube).

  • CDLX offers are only seen when the user wants (solicited), rather than unsolicited and typically blocked (Google / YouTube)

Banks

• Banks doing this themselves.

  • Would require building out all the technology, hire staff, and build relationships with advertisers or create a self-service platform.

  • Therefore, there is likely too high of fixed costs, where an individual bank’s division handling this cannot be supported with a single bank’s MAUs with less ARPU from having less data and reach for advertisers. If Cardlytics at their scale has yet to have gross profit surpass the fixed costs, a bank with less scale will have an even more difficult time. It benefits everyone involved to pool and share resources.

  • In addition, advertisers need enough MAUs to make it worth advertising on that platform, and therefore a single bank’s MAUs may not be enough to appeal to advertisers. This has been where CDLX has struggled in the past, and now given their larger MAU base, it is why investors cannot assume that previous ARPU levels will stay constant.

  • Due to doing everything in house, an individual bank will not have the resources to support small advertisers (without a self-service platform), which limits the number of offers, and becomes less attractive to the consumers.

Cardlytics

• Vs New Competitor

  • Scale: Similar to the discussion on how Dosh and CDLX fit together, as more FIs and other banks join the platform, the number of MAUs increases, which increases the appeal to advertisers (more reach and more data), which increases the number of advertisers and number of offers, which increase the appeal to MAUs (more offers and more relevant offers), which increases usage and ARPU, which appeals to the banks and leads to more banks adding the platform, and so on. This is an advantage, as banks want to go where the most advertisers and revenue potential are at, and advertisers want to go where the most data and MAUs are at, making it difficult for competitors to enter this area.

  • CDLX already has most of the large banks in the US, so new entrants will not be able to scale fast enough to overcome fixed costs by obtaining smaller banks, given the high fixed costs required to operate this business. If Cardlytics at their scale has yet to have gross profit surpass the fixed costs, smaller competitors with less scale will have an even more difficult time.

  • Need to gain bank’s trust to use their data and be able to integrate with their systems. CDLX was able to gain this trust, likely from having founders that were previously bank executives.

  • Difficult to gain other banks to join your alternative platform. The reason is, if you were a small bank, and trying to decide to go with CDLX, or a new competitor, most would feel if Chase, Wells Fargo, Bank of America, US Banks were trusting their much larger dataset and amount of money with CDLX, you as the small bank should also be able to trust them.

  • It will be difficult to start from scratch and catch up to CDLX, given CDLX started many years ago.

  • Given security concerns, a bank channel would not likely service two different offering platforms, making CDLX the only platform on a given bank channel.

• Vs Google Pay

  • One competitor who could gain some market share in this space is Google Pay (future for Apple Pay as well).

  • Through their digital wallet, they have a similar area for advertisers to place offers.

  • Google Pay may have an advantage, where advertisers are familiar with using Google to place ads, and Google likely can combine their other data to have additional insights for marketers for targeting purposes.

  • One area where they lack is in terms of being limited to purchase history that is on Google Pay. It is possible Google Pay only can collect payment information from the transactions made on Google Pay, and therefore does not have the complete purchase history of an individual, from purchases made on a physical debit or credit card. This could change. And with time, it is possible 100% of purchases will be made on a digital wallet, which will likely happen once personal IDs are made mobile, as this would remove any need to carry around a wallet. For now, many SMBs are still without the Google Pay option, which gives CDLX time to grow their marketing bases.

  • Both CDLX and Google Pay can exist, and not be one or the other.  Ads placed on Cardlytics can be used with cards used in person, with Google Pay, Apple Pay, etc., where ads on Google Pay are limited to payments made via Google Pay. Additionally, if all advertisers started placing offers on Google Pay, an advertiser may be more seen if they are the only offer on Cardlytics.

  • Google Pay is not limited to Android users in the sense of restricted use. But rather, as an Apple user, with Apply Pay easily accessible and embedded on the phone, will an Apple user use Google Pay over Apple Pay, or use both options? If not, then a large portion of the market will only be on Apple Pay, which limits the ad reach of Google Pay offers. Therefore, if you project out the scenario where 100% of transactions are on a digital wallet, Cardlytics still works. A way to visualize, is where all Chase users can be serviced via the Chase App, and their offers still work on all digital wallets. While if that same offer is on Google Pay, the advertiser is limited to the population using Google Pay. Therefore, an advertiser can either just use Cardlytics to place an offer that works everywhere and on all wallets, or they can place the ad three or more separate times on each digital wallet advertising platform.

  • Cardlytics also has the support of the underlying banks and cards. Beyond the financial component where the banks get a cut of this ad revenue, with Cardlytics, the banks benefit from increased use of their cards, over others in a customer’s wallet. If one card has a great offer, the customer will likely use this card over others when making a purchase. This is another reason banks would prefer Cardlytics over something like Google Pay, where the offer can apply to any card the customer chooses. It is possible if you extrapolate this out, and all cards are on a digital wallet, no individual card or bank will get any transaction lift from the use of digital wallets, since the customer can go back to using the same card they always use and apply offers to that same card. But with Cardlytics, since the offers are card specific, a customer has incentive to use that specific card, and still able to use it in their digital wallet.

Psychological Factors

As of 4/29/2021:

7. (The following notes in this section were used to make this official post, the first post I ever did)

Based on factors described by Charlie Munger.

For Consumers

• Incentive Caused Bias: Offer for discount on purchase is incentivizing you to make use of that offer and make the purchase.

• Availability Misweighing Tendency: Having an offer in front of you, that is available to you, may make you think about going to that location over others (buy coffee that day at Dunkin’s vs Starbucks), simply by seeing that offer and now thinking about that company.

• Commitment Bias: By clicking to add to your card, you have a sense of committing to using it.

• Deprival Super Reaction Tendency: By activating an offer that is time bound, you may feel that you need to use that offer before it expires and lose that offer.

• Reason Respecting or Justification Tendency, and Liking Tendency: Users may enjoy seeing the total amount saved increase within the app, and use that has justification for buying more of something.

• Operant Conditioning with a Variable Schedule of Rewards: Given that the timing of when new offers appear is random, as well as the number of new offers, users may find themselves over time checking back with the app at unusual rates, in almost an addicting manner.

For Banks

• Consistency / Commitment Bias: Once a large bank is integrated with Cardlytics, it is very unlikely they will switch. The biggest reason is it takes months of work to get the system integrated. Therefore, there are high switching costs, not just financially, but time wise, for them to switch to a new platform.

• Social Proof: If you were a small bank and trying to decide to go with CDLX or a new competitor, most would feel if Chase, Wells Fargo, Bank of America, US Bank were trusting their much larger dataset and amount of money with CDLX, you as the small bank should also be able to trust them.

About Dosh

2/8/2022:

8. Others have believed, Dosh was acquired due to being a superior model than CDLX. This is not the case.

Cardlytics bought them for the neobanks/fintechs in case primary transactions shifted. Not due to being a better platform. Just has light integration process that is good for neobanks/fintechs, and need it as an insurance policy.

4/29/2021:

Dosh

Cardlytics’ acquisition of Dosh could have some positive long-term impacts, beyond short term improvements. See below for a visual of how CDLX and Dosh could possibly fit together.

Description of Company

• Dosh also allows for card linked offers. The offers are more in line with the cash back offers you see offered by other banks or cards. Where most alternative options, such as at credit unions or major credit card companies, offer 1.5-2% cash back on all purchases and up to 4-5% on select categories, Dosh has specific company cash back offers that are anywhere from 2% to 10%, with some higher.

Where This Helps

• Integration with smaller FI’s, smaller banks, neo-banks, etc.

  • Previously, it was difficult to imagine smaller banks being added to the Cardlytics platform, given their long integration times. With Dosh, smaller banks attracted by additional revenue potential can now be more easily added and with shorter integration times.

• Testing of new ads before rolling out larger and longer campaigns on bank channel.

  • An additional benefit is the ability to test new ideas and offers on the smaller user base of Dosh. The insights from these tests can then be used to roll out larger ad campaigns on the bigger banks. This could be valuable when combined with the self-service platform.

  • It is possible that ad agencies and advertisers are using the “Cash Flash” on Dosh as a way to test out a higher offer amount that is more in line with what you would see as a one-time offer on CDLX, before rolling it out on the bank channels. Typically offers on Dosh are more in line with the smaller cash back offers that other banks and cards offer, such as around 5%, while on Cardlytics powered platforms, the offers are typically one time offers that are greater than 10%.

• Increasing network effects

  • The ability to add smaller FIs and neo-banks will add more MAUs, making it more attractive for advertisers, which will increase ads / offers on the platform, which will increase usage and activation by MAUs, leading to increased revenue, which leads to more banks wanting to be a part of the system, and so on.

• Sharing of advertisers

  • We have already seen this at play. Advertisers that were only on Cardlytics, have now begun advertising on Dosh. And advertisers that were only on Dosh, are advertising on Cardlytics.

Each company has done certain things well and certain things poorly. Management of Cardlytics should spend some time thinking things through with adequate testing, before simply taking features of one and adding it to the other. One feature that seems to be discussed frequently is Dosh’s non-activation model, where consumers do not need to click/activate an offer for it to apply to the related transaction. CEO Lynne Laube specifically mentioned they will study this model. If Cardlytics begins using the non-activation model, it may lead to less engagement and less awareness of offers. In addition, it may conflict with the Cost per Served Sale (CPS) pricing model, where Cardlytics gets paid for every served sale, regardless of redemption.

Source: Personally created, but used information and small graphics from Cardlytics.

About Bridg

12/28/2021:

9. In April of 2021, Cardlytics announced the acquisition of Bridg which would allow for SKU data and product-level offers.

Within the last two months, there has been substantial updates and progress on product-level offers within Cardlytics.

Before the acquisition of Bridg, offers within Cardlytics have only been at the store level, where the offers applied storewide. This limited the number of stores that could advertise with Cardlytics and limited the total addressable advertising market for Cardlytics. For instance, a store with many different products with different margin profiles could not offer the same percentage off across all products in that store.

There are also are many CPG advertisers looking for ways to track in-store purchases of CPG digital advertisements, since right now, most are just used for brand awareness (typically consumers do not buy individual CPG items online when they see them in an online ad or on social media, and instead wait to buy them in store, such as paper towels, leading to less visibility and certainty in ad performance). Product-level offers by Cardlytics that are activated online and redeemable in store can solve this issue.

Therefore, by adding product-level offers it significantly increases Cardlytics’ total addressable market (TAM). This was specifically discussed by Lynne Laube:

Additionally, product-level offers should remove all doubt of Cardlytics’ credibility with advertising campaign results. Although Cardlytics uses Nielsen Sales Lift Measurement for an independent, third-party process for measuring and reporting sales lift from Cardlytics’ campaigns, some still want more proof of the results, especially where the numbers are very good in relation to other digital advertising programs. Some advertisers want to do geo-lift testing or geo experiments, to see the impact in certain areas, but that may require significant ad spend to do the testing, which an advertiser may not be comfortable spending yet. This is where product-level offers can help, by allowing advertisers to give offers on very specific items, possibly even ones typically not purchased. This would allow them to see for themselves the uptick in the number sold of that exact item. That should remove a substantial portion of doubt that Cardlytics works.

Finally, product-level offers should increase the number, relevance, and attractiveness of offers for users, increasing engagement and revenue.

These are all the reasons why product-level offers are a big deal for Cardlytics.

4/29/2021:

Bridg

Description of Company

Bridg aggregates product level / SKU level data at scale. In comparison, Cardlytics aggregates transaction level data at scale. Bridg is a SaaS based program, which is their revenue model. Retailers pay a subscription to get access to this platform, where they can understand and run analytics on their consumers and can publish advertisements to the open internet.

What’s Unique

• 60-day onboarding process

  • Possible to get this down even shorter.

  • Extremely quick in relation to Cardlytics onboarding time with large banks.

• Insights into unknown customer

  • Most retailers only know customers enrolled in loyalty program or who provided an email.

  • Able to identify customers without being enrolled or providing an email.

Importance of SKU

• At this time, Cardlytics does not have access to product level or SKU level data. However, recently acquired Bridg will assist with that.

• Bridg can integrate easily with 90% of the Point-of-Sale systems in the United States, allowing them to aggregate SKU level data for about any retailer.

  • Uses The Trade Desk to send offers to customers where they do not have their emails or are not a part of their loyalty program.

Easy Integration Benefits

• Before the announced Bridg acquisition, it was difficult to think through how CDLX would get SKU level data and work with companies on an individual basis for integration. This could be practical with one or two large companies like a Walmart or Target, but not tons of other smaller retailers. Bridg, with quick integration that works with 90% PoS solutions, seems to be the answer.

According to Cardlytics, they like this acquisition because:

• Bridg gives Cardlytics the ability to ingest SKU level data into their existing platform and publish content at the product level into the bank channel.

• With bank permission, it would also give Cardlytics the ability to do exactly the reverse: take transaction level data combined with SKU level data and use that to target on the broader internet with Bridg's capabilities.

• Bridg allows Cardlytics to think about becoming a measurement business, which could compete with companies like Nielsen.

• Cardlytics looked at many companies, and this was one of the only ones that was focused on going where the industry is going. Not relying on cookies or pixels. They get their data from the retailer. The data is never sold, and never leaves the platform.

Advantages of this Acquisition

• Bridg can open doors with their clients to CDLX, and CDLX can open doors with their clients to Bridg. (Similar to what we have already seen between Dosh and Cardlytics).

• Will take about 2 years to develop, integrate, get banks permission, etc.

• Over next year, CDLX is going to help Bridg scale with what they have. For now, CDLX can target based on transaction data within bank channel or can target based on SKU data outside of bank channel. Over time, CDLX would like to combine, but the banks would like to see Bridg having more scale first. Over time, CDLX will have SKU level offers within bank channel.

• Bridg has some clients that CDLX has never been able to obtain, given these clients have required the ability to promote products for advertisements, rather than the overall store.

Product-Level Offers Update

7/1/2022

10. Today within Chase, not only did I have 5 new travel offers, but I received an offer from United Airlines that was very unique. The terms were something usually only seen on Dosh.

Earn 5% back on your United Airlines ticket purchase when you spend $50 or more, or earn 10% cash back when you purchase an Economy Plus ticket, with a $71 maximum.

Different cash back percentages have never been seen within a single bank offer that I am aware of. I have only seen this on Dosh, where a Shake Shack offer was earn 10% off when you spend $25 or more, otherwise 5% when less than $25.

What is more unique here is the higher cash back is on a specific product.

I do not believe product-level offers are live at Chase yet, given I have not heard them being on the new ad server yet (which is required for product-level offers).

Instead, I am guessing it is similar to the DoorDash offer, where it was more like a product-level offer, and worked due to how it showed up in the credit card statement. I’m guessing the same would happen with United Airlines, but I cannot be share. Otherwise, I would think this requires Bridg.

Overall, I was first just happy to see the new travel offers. Great seeing these offers as they have such high cash-back (up to $71 max), which means high ARPU for CDLX. Additionally, it is great seeing the different ways that advertisers use CDLX. This could be a good example of the type of product-level offers airlines or travel will use. It is also a way to provide product-level type offers before the new ad server is live at all banks, which could lead to higher ad spend by advertisers who have specific advertising goals (like United Airlines with their Economy Plus).

(I included this in the Bridg section, since it relates to product-level offers.)

12/28/2021:

(Official post)

Within the last two months, there has been substantial updates and progress on product-level offers within Cardlytics.

Announcing Product-Level Offers Coming Soon

During the Q3 earnings call, on November 2, 2021, it was announced that Cardlytics would soon be piloting product-level offers.

At the time, it was still uncertain where these product-level offers would be coming from. It would make the most sense to be coming from Bridg, given the acquisition. However, it was originally thought that the integration process of Bridg into the banking channel would take much longer. There were also rumors of another partnership to bring in product-level offers.

Product-Level Offers Go Live in U.S. Bank Using Bridg

Approximately one month later, on December 6, 2021, at the Raymond James Technology Investors Conference, it was mentioned that Cardlytics launched product-level offers within U.S. Bank.

Additionally, it was clarified that the product-level offers were coming from Bridg, removing the questions of where these offers were coming from.

As mentioned in the Q3 earnings call by Lynne Laube, it will take the new ads server in order for the other banks to have product level offers, and Cardlytics expects, “the full adoption process to be a two-year journey, we aim to have greater than 50% of our MAUs connected to the new ad server by the end of 2022”.

Dosh Adds Product-Level Offers

An unexpected discovery was product-level offers within Dosh.

On December 27, 2021, Tariq Ali (@valueinvestr) shared with me some screenshots of product-level offers from Rite Aid within the Dosh app.

At the moment they are only from Rite Aid, and for a few products / product categories.

Multiple products are valid within a given category, like “Cold and Flu Remedies”.

This was one of the more exciting Cardlytics updates I’ve seen in a while, since this is the first time I have actually seen the product-level offers. I have U.S. Bank, but I have not seen any of the product-level offers yet.

It is nice seeing this within Dosh, since this is likely what the offers will look like on the new user interface (UI) in the banking channel.

I also had no idea they would add product-level offers to Dosh. I’m wondering if this is only for testing purposes for the banking channel (since it has been mentioned by Cardlytics that they use Dosh for testing). I’ve asked quite a few others, and no one else has seen these product-level offers within their Dosh app. Therefore, it could be just based on certain locations and/or for certain users.

I am also not sure if this is coming from Bridg. If the product-level offers in U.S. Bank that are from Bridg are also Rite Aid, it is likely that these Dosh offers are also from Bridg. If not, it is possible these offers are not from Bridg, and could be from that rumored partnership or from another method.

Closing

Cardlytics seems to be executing on all initiatives (product-level offers, self-service, API connections for partnerships, self-service for banks, push notifications, machine learning for targeting, and more), and in good timing. Many thought, including myself, that product-level offers would take more time.

In all, these are very exciting developments, that according to Lynne Laube, investors may not be fully appreciating.

Bridg Needs the New Ad Server (Reason, Timing, and Engagement Stats)

1/16/2022

Reason

11. Based on January 2022 conference, it sounds like no real additional expenses are needed for both being a Bridg client and also placing product level offers, only need to first have the new ad server (and approval so, “we could use different data for the purposes of targeting and redeeming”).

Originally I thought maybe the new ad server was needed for only product-level offers, and not also to use the data. But the last question below specifically asks this, and Lynne’s answer seemed to be that it just needed the new ad server.

If the new ad server is required for Bridg data to be used, then the benefits of using Bridg data and having less revenue share would likely need to wait until all the banks are on the new ad server. As stated earlier in a footnote, the goal is 50% of MAUs by 2022, and 50% by 2023, but it is possible to have 100% by the end of this year.

Timing

CDLX Q3 Earnings Call: https://ir.cardlytics.com/events/event-details/q3-2021-cardlytics-inc-earnings-conference-call

CDLX December 2021 Conference: https://ir.cardlytics.com/events/event-details/cardlytics-present-raymond-james-2021-technology-investors-conference

Cardlytics January 2022 Conference: https://ir.cardlytics.com/events/event-details/cardlytics-present-24th-annual-needham-growth-conference

Engagement Stats

From January 2022 presentation, engagement stats with the new ad server were given. I believe many were surprised to hear a minimum increase of 200% in click rates, and in some cases more than 400%. Therefore, not only will the new ad server allow for Bridg data and offers, but also at higher engagement levels.

Additionally, these stats may help increase the time until adoption of the new ad server by the banks. It’s possible that is why these stats are in hand and being shared publicly.

Example Calculation of Lower Rev Share and Higher Gross Profit Margins

1/16/2022

12. The rev share, or revenue share, or FI share, is calculated as “To the extent that we use a specific FI customer’s anonymized purchase data in the delivery of our solutions, we pay the applicable FI partner an FI Share calculated based on the relative contribution of the data provided by the FI partner to the overall delivery of the services.”

Therefore, when Bridg data is used, the relative contribution of the FI partner’s bank data decreases. Maybe I am being too aggressive, but I assume, for both Bridg and Cardlytics clients only, their revenue share will decrease in half in the fullness of time for those clients and associated campaigns. I do not think this is out of the question, given the granularity of SKU-level data, and how much is likely will contribute to targeting. When product-level offers are used, it is necessary to have that data, possibly more so than the bank data, but at least in equal amounts. However, for an example, and for conservatism (I will also use these numbers in valuation process later), I will say instead of the data contribution being a 50/50 split, I will assume 75% of the data used in the delivery of service from Bridg and Cardlytics clients is 75% bank data and 25% Bridg data. This leads to an increase in the gross profit margin from 36% to 50%.

Gross Profit = Revenue - FI Share (and 3rd party costs) - Delivery Costs.

I assume delivery costs stay the same, but rev share decreases from assuming only 75% of the FI’s data was used in the delivery of the service.

If instead we assume a 50/50 split of bank and Bridg data being used for the delivering services, gross profit increases up to 65%. Given the amount of data with SKU, and especially how the data is required for product-level offers and redemption, a 50/50 contribution of data does not seem unreasonable.

Panera Possibilities and the CDLX Flywheel

1/16/2022

13. In terms of the Panera example given, product-level offers like the coffee subscription and a corresponding picture of their coffee in the bank app, would feed the left side of the flywheel below, of users saving more money (since a more specific offer with different margins could have larger percentages off, combined with only giving to specifically targeted customers) and benefiting from the new UI and the associated pictures (like KFCs ad on Dosh).

The benefit of combined insights and targeting from Bridg + Cardlytics would be a part of the “More Data” and “Better Targeting of Offers” on the right side of the flywheel below, both of which lead to more effective advertising and so on.

Product-level offers would feed “More Effective Advertising”, “Higher Engagement and Usage / Redemption of Offers” and “Users Save More Money”, thereby helping many different aspects of the Cardlytics system.

Additionally, at the January 2022, it was mentioned that with the new ad server (on the left loop in the flywheel) that, “We compared campaigns in Q4, the same exact campaign, that ran on the old experience versus the new experience, and we saw a minimum of 200% increase in click rates. 200%. Some campaigns had 400, actually over 400.” This provides an example of taking revenue, reinvesting to create the new ad server, which leads to higher engagement, which will generate more revenue and fuel the cycle.

The new ad server will allow for Bridg and all the growth discussed in this write-up, and also at these higher engagement levels (not discussed or factored in the quantitative examples provided later in the post). This is why I like thinking through the flywheel since the impact of all these updates can have compounding effects.

Solves the Attribution Problem

1/16/2022

14. Bridg solving the attribution problem is based on CDLX management explicitly stating it helps solve this problem from Bridg allowing more view in their own data.

I’m not positive on how this will work. One thought is Cardlytics clients do not have access to data at the individual level. This has led to not being able to do testing such as multi-touch attribution (MTA) modeling, which is at the individual level. Without getting into comparing MTA to Marketing-Mix Modeling (MMM) (and the switches we are seeing due to changes in privacy, such as IDFA) or randomized control testing, advertisers have used MTA with other digital advertising. From my understanding, they have not been able to do similar analysis with Cardlytics, leading to no apples-to-apples comparisons. It is possible that Bridg will allow for more comparable testing.

March 2022 Digital Commerce Alliance Forum

3/31/2022

15. Yesterday CDLX announced a partnership with Crypto.com.

“Crypto.com Visa Cards, the world's most popular and most rewarding crypto-card program, will now offer even more rewards through a new partnership with Cardlytics, a cash-back rewards platform with hundreds of brands and retail partners.”

Farrell Hudzik, who presented at the Digital Commerce Alliance Forum on Crypto said the following on the partnership:

"We are very excited to work with an innovative partner like Crypto.com to provide meaningful rewards for their consumers,"

"This is an important area of growth as more consumers engage with crypto and we are thrilled to be a part of this emerging market."

Below, in my original notes on the crypto conference, I thought it was very strange that CDLX did not discuss anything regarding what they can do for crypto-related neobanks / fintechs. Given this partnership announced 1 week later, I wonder if the plan was to announce the partnership 1 week ago and discuss it at the conference. However, I wonder if the announcement got delayed, which led to the presentation to be just on the metaverse in general. That would certainty clear up my confusion on why CDLX even presented.

It does still make me question why CDLX did not present on what they can do to help other crypto-related neobanks / fintechs, and simply not mention the crypto.com partnership. My only thought is they are trying to make progress before the competition.

3/23/2022

Bitcoin and Cryptocurrency: How the Roles of Currency and Technology Are Evolving (Cardlytics, Augeo, and more presented)

CDLX vs Augeo

Yesterday Cardlytics, and others, presented at this conference.

I would say the strangest thing was what Cardlytics presented on vs others.

Others in the loyalty space presented, including Augeo (parent company of Figg), and shared what they are doing in the space related to cryptocurrency. For instance, Augeo has created “Heaps”, an integrated cryptocurrency platform (more on that later). Others who presented mentioned looking for partners to help their crypto fintech with loyalty.

The weird part was everyone else was sharing their very specific business projects they are working on within their organization as it related to crypto. Cardlytics on the other hand had an extremely general presentation about crypto and the metaverse, including discussions on real estate in the metaverse. Almost nothing related to what CDLX can offer. And that is fine if Cardlytics is not going to offer anything in this space, but it made very little sense then why they presented.

However, what makes it stranger was how other companies presented discussing their desire for essentially card linked offers or even essentially exactly what CDLX has been doing with neobanks / fintechs with Dosh, but CDLX did not mention they could help in their presentation. A company called Moonwalk said they want to give discounts to users when they make purchases at specific stores. Right now they are doing it via QR Codes, but want it directly tied to the purchase, such as via a wallet. Cardlytics could do this! It is what they are already doing. They would just need a way to convert the cash back to crypto, such as via a partner. I am not aware of CDLX doing this, but Augeo is and presented on it:

Heaps is an integrated cryptocurrency platform that is launching soon, which enables the exchange of loyalty currencies for leading crypto assets. FI / brands benefit from attracting new customers who are interested in crypto, drive more spend and inspire participation through crypto rewards, and generate more revenue through crypto exchange fees that could be shared back with the FI / brand partner. Customers benefit from a way to enter the crypto market with ease by using loyalty program rewards, achieve potential financial gain by turning points into crypto assets that can appreciate, and build portfolio value every time you spend through “crypto back” rewards. This is not DTC, but for partnering with companies / organizations. “We are an infrastructure company, we have to educate not advocate, and facilitate.” Augeo will be using Prime Trust.

My biggest thought is this is exactly what CDLX is doing with Dosh and partnering with neobanks / fintechs, but having the ability to earn “crypto back” instead of “cash back”. Augeo is not doing that conversion, they are using Prime Trust, something CDLX could do. To me it simply seems like an extremely easy add on for CDLX to gain more share of the neobank / fintech space, and leverage existing tech and resources, and to monetize Dosh.

Others Partnering with Loyalty Programs - Not CDLX

Rethink Loyalty partners with Rakuten, Figg, and others. They have essentially created what Dosh has for neobanks / fintechs, but directly for the loyalty programs (right now with Fanatics). Rethink Loyalty said they “Built a cutting edge loyalty program to launch white label platforms for crypto wallets or apps.” Even a better comparison is Rethink Loyalty is doing in the US what CDLX is doing in U.K. with Open Banking. I have mentioned before how CDLX should look into this in the US to leverage existing tech and resources, especially with the higher gross profit margins. Even stronger would be to use this as a way to get better and bigger partnerships where they are global brands and where CDLX can then also leverage Open Banking. For instance, adding offers inside the Starbucks loyalty app, where redemption of offers at other stores leads to Starbucks loyalty points. The benefit would then be a global partnership where CDLX could then get purchase data where there is Open Banking as well, allowing for better offers. Where there is no open banking, offers more similar to Dosh and local from the Entertainment acquisition could be used. There is a great opportunity here that others are taking advantage of, but CDLX has every tool necessary to win. CDLX just needs to do it.

Last Thoughts

CDLX did mentioned Kris+ of Singapore Airlines. There was no mention of a partnership, but given Singapore has Open Banking or a version of it, and given Kris+ has a way to convert their miles to merchants for loyalty (currently only 18 merchants), there could be some ground for a partnership like Nectar Connect.

CDLX also mentioned Bitpay and card linked offers, but that was the extent. No mention of Dosh / CDLX doing anything with them, the benefits, why this would be a thing, nothing.

One of the only real mentions of what CDLX could do was mentioning sending a Chase offer for a Gucci bag in the metaverse. This was after discussing how a Gucci bag sold for $4K in the metaverse. That was it though. Just that subtle mention.

There was no mention of existing partnerships where CDLX / Dosh is helping with the crypto conversions for “crypto back”, nor powering offers on crypto cards like Bitpay or Coinbase, nor partnering with crypto related neobanks / fintechs. I thought maybe CDLX may be doing this given all the new Dosh partners (up to 32 I believe).

Currency conversion was discussed nearly 1 year ago at investor day when discussing the neobanks / fintechs / Venmo, so maybe it is something CDLX is working on, or has already done with existing partners, and CDLX did not want to share that with others like Rethink Loyalty and Augeo there. However, if CDLX is not public about it, how will they get additional partnerships or avoid losing potential partnerships to others who are vocal?

Notes taken from Rethink Loyalty Presentation

• FI have been using loyalty to drive engagement, retention, and relationships

• Traditional loyalty programs are too expensive, so Rethink gives this option similar to airlines and banks

• Provides brands with low-cost loyalty programs

• Partners with Figg, Rakuten, and others: 1300 Retailers, 65K locations

  • Expanding to dining and travel

• “Crypto rewards serve as a gateway to crypto investing without much know-how and no money out of pocket”

• “57% of consumers want to earn cryptocurrency via a rewards program, according to Visa”

• Vast majority of points don’t get used, because the rewards are not worth the effort, which ends up not building loyalty

• Solution: Convert existing rewards into crypto

  • Help stale loyalty programs to engage younger audience

  • Same as cash back with upside future value potential

• What they are doing with Fanatics

  • Previously only 3% cash back on Jersey’s, so limited the loyalty program

  • FanCash+ gives loyalty points, or FanCash to Fanatics from redeeming offers from Figg and Rakuten, via card linked offers

  • FanCash+ members shop 5.6x as much, and spend 5.6x more at Fanatics

  • Built a cutting edge loyalty program to launch white label platforms for crypto wallets or apps

  • Gives more value to these rewards program

  • Good fit: those with already loyalty programs that want to give more value, “democratize loyalty”, work with those who can’t afford them, work with SMBs

  • Plug and play platform to get into loyalty or improve. Also works as a loyalty program.

  • Can work with marketers to place offers in Fanatics, or give them loyalty like Fanatics

  • Don’t have SKU data - only total purchase level

  • “Account linking in open banking vs card linking"

    • worked with both

    • CLO is instant

    • Account linking, has more data, but more cost when there is no purchase

    • Company in Canada does both, where uses card linking for instant data, and uses account linking for more data

  • Doesn’t do crypto today, but could do it similar to Fanatics. Instead of FanCash, do crypto by partnering with someone to exchange the points and redeem as crypto.

    • Given partnered with Figg, could see partnership with Augeo will Heaps or something along those lines.

Notes taken from Discover Presentation

• Discover at the end mentioned loyalty

Notes taken from Moonwalk Presentation

• NFT giving the rewards

• “Anyone with this NFT can get this 30% discount”

• Loyalty programs are communities where they don’t know each other. Could become that via owning an NFT

• Gives utility to the NFT by having rewards / discounts / POS discounts

• Earn tokens for actions (swiping up or liking), where the tokens can be redeemed to NFT

• Giving marketers a “branded user wallet”

• My thought: Is CDLX partnered with Moonwalk?

• My thought: Could they do “NFT Wallet Purchase Only”, instead of “app only or “online only” to get people to use and become a loyalty member

• They joined this group to partner with stadiums or big box retailer to get discounts. Currently doing with QR codes, but wants instead of scanning QR codes to use payments rails.

  • Why not CDLX? CDLX could simply help them like neobanks / fintechs, where they add offer section that marketers place offers there. Payment would be digital wallet, which should work fine.

• 3 different tiers, higher tiers, more discounts

• Give only Bored Apes discounts to Coca Cola, for utility tied to members-only.

  • My thought: Could be exclusive offers, like CSR exclusive offers.

• Loyalty program is a value exchange. Give up info to get rewards. Used as a way to get more insights into customers. Need to incentivize them to get up that info.

Notes taken from CDLX Presentation- “Customers want the flexibility of crypto to shop, pay, and be rewarded”

• “46M consumers say they plan to use cryptocurrency to make purchases”

• Re-Imagine financial inclusion

  • “1.7B adults were unbanked in 2020”

  • Use of crypto in DeFi presents a powerful global solution for serving unbanked

  • Send and receive funds

  • Allow for easier transfer with cryptocurrency

  • More for underbanked and impoverished

  • Bitpay - use email or wallet to send money

    • Mentioned card linked offers

    • My thought: They partnered with CDLX?

  • Ukraine

    • Giving confidence to get money out of the country with crypto

    • Similar to Venezuela situation

• “We saw crypto-related accounts grow 11x over year”, - i2c

• Blockfi - first rewards through 1.5% cash back, not direct yet, first cash to crypto

  • My thought: They partnered with CDLX?

• Utility within digital wallets and super apps

  • Affirm shown

  • Apple, Alipay, Grab in southwest Asia, WeChat

  • “Top purchase category for Crypto owners is grocery, followed by gaming”

  • “Crypto is emerging for pay and earn while blockchain creates efficiencies, increased security

• Blockchain can drive currency ubiquity and universal redemptions

• Crypto-back rewards credit cards and rewards

• Kris+ shown

• Crypto bowl drives crypto usage

  • Mentioned the ads at the last super bowl

• 3.0 Metaverse

  • Not VR. Not Facebook. It is here.

  • Kids already using, like in Roblox

  • Mentioned purchases in Metaverse, like Gucci for $4K in Roblox

  • Chase, Onyx lounge

  • Mentioned metaverse real-estate is on the rise

• Weird not pitching what CDLX can do for rewards programs

  • Can they not do what I think they can? Can they not power the offers?

Notes taken from Augeo Presentation - ‘INTRODUCING CRYPTO LOYALTY: YOUR CUSTOMERS ARE WAITING’

• HEAPS - uses Prime Trust, for crypto loyalty

• Does millions of dollars of loyalty conversion. Loyalty members asked them if could redeem for crypto. Few competitors brought an engagement angle

• “We are an infrastructure company, we have to educate not advocate, and facilitate”

• “rewards bring compelling, easy entry for consumers and companies into cryptocurrency”

  • “6x spend bitcoin rewards card owners vs average US cardholder”

• Heaps / “Heaps exchange” = an integrated cryptocurrency platform

  • Enabling the exchange of loyalty currencies for leading crypto assets

  • Launching soon

  • FI / Brands benefit:

    • Attract new customers interesting in crypto

    • drive more spend and inspire participation through crypto rewards

      • 6x spends

    • Generate more revenue through crypto exchange fees that could be shared back with the FI / brand partner

  • Customers benefit

    • Enter the crypto market with ease by using loyalty program rewards

    • Achieve potential financial gain by turning points into crypto assets that can appreciate

    • Build portfolio value every time you spend through “crypto back” rewards

  • Activate via funding sources, exchange for crypto, and earn more crypto when you spend at national and local offers

  • Not DTC, but working with companies / organizations

January 2022 Needham Growth Conference

Quick Notes from First Watch Through (more exact quotes later)

• 1/11/2022 - Needham

  • Good for banks: More digitally engaged, attrite less, spend more, and cross sell

  • 6 new logos for travel (I believe 6 Andy said. Matches Aaron's findings I believe)

  • 47 new logos in Q4! (wow)

  • Dosh

    • 14 neobanks last quarter

    • Some will launch in Q1

    • Burn is eliminated

  • Bridg

    • Investors will look back and how did we miss. It’s a gold mine

    • Use their POS data

    • Starbucks is Bridg clients.

      • 12% of customers is only in loyal

      • Help identify 90% of customers

      • Engage

      • SHE MENTIONED MY example of other companies with assuming what they are buying

    • Sell to brands and CPG

    • Product level offers using Bridg, targeted and redeemed by what you buy, not just going

    • Requires banks to adopt ad server

    • Massively expand tam with brands and CPGs

  • Path to 100% on new ad server by 2022. 50 for 2022, and 50% 2023. all on path

  • Half of ad spend is directed by agency

    • Start 2021 no agency relationships

    • End of 2021, 58 new logos through agencies

    • 10% of billings

    • Agency over time will be 40-60 billings. But prefer direct relationships. Will be meaningful to CDLX

  • Local Offers

    • To go from 1000s to 10,000 need both ad server, and self service truly democratized. Not quite there. Agency is the first step.

    • That being said, in Q4, we took 3rd party content, Rewards Network. Not self-service. Did not mention Figg

  • Engagement

    • Not our problem

    • More engagement than we know what do to. Need more budgets

    • Unique customers activating and unique customers____

    • Compared campaigns, exact same, old vs new experience, say a minimum 200% in click rates, some had over 400%, and

    • Need more content to get in front of MAUs

  • ARPU

    • 2023 positive CF

  • BofA renewal

    • 100% confident will renew

    • We are holding out to get the right things, to make this a better relationship. Should not be worried.

    • Auto-renewed at the end of the year

  • US Bank

    • Different data for targeting

    • New ad server needed

  • Competition like Cap One or Citi

    • Mentioned Figg

    • Only provider that gets the data. Which is what the advertisers want.

    • iBotta and Figg are talking to the banks, but banks are not in the business giving to

    • Pushing data for 3rd party, So they don't have to get the data. Took years to get comfortable. Took decades. Investors don't appreciate our moat

    • AmEx doesn't want to give data

  • Misunderstood by investors:

    • Shouldn't be freaked out about CDLX

    • Well ahead of schedule: product level offers, ad server, 3rd party content

    • Bridg - how did we miss this thing

Extra Notes

16. US Bank, the offers are both targeted and redeemed using Bridg data, based on what you are buying at the retailer, not just going to that retailer.

More Accurate Quotes From Re-Watching

New Logos

“Just to put an exclamation point on that, we had 47 new logos join the platform in Q4”

-Lynne Laube, Co-Founder and CEO, Cardlytics, January 2022 Needham Growth Conference

Bridg

“The Bridg acquisition, I have said repeatedly, investors are going to look back two years from now and say, ‘how did we miss this thing’, because it’s a gold mine.

Bridg is a platform that enables retailers to understand and utilize their POS data, to understand all the customers that are shopping with them, not just customers enrolled in a loyalty program.

Just as an example, Starbucks has been very public, Starbucks is one of Bridg’s clients, there one of Cardlytics’ client. Starbucks has one of the best loyalty programs in the United States, and they see, and this is public, they see somewhere in the neighborhood of 12% of all their customers are in their loyalty program. So they understand what they are buying and how to engage with them.

Starbucks using the Bridg platform, we are now able to help Starbucks identify over 90% of all their customers, whether or not they are enrolled in the loyalty program. Which means now they can engage with those customers with the full knowledge of what they’re buying at Starbucks. Oh, and by the way, when you couple that with Cardlytics data, what they’re buying at Starbucks is what they’re buying at McDonalds, or Dunkin’, or wherever else too. It’s incredibly powerful.”

-Lynne Laube, Co-Founder and CEO, Cardlytics, January 2022 Needham Growth Conference

"I don't think investors have internalized Bridg at all. Which I think two years from now they are going to look back and go, ‘how did we miss this’”."

-Lynne Laube, Co-Founder and CEO, Cardlytics, January 2022 Needham Growth Conference

New Ad Server

“Just as a reminder to investors, when I say new ad server, that is the technology that the banks need to install to enable the new user experience. So they’re synonymous. New ad server, new user experience, the same thing.”

-Lynne Laube, Co-Founder and CEO, Cardlytics, January 2022 Needham Growth Conference

My guess she just means whenever she is talking about that, it also refers to new user experience, that that they are the exact same thing, given new user experience is not fully up

“What we’ve publicly stated is we will have 50% of our MAUs connected to a new ad server by the end of 2022, and the remainder by the end of 2023.

Every single bank in our network is engaged. Every single bank is on their own path to adopting the new ad server. In theory we have a path to getting to 100% in 2022. But I know banks, one or more is going to slide, so we are going to try like heck to beat those metrics that I gave you, but those are the metrics the street should bank on, which is half this year, half next year.”

-Lynne Laube, Co-Founder and CEO, Cardlytics, January 2022 Needham Growth Conference

Engagement

“So as a reminder, engagement is not our problem. I know investors have a hard time getting their heads around this. But we have more engagement than we know what to do with. We need more budgets.”

“In Q4, we had the highest number of customers, unique customers ever redeeming and unique customers ever activating offers.”

“You talk about the new user experience. We compared campaigns in Q4, the same exact campaign, that ran on the old experience versus the new experience, and we saw a minimum of 200% increase in click rates. 200%. Some campaigns had 400, actually over 400%. So, engagement is not our problem. And as more banks adopt the new ad server, its going to become even more not our problem.

It’s just so easy to engage these bank customers. They’re already engaged. The question is how do you get enough content in front of them so that they actually do want to engage for this first time? That’s the biggest challenge, is getting enough budgets to get content in front of all our MAUs.”

-Lynne Laube, Co-Founder and CEO, Cardlytics, January 2022 Needham Growth Conference

Cash Flow

“We do expect to reach positive cash flow from our core business in 2023.”

-Andy Christiansen, CFO, Cardlytics, January 2022 Needham Growth Conference

BofA Update – Rewards Network

“In Q4, for the first time ever, we took third party local content, and ingested it, and started displaying it to one of our largest banks in the network, through third party content provider called Rewards Network. So that happened in I think December of Q4 with frankly one of our largest banks.

So even if we’re not ingesting it through self-service, we’ve now built enough technology, APIs, even without the new ad server, that we can start to work with some of those local content providers that are out there, and ingest their content.”

-Lynne Laube, Co-Founder and CEO, Cardlytics, January 2022 Needham Growth Conference

BofA Update – Renewal

“I am 100% confident we’re going to get this thing signed. We’re holding out, to get the right things into that contract.

We are effectively operating on a contract that was signed by BofA and us in 2010. So we’re trying to make sure we get things like, ‘we want to host for you, it’s going to be in the cloud, you need to adopt the new ad server’, those types of things are what we are negotiating right now.

The contract auto-renewed as expected. Both parties signed it at the end of the year. We’re exchanging redlines, with great conversations with them just last week. I think it’s sort of on us to give back the next set of redlines that we are hoping to do quite soon.”

-Lynne Laube, Co-Founder and CEO, Cardlytics, January 2022 Needham Growth Conference

Competition

“To the best of my knowledge, and I believe this to be highly accurate, we are the only provider that actually gets the data. Which is what the advertisers want. So there are definitely lots…not lots…but there are I’m sure the Ibotta’s of the world, and the Figg’s of the world are talking to the banks, because they recognize what a massive channel this is.

The banks are not in the business of giving access to their data to anyone. In fact, quite frankly, one of our large banks, one of the reasons we’re running third party content through them, on behalf of them, we’re working with a partner on their behalf, to run it through, is so they don’t have to give them the data, because we already have it, and we are using the data to better target.

So I don’t want to minimize, we’re very aware of things that are going on. We’re very aware, that even though our stock is way down right now, people have seen us be successful, so people are kind of nipping out our heals a little bit.  

But I do not believe the banks are in the business of giving their data to anyone else. It took us years to get them comfortable, and to get them where they are. And in some cases, like with Chase, it took us a decade. And the things we had to go through and the things we had to prove; I don’t think investors appreciate how big our moat is.

So, you know, we’re watching those. They are definitely opportunities. Certainly the one we would love to have is AmEx, which is a home-grown program. Not sure we’ll ever get them quite frankly, because they have this religious thing, as they should, about they don’t want to give their data to anyone. And we need data. So we’ll see.

But really our competition always has been, and I think always will be, the way advertisers can spend advertising dollars, because that is really what we’re competing for, our share of ad budget.”

-Lynne Laube, Co-Founder and CEO, Cardlytics, January 2022 Needham Growth Conference

Implementation at U.S. Bank

Q: “U.S. Bank, and the transition to the new ad server, and product-level offers, was there anything logistically that U.S. Bank had to do, whether it’s dedicating with their own IT spend, or time, or kind of how much kind of leg work was it for them, and how long did it take start to finish?” -Host

A: “There was no technology that they had to do. It was more approval, that we could use different data for purposes of targeting and redeeming. So, it was more of an LRC thing, than it was a technology thing. From start to finish, from the first conversation with U.S. Bank to having product-level offers live to their customers, maybe 3 months, ish, something like that, maybe 4, maybe 2, I’m not sure, but not long.” - Lynne Laube, Co-Founder and CEO, Cardlytics

Q: “And there was no like kind of spend or anything required, it was more just kind of a check the box, and improve the use of different data and such?”, Host

A: “[inaudible but assume “needing”] of the new ad server.” Lynne Laube, Co-Founder and CEO, Cardlytics

-January 2022 Needham Growth Conference

December 2021 Raymond James Conference

Quick Notes from First Watch Through (more exact quotes later)

• 12/6/2021

• Regarding Covid Impact: "We haven't seen anything quite yet, as it relates to the most recent variant. But you know I think one of the things in the quarter probably worth talking a little about is some of the labor and supply challenges that we were trying to bake in to our Q4 guide. We tried a wider range in Q4, largely the downside scenario got baked in…So I think as we've gotten basically two months in the quarter, that downside scenario does not look likely to playing out. We feel very very comfortable that we would be over the mid-point of our guide" - need to verify quote, Andy

• Lynne

  • "We believe 2022 is going to be a massive growth year for us in terms of agency spend in billings and mid-market spend in billings" - Lynne

  • Dramatically improving user experience. Primary to bring in product level data. Bring in Bridg data.

  • The new ad server is what enables to the new user experience

  • Thrill announced, actually sent a product level offer last week to US Bank clients.

“I’m thrilled to announce that we for the first time ever launched a product-level offer, actually a number of product level offers, to US bank consumers actually last week, so if you’re an investor with an account you can see it. That comes from Bridg which is super exciting.” - Lynne

17.

"And now really the focus of 2022 is about getting that new ad server installed into all of our other banks. We have publicly said we're shooting for more than half of MAUs to be installed by the end of the year. That is an aggressive goal, but one we are very committed to doing, because it is so important for future growth  " - Lynne Laube.

• Q: "You mentioned kind of a CPG category, and starting to integrate some of these SKU-based data with the Bridg acquisition into US Bancorp. How should investors think about how much additional budget you can unlock with SKU-based data and CPG companies?"

  • "It doubles our TAM. If you look at ad spend in the US, about half of all advertising spend is at the brand level, so it’s Sony's, Nike's, and CPG's, and the other half is at the retail level. If you look at our current offering today, we can't sell to any of those brands. So it really does doubles our TAM. It is a huge part of our growth way. Lynne

• Results of product level offer: Wait until one more bank on new ad server to share. Banks don't want individual bank data shared

• Update on BofA

  • Oldest client

  • Working on resigning the 2010 contract

  • Massive relevel set the relationship

  • 5  big things

    1. Only major bank not hosting tech

       1. 2 min vs 2 months

    2. Put in cloud

       1. Some banks need education

    3. New ad server

    4. Economics

       1. Still have old economics. Should not assume windfalls. Should have better economics

    5. New ad server opens up the banks to customize their own program. Self service for banks. Do stuff we do for Chase, but themselves.

  • Even auto renewals take  awhile

  • No concerns to get this contract  done, just how much we will get

“So that’s why it is going to take time to get this contract done. It always does, no matter what. Even an autorenewal sometimes takes, you know, six months for a party to agree. But I think we’ll probably get it done in the first half of next year. Not sure it will be signed in the first quarter of next year, but we have no concerns about our ability to get this contract done, it’s just how much of those five things do we get.” – Lynne Laube

• I believe said same thing about happening next year

• Self service, local, SMBs

  • BofA local ads

  • SMB later part of initiative

  • 2022 focus agency

  • Have plans to introduce SMB in 2023

  • "We have already started with pushing some local offers for one of bank partners" - Andy

  • Built on new ad manger with API. 2023.  I believe discussed in relation to partners. Not positive if API was quoted here.

“One of the things we may end up doing in SMB right is utilizing a lot of channel partners,. We’ve built into the new ads manager an ability to connect through APIs to be able to partner with other people and bring that content. And over time if it ends up being a lucrative business you could certainly see us you know maybe building out our own team, but certainly seems like the first natural starting point would be to test and learn, bring in that content from an outside source, and probably in 2023.” - Andy

• Dosh

  • Started DTC app

  • When they made pivot to white label, "we started  getting interested. When they got Venmo, got to have it"

  • "Security blanket"

• Path to Revenue

  • MAU growth is not the primary focus, given chase and wells

  • Monetization

    • Product level offers

    • Working with agencies

  • When adding MAU, ad budgets don't keep up

  • 2023 when we see all come together, with 50% on new ad server

Q: How should investors think about that longer term revenue per user as well?":

A: "I think from an MAU perspective, MAU growth really isn't the primary focus. You're right we've seen a very explosive growth in MAU's as we've launched Wells and Chase in the last 2+ years. And really everything now kind of on our roadmap is about monetization of the users. So the things we are looking to unlock, with product-level offers, working with agencies, etc. Those are all things that we're seeking a kind of step change if you will of our growth. Adding all those MAU's so quickly, those ad budgets just don't keep up. So we've got many, many years of growth ahead of us, call it 25,35% growth rate range right just doing what we're doing today, continuing to take budget and share and growing our existing base. But you know you start layering these other huge unlocks, that quadruple our TAM essentially, you know we're really on a path to having a very nice enhanced growth profile on top of that kind of base BAU growth that we see. I think it is probably going to be 2023 that we really see that all coming together. We put a goal out there of having half our MAU's connected to the new ad servers by the end of 2022, so I think that leads into 2023, us having the scale need to go and market to sell some of these new things. "– Andy Christiansen

• Pricing model

  • Hasn't changed, CPS

  • As we look to "externalizing platform", more simplified and standardized, we are going to need something accepted "Cost per Acquisition or CPM"

• EBITDA margins

  • 20% long term EBITDA margins

  • "We are going to be rewarded..2022…for investments made during Covid"

  • Originally goal is not 500K by 2028, but 1B or 2B of revenue mention. All about the new unlocks. Matches 4x Andy mentioned, due to SKU and agencies

  • Q: "Could you provide maybe provide an updated view on EBITDA margin. I don't know if there is an updated timing, interested to get your thoughts when investors could expect maybe a 20% EBITDA margin, or maybe at what revenue rate would you expect that type of margin level? "

“Yeah, that's right. We do fully expect to achieve 20% EBTIDA margins long term. I think that view has been unchanged. And there has been a lot of evolution of things that have happened since the IPO. We're now on a path to go do and unlock things that were really kind of more a dream back then. And so we've been so close to that, we've really invested heavily in the last year and half through Covid. We kept the peddle down. I think we're going to be rewarded for that. That's why we are really excited for 2022, and what we are on the cusp of unlocking. The cost of that has been the profitability has also been shifted out, but at the same timetable if you will. It's going to take us a couple years to really get the scale that is needed to show that profitability. We’ve also kind of readjusted what scale really is right, 500m of revenue that we thought of in 2028 being scale, but with these opportunities that we have in front of us there’s a different concept of scale. Building a company not for $500m of revenue, but for a billion, 2 billion, what is really needed to make that happen. So, but, we certainly are on a path to 20% EBITDA margins in time, as we recover from this. And we are very optimistic.”

• ARPU between bank

  • Delta between new ad server, drive engagement, new content, budgets from CPG last week.

  • Engagement is dramatic, but will come down, since at the beginning, it is all the most engaged using. Over time, less and less active users will use, which will bring done the numbers. But absolutely engagement is higher on new ad server. Just need time to know if it is 3-4x higher, or 50% higher.

“Also how she talked about the difference between US Bancorp Arpu vs the rest and how they need more time to figure out if it is gonna be 3-4x or 50% higher with the new ad server

"When a bank first launches, the first people who use the product are the hyper users, and then you get kind of the average users, and then you even get the below average users. So it takes a couple quarters to really see where that bank's engagement is going to kind of start from. And we are still in that mode with US Bank. And because we have never had a bank on the new ad server, we just don't fully know, how much of the [stops]. The engagement right now, in terms of any measure that you look at, is dramatic. But it will come down. We just don't know how far it's going to come down yet. It will absolutely be higher than the old ad server. I just don't know if it's going to be 3-4x higher, of it's going to be 50%." - Lynne

• Will show engagement stats in Q1, and can match with new ad server.  Going to show from banks perspective, incremental spend.

• Activation rates

  • "We already share activation rates, and number of logins per user. And by the way, that log in number is they log in and our content is there. Not just that they log in."

  • Discussing why there is not an agreement activation level, and is instead broken out by industry

  • "The really big difference by vertical is just how frequent. There is small, fast, fun purchases, you're going to have much more engagement. People are less likely to engage with something like a subscription or a large purchase." - Andy

  • "If we got a 50M budget from a big subscription service provider, our activation rates on average, over the whole network would go down. Because we would have so much budget coming in from something that is high value, but low activation rate. So that's why just showing one number, then we would be answering all kind of questions why is your activation rate down, when its actually good news." - Lynne Laube

• 2022 Verticals

  • Most bullish on restaurant in Q4

  • "Travel is still challenging for us. We've had some large clients in that space as well that aren't in the channel, so that, in combination, with those budgets not really picking up quite yet, and it's really hit or miss within travel.

“I would say, travel is really something that has really caused us from a high-level perspective to really show in some periods not as high of growth. You strip out travel from our results and we’re up 36% over 2019, we’re up nearly 60% over last year, so travel is very challenging for us. I do think it going to continually get better. I don't have a crystal ball on covid. But that aside, I do expect a recovery throughout next year.” - Andy

• International

  • 2 things: Installing tech, Salesforce

  • Did mention it required no additional staff to onboard Wells. Showing operating leverage.

  • Better economics model

  • Or get sales partners

  • Watching open banking. Waiting with Covid

  • Did 10 year burn in US. Don't want to repeat. Watching open banking, but likely not something getting into until after 2023. Would look more for sales partners.

• Anything misunderstood

  • Q: Anything else you think that is kind of misunderstood from investors today?"

  • "I mean obviously our stock is way down. And I do think it's an epic overreaction, quite frankly, but it is my job to think that. But I think it is an epic overreaction for two reasons. One is when we said the BofA contract wasn't going to get done by the end of the year, I think a number of investors freaked out. I can confidently tell you that contract is going to get done. Confidently. It's just a matter of how much goodness do we get in there.

  • And then I think the other reason is there is this perception that not a lot of people use this thing, so can it ever be big. We are going to address that next year with the engagement stats. So I think this is a still massively misunderstood company. I don't think people understand how engaged our channel is. These are adults, with money, thinking about their money. Not sharing pictures of their cat, or inciting capital riots.

  • "I don't think investors appreciate the power of Bridg and Cardlytics' data combined, and what we're going to do there, and how much we are going to scale Bridg"

  • And I don't think investors understand the dynamics behind the banks, the bank channel, and just how the banks operate. It is common for us to not have a contract signed for many quarters after it expires, because they are banks." - Lynne

More Accurate Quotes From Re-Watching

New Ad Server

"And now really the focus of 2022 is about getting that new ad server installed into all of our other banks. We have publicly said we're shooting for more than half of MAUs to be installed by the end of the year. That is an aggressive goal, but one we are very committed to doing, because it is so important for future growth."

- Lynne Laube, Co-Founder and CEO, Cardlytics, December 2021 Raymond James Technology Investors Conference

Misunderstood by Investors

Q: “Anything else you think that is kind of misunderstood from investors today?"

A: "I mean obviously our stock is way down. And I do think it's an epic overreaction, quite frankly, but it is my job to think that. But I think it is an epic overreaction for two reasons.

One is when we said the BofA contract wasn't going to get done by the end of the year, I think a number of investors freaked out. I can confidently tell you that contract is going to get done. Confidently. It's just a matter of how much goodness do we get in there.

And then I think the other reason is there is this perception that not a lot of people use this thing, so can it ever be big. We are going to address that next year with the engagement stats. So, I think this is a still massively misunderstood company. I don't think people understand how engaged our channel is. These are adults, with money, thinking about their money. Not sharing pictures of their cat, or inciting capital riots.

I don't think investors appreciate the power of Bridg and Cardlytics' data combined, and what we're going to do there, and how much we are going to scale Bridg

And I don't think investors understand the dynamics behind the banks, the bank channel, and just how the banks operate. It is common for us to not have a contract signed for many quarters after it expires, because they are banks." – Lynne Laube

First Product-Level Offers

“I’m thrilled to announce that we for the first time ever launched a product-level offer, actually a number of product level offers, to US bank consumers actually last week, so if you’re an investor with an account you can see it. That comes from Bridg which is super exciting.” – Lynne Laube

SKU Doubles TAM

Q: "You mentioned kind of a CPG category, and starting to integrate some of these SKU-based data with the Bridg acquisition into US Bancorp. How should investors think about how much additional budget you can unlock with SKU-based data and CPG companies?"

A: "It doubles our TAM. If you look at ad spend in the US, about half of all advertising spend is at the brand level, so it’s Sony's, Nike's, and CPG's, and the other half is at the retail level. If you look at our current offering today, we can't sell to any of those brands. So, it really does double our TAM. It is a huge part of our growth way.” – Lynne Laube

Bridg + SKU

"I don't think investors appreciate the power of Bridg and Cardlytics' data combined, and what we're going to do there, and how much we are going to scale Bridg." – Lynne Laube

Investors Misunderstood Timing of Renewal

Q: “Anything else you think that is kind of misunderstood from investors today?"

A: "I mean obviously our stock is way down. And I do think it's an epic overreaction, quite frankly, but it is my job to think that. But I think it is an epic overreaction for two reasons.

One is when we said the BofA contract wasn't going to get done by the end of the year, I think a number of investors freaked out. I can confidently tell you that contract is going to get done. Confidently. It's just a matter of how much goodness do we get in there.” – Lynne Laube

Takes Time to Renew, and The Timing

“So that’s why it is going to take time to get this contract done. It always does, no matter what. Even an autorenewal sometimes takes, you know, six months for a party to agree.

But I think we’ll probably get it done in the first half of next year. Not sure it will be signed in the first quarter of next year, but we have no concerns about our ability to get this contract done, it’s just how much of those five things do we get.” – Lynne Laube

BofA Renewal

“As a reminder, BofA is our oldest client. The contract that we’re working on is, I’m not exaggerating, the contract we signed in 2010, when they were really the only bank we had. So, we are looking at this as an opportunity to really, massively relevel-set the contractual relationship that we have with BofA.

 So, there’s 5 really big things that we’re trying to drive:

The first is they’re the only major bank where we don’t host the technology. It’s still sitting in their environment. So if we want to make a change to like Chase or Wells Fargo it takes us 2 minutes, we want to make that same change in BofA it can take us 2 months, because we have to go through their internal processes. So we’re negotiating that they’re going to let us host it.

As a part of hosting, we want to put it in the cloud. Some banks are still very anxious about the cloud, and so that is an education process and a negotiation process, to help them understand all the benefits and value they get by being in the cloud.

Third thing that we are negotiating with BofA is, ‘by the way, you need to take the new ads server in 2022 as a part of this new contract’.

Forth thing is ‘you know, you still have economics like you’re the only bank in the network and we’re still a small startup. So let’s have that conversation now’. I would caution investors, you should not assume you will see major windfalls there, but I think we will get some wins on the margin, with better economics in that overall relationship.

And then in return for all that, the carrot if you will that we’re giving BofA is not only does this new ads server open up all this new content that we just been talking about, but it also opens the ability for you, bank, to customize your own program. And we’re building it for all banks. So it’s basically self service for banks, so that they can run, they can do some of the things we’ve been doing for Chase for the last 2 years, so any bank can do that but they can do it themselves.

And so that’s why it is going to take time to get this contract done. It always does, no matter what. Even an auto-renewal sometimes takes, you know, 6 months for a party to agree. But I think we’ll probably get in done in the first half of next year. Not sure it will be signed in the first quarter of next year, but we have no concerns about our ability to get this contract done, it’s just how much of those 5 things do we get.” Lynne

“And then in return for all that, the carrot if you will that we’re giving BofA is not only does this new ads server open up all this new content that we just been talking about, but it also opens the ability for you, bank, to customize your own program. And we’re building it for all banks. So it’s basically self service for banks, so that they can run, they can do some of the things we’ve been doing for Chase for the last 2 years, so any bank can do that but they can do it themselves.” -Lynne Laube, Co-Founder and CEO, Cardlytics, December 2021 Raymond James Technology Investors Conference

SMB + Local

“We certainly have plans to introduce SMB in the platform, but that’s really probably going to be more a 2023 exercise, and not 2022, but we have already started with pushing some local offers for one of bank partners.”

“One of the things we may end up doing in SMB right is utilizing a lot of channel partners. We’ve built into the new ads manager an ability to connect through APIs to be able to partner with other people and bring that content. And over time if it ends up being a lucrative business you could certainly see us you know maybe building out our own team, but certainly seems like the first natural starting point would be to test and learn, bring in that content from an outside source, and probably in 2023.”

– Andy Christiansen, CFO, Cardlytics, December 2021 Raymond James Technology Investors Conference

Self Service / Ads Manger

"We believe 2022 is going to be a massive growth year for us in terms of agency spend in billings and mid-market spend in billings" – Lynne Laube

Long-Term Revenue

Q: “How should investors think about that longer term revenue per user as well?"

A: "I think from an MAU perspective, MAU growth really isn't the primary focus. You're right we've seen a very explosive growth in MAU's as we've launched Wells and Chase in the last 2+ years. And really everything now kind of on our roadmap is about monetization of the users. So, the things we are looking to unlock, with product-level offers, working with agencies, etc. Those are all things that we're seeking a kind of step change if you will of our growth. Adding all those MAU's so quickly, those ad budgets just don't keep up. So, we've got many, many years of growth ahead of us, call it 25-35% growth rate range right just doing what we're doing today, continuing to take budget and share and growing our existing base. But you know you start layering these other huge unlocks, that quadruples our TAM essentially, you know we're really on a path to having a very nice, enhanced growth profile on top of that kind of base BAU growth that we see. I think it is probably going to be 2023 that we really see that all coming together. We put a goal out there of having half our MAU's connected to the new ad servers by the end of 2022, so I think that leads into 2023, us having the scale need to go and market to sell some of these new things." – Andy Christiansen

Long-Term EBITA Margins

Q: "Could you provide maybe provide an updated view on EBITDA margin. I don't know if there is an updated timing, interested to get your thoughts when investors could expect maybe a 20% EBITDA margin, or maybe at what revenue rate would you expect that type of margin level? "

A: “Yeah, that's right. We do fully expect to achieve 20% EBTIDA margins long term. I think that view has been unchanged.

And there has been a lot of evolution of things that have happened since the IPO. We're now on a path to go do and unlock things that were really kind of more a dream back then. And so, we've been so close to that, we've really invested heavily in the last year and half through Covid. We kept the peddle down. I think we're going to be rewarded for that. That's why we are really excited for 2022, and what we are on the cusp of unlocking. The cost of that has been the profitability has also been shifted out, but at the same timetable if you will. It's going to take us a couple years to really get the scale that is needed to show that profitability. We’ve also kind of readjusted what scale really is right, 500m of revenue that we thought of in 2028 being scale, but with these opportunities that we have in front of us there’s a different concept of scale. Building a company not for $500m of revenue, but for a billion, 2 billion, what is really needed to make that happen. So, but we certainly are on a path to 20% EBITDA margins in time, as we recover from this. And we are very optimistic.” – Andy Christiansen

Engagement on New Ad Server

"When a bank first launches, the first people who use the product are the hyper users, and then you get kind of the average users, and then you even get the below average users. So, it takes a couple quarters to really see where that bank's engagement is going to kind of start from. And we are still in that mode with US Bank. And because we have never had a bank on the new ad server, we just don't fully know, how much of the [stops]. The engagement right now, in terms of any measure that you look at, is dramatic. But it will come down. We just don't know how far it's going to come down yet. It will absolutely be higher than the old ad server. I just don't know if it's going to be 3-4x higher, of it's going to be 50%." – Lynne Laube

Engagement Misunderstood by Investors

“… there is this perception that not a lot of people use this thing, so can it ever be big. We are going to address that next year with the engagement stats. So, I think this is a still massively misunderstood company. I don't think people understand how engaged our channel is. These are adults, with money, thinking about their money. Not sharing pictures of their cat, or inciting capital riots.” – Lynne Laube

Travel

"Travel is still challenging for us. We've had some large clients in that space as well that aren't in the channel, so that, in combination, with those budgets not really picking up quite yet, and it's really hit or miss within travel.                                                

“I would say, travel is really something that has really caused us from a high-level perspective to really show in some periods not as high of growth. You strip out travel from our results and we’re up 36% over 2019, we’re up nearly 60% over last year, so travel is very challenging for us. I do think it going to continually get better. I don't have a crystal ball on Covid. But that aside, I do expect a recovery throughout next year.” – Andy Christiansen

September 2021 Acceleration Partners Conference with Cardlytics and Affirm

18. Date of Conference: 9/2021

https://www.accelerationpartners.com/thank-you-fintech-webinar-series

• Already understood helping marketers find new customers, customers who already shop but could spend more, and even the most loyal to spend even more. But what I never thought of, or explicitly heard, is how a lot of marketers only really focus on new customers, since they think they already have their current customers. Since they only see the spend with them, they do not see all the spend those supposedly loyal customers are making outside of the channel. This is where Cardlytics can use their data to show share of wallet and target those customers that are spending elsewhere. The key point was how advertisers really are not focusing on this, only new customers, so it is a significant area where ad spend could shift. Likely could get better returns from customers who already recognize your brand / logo and like the store or restaurant, and so will not need much convincing to return to the store, so low offer amounts likely work. "We are able to enlighten them"

• Acceleration mostly deals with affiliate marketing, and they said that were surprised and really got value out of Cardlytics data from a competitor standpoint, more than then get from the affiliate work or from the underlying company itself (since data is outside of the underlying store as well)

  • Using the data to "really understand our competitors, which we were surprised about. So that is so important to us, because we love data, and that wasn't something we were seeing our affiliate data or analytical data within the brand so that was really huge for us"

• With the randomized control group, the control group is called a "would have been served control group" since in order to be in the control group, they have to of logged into their bank and been someone to have seen the offer, such that the only difference between the test and control group is being shown that offer. Must more specific then I assumed.

  • Host even mentioned how great this is, since a lot of brands will ask what if those users would of bought anyways.

• "When we think about buy now pay later, of the likes of Klarna and Affirm, how do you see, if at all, how do you see BNPL fitting into your audience, and does Dosh specifically partner with those players, or is at all separate? How do you envision that?"

  • "Yeah so we don't…I mean that is a massive segment that is growing so much. We don't partner with them today (emphasized today), although that is something that is certainty top of mind and I believe on our (stops herself, smiles, stutters) our organization is actually separated into ads and bank. The bank team are the people that runs all our relationships with the major banks, etc. So that is I believe is something that is top of mind, but not an area that we or Dosh is actually working in today. But lots of opportunity there."

• "We are working on more premium placements. Where for example, you could be featured in a Chase email going out to their customers. Ad formats and placements are going to be a big thing next year. Not entirely fleshed out at this point yet."

Q: "How granular can [the targeting] be?"

A: "So we are in this transformation stage in our targeting strategy right now. If you talked to me three months ago, the answer would be like 'as granular as you want'. Like eats pizza five times a year, but only on Tuesday's. And we have targeted like that over the past several years We recently launched, or relaunched, a new ads server... that now is powered by Purchase Graph, or Social Graph, or Taste Graph, our machine learning algorithm, which means that we no longer, from an analytics standpoint, create these hyper-segmented audiences and target those populations. We now, all of those insights that we deliver to brands and clients, letting them know where they have room to grow, informing that granular targeting strategy, all of that logic is now baked into the platform, and is the logic that powers the algorithms today. Instead of coming up with that granular segment, its like, let the machines do their work, and identify, based upon your marketing objective, who are the right people to go after to really increase loyalty in a meaningful way. Meaning they weren't going to just purchase anyway. Drive the most high-valuable customers as possible. We can still offer, we don't need to anymore, let's just put it that way, we don't need to create granular segments anymore because it's baked into the technology, but it is still very much a capability that some of our largest advertisers still hold onto. That comes will a basically a level of service programs or spend tiers "

With Affirm:

Affirm presented before Cardlytics, and hinted at a partnership.

"Anything new or exciting you wanted to touch on"

"I mentioned the in store fork, which is this like omni channel experience which we are really looking to deliver, connecting online and offline which is also like the incrementality word, Kelly (other speaker), probably we've always heard.

 And because we are a payment network as well, and have this affiliate program, I think this could be really interesting to think about this in the future, so it is a bit of a teaser I think, you know, if you partner with us, or are looking to partner with us, the things we are thinking about is how do we leverage the payment data we have to connect online and offline.

Rewards and incentives. We are running a small cash-back test right now with a handful of merchants which we are going to look to expand. And again, those cash-back transactions, is like, if you think about 0% APR financing offers and cash-back and the consumer rewards behind that, and consumers having the ability to feel really compelled to make a purchase, we really believe its going to generate additional conversions and higher AOVs, because consumers feel really compelled to shop via Affirm. So there is going to be an expansion that's coming up on that."

June 2021 CDLX Investor Day Presentation

2/26/2022

Chase Adopting the New Ad Server

19. After relistening to portions of the Cardlytics investor day, I realized for the first time that Chase potentially taking the new ad server by the end of 2021 was not mentioned just once, but twice (both Michael and Farrell mentioned, with Farrell explicitly saying this). Therefore, I don’t think it was a mistake.

Specifically, Michael mentioned US Bank rolled out the new ad server and user experience, Nectar with open banking has also adopted it, and one of their large banks committed to moving to the new ads server by the end of that year (2021) and where Farrell would talk about later.

Later Farrell said (which I have made note of before), "Chase is also, as Michael mentioned, on track to take the new Cardlytics ad server and UI by the end of the year, which will continue their engagement growth trajectory." - Farrell Hudzik, Executive Vice President, Financial Institutions, Cardlytics

2/25/2022

Machine Learning

Referred to as the “secret weapon” and “secret sauce” is the “Cardlytics Purchase Graph”.

When I first heard this back in June, I didn’t really understand. It wasn’t until hearing the following in September, and relistening to investor day today and hearing the mention of Purchase Graph and “automating targeting” when discussing the new ads manager.

September Conference (also in Table of Contents, under Conferences / Presentations):

Q: "How granular can [the targeting] be?"

A: "So we are in this transformation stage in our targeting strategy right now. If you talked to me three months ago, the answer would be like 'as granular as you want'. Like eats pizza five times a year, but only on Tuesday's. And we have targeted like that over the past several years We recently launched, or relaunched, a new ads server... that now is powered by Purchase Graph, or Social Graph, or Taste Graph, our machine learning algorithm, which means that we no longer, from an analytics standpoint, create these hyper-segmented audiences and target those populations. We now, all of those insights that we deliver to brands and clients, letting them know where they have room to grow, informing that granular targeting strategy, all of that logic is now baked into the platform, and is the logic that powers the algorithms today. Instead of coming up with that granular segment, its like, let the machines do their work, and identify, based upon your marketing objective, who are the right people to go after to really increase loyalty in a meaningful way. Meaning they weren't going to just purchase anyway. Drive the most high-valuable customers as possible. We can still offer, we don't need to anymore, let's just put it that way, we don't need to create granular segments anymore because it's baked into the technology, but it is still very much a capability that some of our largest advertisers still hold onto. That comes will a basically a level of service programs or spend tiers "

2/10/2022

“above the dotted line you will see some of our top existing clients, while below remains some of our highest value business targets”

I believe we've already seen IKEA, Kohl’s, Burger King, IHOP, Wendy’s, Lyft, Southwest, Chevron, Petco, T-Mobile,

6/11/2021:

Quick Notes

• Push Notifications:

  • "And then bringing it all together, with what we are building, which is a brand new set of messaging, in real time, and engagement functionality. So being able to send push notifications, that there are offers available from merchants around them at that location. Or that quite frankly, being able to create FOMO, 'Hey, here are offers that you are missing out because you are not logging in'. All of those are what we are testing right now and also have been built into the platform."

• "Could you please talk about the bank systems you are building, can banks onboard new advertisers and new campaigns at a very high pace?"

  • "The way we built the ads manager, is to allow anyone to be in the driver's seat: whether that is an advertiser, an agency, our own managed service team, or yes, indeed, a bank within the emerging services organization. So they can leverage that exact same platform to go and drive their own desires as they pertain and work with their merchants. Additionally, as I touched upon, we have created a lot of governance tools, for the banks themselves, that allow them to monitor, report, and control the program at large. So they get greater insight into how consumers are engaging, and greater insight into their ability to audit everything going through their channels, and those two things combined, mean this becomes a platform not just available for advertisers, but banks at scale too."

• Groups:

  • Enterprise & Mid Market: Fortune 500 – seek $1M + min annually– most focus

  • Agency – Controls 50% of ad spend

  • Commercial: Emerging and Self-Service – Fortune 1000 brands, regional, DTC brands, SMBs,

• Chase and SMBs

  • "Chase continues to take full advantage of our platform by reinvesting their own loyalty marketing dollars into the program with the focus on driving audiences and brands. They launched new grocery category level offers, or rolling out local offers leveraging the Cardlytics platform for small business clients in select markets. We also partnered with chase and eureka, a company focused on bringing small businesses (majority of them minority owned) the strategies and tools historically only available to larger organizations….We are excited to expand this with Chase into evergreen programs

  • "Chase is also, as Michael mentioned, on track to take the new Cardlytics ad server and UI by the end of the year, which will continue their engagement growth trajectory."

More Detailed Notes

(The following notes were used to create the official post)

The investor day presentation provided some additional information in areas such as open banking, where the future potential has been unclear. It was also nice hearing from Amit Jain, Founder & Chief Executive Officer of Bridg, who seems excited and passionate about his work.

Although items like the international opportunity with open banking, and SKU level data possibilities via Bridg are important, and likely where a large portion of future growth could come from, this write-up will explore some of the other items discussed at investor day. Some points were explained at length, such as the new user experience and ad manager. Other items were only a single brief comment, but gave insights into what Cardlytics is working on, and showed how Cardlytics is focused on areas that could capture the most potential out of the opportunity at hand.

For a quick overview of what will be discussed:

• MAU growth via Venmo’s 70M users

• ARPU growth via:

  • New User Experience

  • Push Notifications

  • Habits

  • Ad Manage / Self-Serve

Source: Personally Created

New User Experience

The new user experience looks to be very similar to Dosh, and a big improvement from the current interface. It was very interesting to see a section for “Auto-Activated” offers. This was mentioned by Laube in the past, as a consideration. I was glad to see it on only a portion of offers, as opposed to switching completely to an automatically activated offers model. For further discussion on the topic of the non-activation model, see the first Cardlytics write-up.

With this new interface, it would seem there is more opportunity for different pricing for different ad placement, such as offers that are “featured” (as seen below), and as mentioned by Cardlytics when discussing these featured sections. I need to spend some additional time on how that would work when considering ROAS.

This new interface should also be better for lesser known brands or SMBs advertising on the platform, given the imagery. The ability to have images makes it easier to know what the company offers. Before, such as on the old/current banking platform, the only way to know what the company offered was to read a wall of text, which I don’t believe many people would take the time to do. (As a side note, the bank channel at one point did have images that changed between a few different pictures for a single offer, but I have not seen this back on the platform for a while.) This idea seems to be confirmed by the success of the US Bank launch, “Premium Imagery drove 5X Visits to Website on average”1.

As an example, if I saw the offers seen in the picture below, although I have “seen” all these offers, I am much more aware and able to remember, and consequently more likely to then purchase, from one with a picture shown.

Source: Cardlytics Investor Day Presentation Live Demo

Also shown was the future capability for product level offers, which is currently in the testing phase and still being built.

Source: Cardlytics Investor Day Presentation Live Demo

In total, the new user experience should increase engagement, increase activation and awareness from more understanding of the offers, and ultimately increase the number of purchases made with offers, which should increase ARPU. This seems to be verified by the US Bank Launch, where, “Visits to Rewards Hub increased by +50%”2 and “Activation Rates up +49%”3.

Push Notifications

When I did my first Cardlytics write-up, adding notifications was one of my first thoughts for how ARPU could grow. The reason, a push notification would increase awareness and the probability of making a purchase with that offer. Therefore, I was excited to hear the following in regards to the testing of push notifications.

"And then bringing it all together, with what we are building, which is a brand new set of messaging, in real time, and engagement functionality. So being able to send push notifications, that there are offers available from merchants around them at that location. Or that quite frankly, being able to create FOMO, 'Hey, here are offers that you are missing out because you are not logging in'. All of those are what we are testing right now and also have been built into the platform." - Michael Akkerman, Chief Product & Strategy Officer, Cardlytics Investor Day4

The current emails sent to bank users to drive awareness of the offers are very weak in my opinion. Push notifications should dramatically increase awareness of offers, purchases with offers, and then ARPU.

The reason these notifications are needed, is even if the offers are highly targeted and have a high probability of being used upon seeing the offer, the user may not be looking at their offers anymore if they never saw anything relevant the first time they engaged with the offers section. Therefore, push notification would let them know of these new highly relevant offers that they may now be interested in.

Even though today you can turn on push notifications for after you redeem an offer, I assumed banks would not allow it for notifying of new offers. Possibly due to coming off as spam. Therefore, the planned usage of push notification is nice to hear.

A reason these push notifications could have higher engagement than push notifications compared to other apps and ads, is due to being alerted by a notification from your bank. I would assume most people would not ignore a notification from their bank, since the first thought would likely be wondering if something is wrong. Therefore, I do not see as many people turning these notifications off, and I believe more people will read these notifications compared to other apps.

In addition, they are testing real time notifications. They mentioned notifying users of offers that are around them in real time. I feel this would dramatically increase usage of offers (and then ARPU). No longer would you have to rely on the user remembering they have an offer that they last saw 1 week ago. If you can target based on past purchases at exact times, and send notifications in real time, this could work very well. As an example, if you know a user who gets Dunkin everyday at 2pm, and can now send a notification at 1:30pm for a Starbucks offer, it is more likely they will utilize that offer when they are more likely thinking about it, and right before the purchase. Compare that to that same customer seeing that offer immediately after purchasing their Dunkin coffee. Cardlytics has to rely on that user remembering to go to Starbucks instead next time, and without their habit kicking in of defaulting to going to Dunkin.

These push notifications could also work very well with the new gas offers. Given it’s mostly a commodity type product, I personally do not care too much where I get my gas (to a certain extent), but currently have a habit of going to the same gas station, around the same time in the morning. A notification of an offer for a gas station on my normal route to work, would likely have a higher probability of usage and redemption, given the thought “I might as well go one station down and save 5%”.

Habits

I may have missed it referenced in the past, but it was nice to hear the term “habitual use” by Cardlytics when discussing the customer during investor day. They may be mentioning it more in terms of a subset of users who constantly use their offers for making a purchase. However, there is still a possibility that Cardlytics is aware of the habits of checking for offers, similar to what is seen on social media apps.

I mentioned previously in a short Cardlytics blog post, and my first Cardlytics write-up, I have built a habit of checking for new offers on all my apps (however, I am a biased customer given my interest in following the company from an investment prospective). But the area I was always curious was in regards to whether it was purposeful, or by luck.

I felt it had to be on purpose, given the consistency in the randomness of new offers presented (i.e., it is always random, and has never changed to a recognizable pattern).

I feel the “addiction” of checking for new offers on Chase, US Bank, Dosh, and Venmo is due to the timing and number of new offers having no recognizable pattern. Compared to knowing 1 new offer shows up every morning at 8am, leading to me only needing to check once a day, I find myself checking constantly, since I can go 4 days without a single offer, then 3 great offers at the same time at 11:00am.

I’ve always hoped it was from consciously structuring the offers to model B.F. Skinner’s experiments with a variable schedule of rewards. I’m still not positive that is the case, but it is nice to hear Cardlytics is aware of the habitual use. The reason is, if Cardlytics is aware, and are working to increase this among users, it would increase engagement, awareness, and purchases with offers, increasing ARPU.

And if that is not the case, it is promising to note that engaged customers are using offers often. Therefore, after the new user interface is live on all platforms, with new and more relevant offers from marketers using the self-service platform, push notifications can be sent to non-engaged MAUs, with a now higher probability of increased on-going engagement, and possible future habitual use.

Neobanks and Venmo

In the last video / write-up, I discussed how Venmo Offers could have a value that exceeds CDLX’s then current market cap of ~$3.5B. The following is the background and my thoughts around Venmo Offers, with updated thoughts even from last week.

Cardlytics has the potential to add more MAUs than I originally thought possible, and at higher gross profit levels. This can be achieved via Venmo. Powered by Dosh, Venmo offers were only available to Venmo debit card owners, and when they used that card, which would be a very small amount of MAUs. But this is changing.

From the Cardlytics investor day presentation:

“Our continued focus on growing our Venmo partnership…the team is focused on expanding rewards to additional payment types, creating a rewarding experience with Venmo, regardless of what payment instrument the consumer uses…We will also continue to invest along with product in our teams, supporting the build and partner integrations for enhancements, including currency conversion, pay with QR code currently live at Venmo.” - Farrell Hudzik, Executive Vice President, Financial Institutions, Cardlytics Investor Day Presentation5

Originally, I would assume MAUs from Venmo would be limited to users who had to get a Venmo debit card (or possible credit card). Which would be a very limited number. My wife’s Venmo does not have a Venmo card, and therefore no offers and likely not an MAU.

Versus my Venmo, where I got the Venmo debit card (for purposes of monitoring offers), and therefore have access to the offers, and am likely counted as an MAU for Dosh / Cardlytics. It is the Dosh platform, without travel, and I get different offers on Venmo than on the Dosh app.

The important point: Currently, looks to be an individual can only get Venmo Offers from getting one of their cards.

However, if now the focus is building out the capability of offers working on any payment instrument (more on this later), then offers could be available for all Venmo users. This would dramatically increase the MAU potential with Venmo.

There is obviously some double counting of Venmo users who also have Chase, Wells Fargo, etc. and have those cards/banks linked. However, even with users that have a card or bank linked that is currently covered by CDLX, there are certain transactions that would more likely to be made via Venmo. Therefore, even if it is counted as a single MAU, the ARPU for them would likely be higher. These types of transactions on Venmo are discussed in more detail below. Beyond this, there is likely a high percentage of the 70M+ users (updated from 60M just one week prior) who use other cards and banks, like credit unions. For example, I have one debit card and one bank linked, both banks not covered by CDLX.

My first thought was how will a Venmo user use a non-Venmo card or their balance to make purchases without a digital wallet? This is what was meant by Cardlytics mentioning QR codes. Homepage > Scan > “Show to Pay”. Essentially, Venmo’s version of a digital wallet.

Given Cardlytics said “regardless of payment instrument”, my hope is given Venmo “Scan and Show to Pay” allows for Venmo balance, debit, bank account, etc., that Venmo Offers will work for all these payment forms as well, and for all that are already linked to Venmo.

This would be an improvement to previous impediments to utilization. The hurdle of requiring a Venmo card made it very unlikely for offers to be seen or used. Also, requiring a new card to be added would be too much friction. This was always my concern with the Dosh app. Therefore, it is good to hear the mention of working with Venmo on allowing all payment instruments, as well as their focus on using the QR codes.

Further upside and utilization of paying with Venmo could could come from the new Venmo business profiles. Venmo already shows that they have 2M+ businesses accepting Venmo and using online capabilities. This was something I was hoping for, and unaware of, last week. This increases the likelihood of a transaction via Venmo, since it is no longer limited to QR code use. As seen in the screenshot below, payments can be made with businesses within their app and website.

I’m curious how many small businesses would use Venmo to accept payments. The probability of use is likely very high for business owners who already have a personal Venmo account. Given that users see the option to open a Venmo account for their business, and are familiar with the platform, I feel this would significantly increase the likelihood of opening a Venmo business account, increasing payments made on Venmo and offers sent by businesses. In addition, in the service business, when dealing with an individual, I have paid via Venmo rather than cash often. It feels very natural to do so. Given that the option to open a Venmo business account is prompted each time I open the app, I feel those who use Venmo on their business will be opening a business account soon. Paying and accepting payments via Venmo will feel more legitimate when it is with a Venmo business account, and therefore will likely be quickly adopted.

The social aspect of being able to appear on the feed seems like a benefit for businesses, as it would increase awareness and social proof of their store. This increased visibility could incentivize businesses to start accepting payments via Venmo.

Another reason for business owners to use Venmo for accepting payments is due to lower transaction fees. From what I see currently, compared to Square’s fee of 2.6% + $0.10 per transaction, Venmo looks to have lower fees at 1.9% + $0.10.

Similar to the banks, if businesses start a Venmo account and have the ability to create ads/offers directly within Venmo, it creates more opportunity for additional ARPU. With the self-service platform integrated on Venmo, it would lead to a higher likelihood of SMBs advertising on Venmo (which benefits Cardlytics), since there would be less steps compared to needing to leave the app to then go to Cardlytics to advertise, and from them already having an account with the functionality to advertise (no second Cardlytics account needed to be created).

I am curious if the transactional data will be limited to transactions made via Venmo, or if it will be more similar to what we saw with Nectar Connect, where upon linking a bank account (which many Venmo users have already done in order to fund their account), CDLX gained access to last 3 years of transactional data.

Combined, if users can use this Venmo Pay type feature, both online and in stores, and with their existing funding method for Venmo (minimizing friction for the customer), this should maximize availability and usage of Venmo Offers, and increase ARPU.

A big headwind would be changing customer behavior. Although many use Venmo, and other digital wallets, how many people will use the Venmo digital wallet or Venmo to pay beyond the areas where they already use Venmo to pay (i.e., the service business)? Maybe not much now, but we may see increase in usage if users want to make more use of their Venmo balances, use the sharing/splitting payments feature, see others using payments via Venmo on their feed, and if digital wallet usage increases.

One area that could lead to significantly higher usage of Venmo payments is the ability to split payments at purchase (similar to what is already available on Uber). Using Venmo to pay another person back is likely the single biggest reason for using Venmo. At purchase splitting (compared to post splitting, which is used now) would lead to reduced awkwardness of requesting payments, proof of amounts paid, less forgetting to “I’ll Venmo you later”, etc. Therefore, we may see increased use of paying with Venmo to split, instead of using a different card and then splitting on Venmo manually.

Another possible boost in usage with Venmo, compared to other CDLX platforms, is from the social aspect. When a user makes a purchase with an offer, if it were to show up on the social feed, it would increase awareness of the Venmo Offers. Currently, it is known that payments to businesses with Venmo will show up on the feed. I have also seen when Dosh balances are transferred to Venmo that it also shows up on the feed. I am not aware if Venmo Offers used with Venmo purchases will be shown on the social feed. It does not seem that is likely, since it would lead to users making purchases with offers that did not need the offer to make the purchase. Regardless, an increase in payments using Venmo should lead to an increase in usage of Venmo Offers.

Also, once IDs are valid on phones, the need for physical wallets decreases, increasing use of digital wallets. Apple recently announced the ability to add an ID to your phone. It may be awhile until this is accepted everywhere, but shows where things are moving.

Therefore, it is nice knowing all existing bank cards can still use Cardlytics offers with digital wallets, and Venmo has their own form of a digital wallet, which could increase in use.

In regards to higher gross profits with the neobanks and Venmo:

“The ARPU opportunity at neobanks is actually greater, because the neobanks, this is their core loyalty program and they are not nearly as focused on the revenue, because they laser focused on growing their base, and see this as an engagement opportunity” - Farrell Hudzik, Executive Vice President, Financial Institutions, Cardlytics Investor Day Presentation6

I will assume instead that ARPU will remain the same, but gross profit will be higher. This is assuming that the comments mean that the revenue share is lower than with the big banks. We have heard that with the open banking model, revenue share is currently around 0%.

In total, I will be following the Venmo developments closely, and post small updates on twitter. I am eager to see what happens.

Ad Manager

The self-service platform would have a significant impact if there was integration within each of the native platforms, such as the banks. This would allow SMBs who already have a bank account to easily send offers themselves (without the help from the banks) from within the app or online (without needing to create a Cardlytics account or leave the app/website), at a time when they are thinking about their business. This would help increase the number of SMBs sending offers on Cardlytics, and increase ARPU. I am not sure if that is going to happen, but there were some discussions regarding onboarding new advertisers by the banks when discussing the ad manager.

When asked "Could you please talk about the bank systems you are building, and can banks onboard new advertisers and new campaigns at a very high pace?":

"The way we built the ads manager, is to allow anyone to be in the driver's seat: whether that is an advertiser, an agency, our own managed service team, or yes, indeed, a bank within the emerging services organization. So they can leverage that exact same platform to go and drive their own desires as they pertain and work with their merchants. Additionally, as I touched upon, we have created a lot of governance tools, for the banks themselves, that allow them to monitor, report, and control the program at large. So they get greater insight into how consumers are engaging, and greater insight into their ability to audit everything going through their channels, and those two things combined, mean this becomes a platform not just available for advertisers, but banks at scale too." - Michael Akkerman, Chief Product & Strategy Officer, Cardlytics Investor Day Presentation7

It seems as if this would incentivize banks, both current and potential new bank partners, to use the ad manager. Not only would it provide increased insights from the ability to analyze payment data, and control the offers being fed onto their platform via self-service, but it gives them more power to incentivize SMBs to open or switch accounts to them. Given the focus on adding new accounts, one would think this would be a benefit, and a way to increase how much SMBs keep and earn in a given account. Since effective ad use would also benefit the SMBs, it would seem this is another way how everyone wins.

It is difficult to say whether self-service integration with the banks that is accessible and usable by the SMBs can be drawn from the comments made, but it would seem that the ad manager in the hands of the banks would at least increase the chance of more SMBs sending offers, increasing ARPU.

Closing

So far, quite a few of my previous concerns have now been addressed, or at least discussed in terms of recognizing what is needed and how they are working to address them. These items are necessary to fulfill the potential of Cardlytics.

• Long integration times with the large banks has been answered via Dosh, with shorter integration times for smaller banks and neobanks.

• Concerns regarding no more MAU growth has been answered by Venmo, with potential of 70M+ more MAUs added very soon.

• Not having capabilities to advertise at the SKU level data has been addressed via Bridg, ran by a capable and passionate leader.

• International opportunity can possibly be addressed via open banking.

• Currently not driving more awareness to the app has been previously reasoned by waiting until the new UI is in place along with more and relevant offers from self-service, but will be made aware to users via push notifications in the future.

• Self service is now in the hands of more agencies, and potentially has the capabilities to be used via the banks.

• Increasing engagement among users has been addressed via the new user experience, with initial success at the US Bank launch.

My current thought is the good scenario may be better than I originally thought. As always, anything can happen, where today’s market price may be the highest we ever see it again. However, everything seems to be working in the right direction, and the current market price seems to reflect conservative assumptions of today and the future, so all that may be left is some patience.

Neobank / Fintech Partners (Existing, Confirmed, Suspected and Potential)

• Existing = Partners prior to CDLX acquiring Dosh

• Confirmed = New Partnerships post acquisition, and confirmed to be partners

• Suspected = Partners that I have a reason to believe they will become CDLX partners. My list of suspected has decreased substantially as they have been confirmed.

• Potential = Neobanks / Fintechs that would make sense for a partnership, but where there is no reason to believe at this time that there will be a partnership

11.1.2022

New Dosh Partner

20. Discovered a new Dosh partner today, “Solid”, with "Solid Fintech Program Rewards powered by Dosh"

About Solid:

• Modern FinTech Infrastructure: Instantly create bank accounts, offer crypto wallets, send payments, and issue cards to your customers.

• Introducing, FinTech as a Service: Solid offers a fully integrated & compliant suite of FinTech services. Integrate in minutes to build never-before-seen experiences.

• Fully Managed FinTech Infrastructure: Banking | Payments | Cards | Crypto

• Solid takes the complexity out of FinTech: We’ve got banking, payments, cards, security, ops, risk & compliance covered – you can focus on the building the right experience.

Given Solid helps many other fintechs, this single partnership by Dosh with Solid could lead to many more partnerships (which are the right type of partnerships Dosh / Bridg / CDLX should be going after).

Updated list of existing, confirmed, suspected, and potential Dosh partners:

The following is the most up to date list of confirmed Dosh partners:

9.1.2022 PM

New Dosh Partner

Found another new Dosh partner, Onyx, "Modern private banking services for the new generation"

Y Combinator backed them. On their website, they say, “Onyx Card is the next-generation luxury black card with a digital 24/7 human lifestyle concierge with 60 second response times and over $3,000 / year of member benefits. Our card is especially valuable to those with a high travel frequency / live nomadically, or that love going out to dine, with a moderate to high leisure budget.”

A couple interesting notes:

• The Dosh UI they show is slightly more customized to match the look of Onyx. This could give us a glimpse of what we could eventually see more of with the banks, providing them another form of differentiation that they have desired. This was a feature discussed by CDLX at the 2021 investor day.

  • Screenshot on twitter, first pic

• On the homepage of the app, and what could be above the fold (so more discoverability and more repeat usage), is some of the Dosh offers featured (same two companies featured on Dosh’s homepage). This is similar to the banks and even Venmo, highlighting a few offers with the option to see all. What is different here is how large the logos are, compared to all other intro offers seen in the banks and Venmo. They match the size and look of the offers within Dosh. It is possible this will change. If not, could be very good, given how much it stands out.

  • Screenshot on twitter, second pic

On Onyx’s website, they both show a Dosh UI and have a placeholder to the Dosh terms of service where the footnotes for "2-10% cashback on special brands offers" says "[Dosh Rewards link here]". Between those two items, and seeing the actual Dosh terms of service, I believe this partner can be ruled confirmed.

9.1.2022 AM

New Dosh Partner

From a new terms of service page, I found DNERO. It looks like they will soon have Dosh powering their offers on their upcoming Mastercard.

About DNERO:

“With DNERO, you can send and receive money. Get instant cashback rewards. Convert cryptocurrency into cash and shop. Oh, and best of all, invite all your friends and get cash rewards from their spending.”

Given this hasn’t been announced yet, I have left them in the “suspected partners” list.

8.10.2022

Bitpay was confirmed as a Dosh partner today.

“BitPay Launches Cash Back Rewards for BitPay Cardholders Through a Partnership with Cardlytics.”

I believe this is the first time I've seen the press release with a new Dosh partner advertise a cash-back percentage higher than 10%.

"where the BitPay cardholder automatically receives up to 15 percent cash back"

Below I moved BitPay from potential partner to confirmed.

One reason I already had BitPay on the list of potential partners was when CDLX gave a presentation at a conference related to crypto back in March, CDLX mentioned BitPay (as well as BlockFi which was also later officially announced). I had the following in my Research Notes:

6/21/2022

Credit Karma was confirmed today as both a partner AND the innovative fintech. There was confirmation from CDLX IR that they are the innovative fintech. Credit Karma Money also matches everything CDLX said, with launching with Dosh in Q2, having more users than any other Dosh partner (110M is more than 83M Venmo users), launching with a debit card, and more.

“Credit Karma Money…today announced the launch of cash back rewards, giving its more than 110 million members in the U.S. the chance to earn cash back…This experience, powered by Cardlytics’ cash back platform…”

I would think this would be a good target audience. These are users concerned about improving their financial position (based on checking their credit score). They may be more likely to user offers to save money.

There is likely quite a bit of overlap with the 110M Credit Karma users with the current CDLX MAUs, but that is similar to most fintechs. For instance, most CDLX users likely also have a Venmo account.

As a reminder, Dosh was more an insurance policy on primary transactions switching from traditional banks to fintechs and neobanks. Therefore overlap is fine.

I do believe there is likely many millions of users on Credit Karma that do not have a CDLX-partnered bank account. If a portion of those users sign up for the debit card, it may be one of their only cards that has as rich of cash-back offers, leading to using the Credit Karma debit card, and not shifting spend and redemption of offers away from a CDLX card. This would then be pure incremental revenue for CDLX.

I’m not sure how many of those 110M will sign up for a debit card though to be able to access the CDLX offers. My guess is very few. So MAUs for CDLX will be small for now. Similar to Venmo’s 83M users, where only a small portion have the debit card.

The odds of signing up for the debit card (as well as using it) will increase as the offers improve. Such as from adding more local offers from the Entertainment acquisition, product-level offers from Bridg, and more offers in general from ad agencies using self-service.

I did sign up for the debit card on Credit Karma. Very easy to do. Credit Karma Money is one of the tabs within the app. Therefore anyone checking their credit score within the app will likely see this tab, which increases the odds of signing up for the debit card and using CDLX offers.

I believe a credit card would be better, given Credit Karma can upsell that card to help improve their credit score (which is what users are focused on within the app).

This is still a great win for CDLX. 110M is a massive user base. Even if a small fraction sign up for the debit card, it could be a large benefit for CDLX. I’m guessing there is a lower revenue share with them, similar to other Dosh partners. I believe we have heard Dosh operations have no cash burn, and therefore this gross profit could be pure incremental cash flow.

Also benefit from users getting more push notifications, similar to Venmo. This could increase the number of sign-ups and number of redemptions of offers (such as from notifications related to new offers). As a reminder, this is something ad agencies have said they prefer with Figg.

Example scenarios:

• Assume some percentage of 110M Credit Karma users will sign up for the debit card and redeem offers

• Assume $10 of offers redeemed throughout the entire year (less than $1 per month)

• Assume $2 of revenue per consumer incentive redeemed

• Assume 25% revenue share

• (1% of 110M users) x $10 of redemptions x $2 of revenue / redemption x (1 - 25% revenue share) = $16.5M Gross Profit (20x multiple = $330M of additional value)

• (5% of 110M users) x $10 of redemptions x $2 of revenue / redemption x (1 - 25% revenue share) = $82.5M Gross Profit (20x multiple = $1.65B of additional value)

6/20/2022

Credit Karma Money Rewards on the Credit Karma Money Spend Account (debit card) looks to be powered by Dosh.

This is based on finding a new terms of service page.

I added Credit Karma to the suspected partners list. I will wait to move them to the confirmed list when it is announced.

6/17/2022

Petal was confirmed this week as a new CDLX / Dosh partner.

• Petal Announcement 1

• Petal Announcement 2

• Petal Website

• Petal Tweet About New Cash Back

I moved them from the suspected partners to confirmed.

6/8/2022

I received new information from an investor who spoke with CDLX regarding the new unknown marquee partner. This was information I had not heard before.

They said that the new partner that has not been announced is launching a new debit card will have 0 MAUs day one, and that it is not Affirm, but they are on their list.

I have been convinced the marquee partner was Affirm, until this statement by CDLX. All the timelines matched up. However, beyond CDLX explicitly saying it is not them now, we know the new Affirm Debit+ card has been in beta, with users coming off the waitlist. Therefore there will be more than 0 users day one.

I am actually kind of happy it is not Affirm, given I do not think at this current time there is that much positive sentiment around them. However, what matters more is the long term, where CDLX should partner with as many neobanks / fintechs as they can, to protect against a future where primary transactions are elsewhere. But I am hoping the marquee partner is a big name.

I started thinking that the marquee partner may instead be Klarna. CDLX has mentioned BNPL in the past.

Klarna announced June 1, 2022: “With over 1 million waitlisted consumers, the highly anticipated Klarna Card is now available in the US enabling consumers to "Pay in 4" everywhere with zero interest”.

This shows me Klarna has significant users (matching CDLX comments in the past on the marquee partner having a lot of users), and just released a new card in the US (matching CDLX saying the card releases Q2).

However, the card is not referred to as a debit card (even though Affirm’s card is pretty much the same but called “Affirm Debit+). Also, the waitlist of 1M may mean there will be 1M users day one (which doesn’t match CDLX’s comments of zero MAUs day one). Additionally, Klarna is based in Stockholm, Sweden, where the first comment at Q2 2021 earnings regarding this marquee partner was “The new partners include a contract with one of the most innovative fintechs in the U.S.” But the new debit card is in the U.S…

In March there was the announcement of the new Robinhood debit card. So that is a possibility, given a debit card, large fintech in the U.S., possibly considered innovative, etc.

I removed Affirm from the suspected partners and moved them to the potential partners list, and also added Klarna and Robinhood to the potentials partners list. It is possible the marquee partner is not on my potential partners list.

5/19/2022

BlockFi was confirmed today as a Dosh partner.

They were first name dropped by CDLX back at the March 2022 Digital Commerce Alliance Forum, which is what led me to adding them to the potential partners list.

BitPay was also mentioned at that conference by CDLX, so there could now be a higher chance they are one of the 9 unknown partners. BitPay also has a BitPay card, where usually Dosh is only powering the offers of a card, making a partnership possible.

5/16/2022

From Affirm’s recent earnings call for FY 2022 Q3 ending 3/31/22, sounds like Debit+ card will be now eligible to all users this quarter.

“We appreciate your patience and open Debit+ to all eligible Affirm users in fiscal Q4.”

This matches CDLX’s statement from their latest call where they said the Dosh program is launching with the new marquee partner this quarter.

“Additionally, despite the delay, the marquee partner we mentioned last year is scheduled to launch the Dosh program this quarter. This partner reaches more users than any Dosh partner we've signed, and we are excited to begin working with them.”

Not only does the timing match up, both separately acknowledge the delay in the release of the new card / program.

5/3/2022

More Live. New Partners. Total Partners.

Yesterday was CDLX’s Q1 2022 earnings call. There were some updates related to Dosh.

Related to live, new, and total partners:

• Q1 2022: “With our recent focus on neobanks and fintechs via Dosh, we now have 18 publishers live and 15 publishers that are under contract and scheduled to launch later this year.”

• Q4 2021: "With Dosh, now have 13 publishers live with the program and 19 publishers under contract and scheduled to launch later this year."

There are now 5 more publishers live, and there are a total of 33 (18+15) partners now vs 32 (13+19) at Q4, therefore on the surface there is one new partner.

However, I came across that as of January 11, 2022, “The German-based neobank [N26] shut down its U.S. operation and has been unavailable to U.S. customers”. On N26’s website, “For the past 2 years, we’ve had the pleasure of providing our 100% mobile banking experience to hundreds of thousands of people across the US. It is with sincere gratitude and appreciation that we've made the tough decision to sharpen our focus on our European business. As a result, our product is no longer available to customers in the US.” Therefore, I removed N26 from the list of Dosh partners. It is good news this is not from N26 dropping Dosh / CDLX, but instead from N26 stopping their US operations, where when Dosh powered their offers it was only for the US Rewards Program.

This leads me to believe there was actually two new Dosh partners. 32 total at Q4 2021, then lost N26 in January 2022, so 31 total, then now at there is 33 total as of the end of Q1 2022 (and therefore 2 new partners).

Marquee Partner Update

Related to the unknown marquee partners was the following update:

“Additionally, despite the delay, the marquee partner we mentioned last year is scheduled to launch the Dosh program this quarter. This partner reaches more users than any Dosh partner we've signed, and we are excited to be working with them.”

The bolded sentence is new.

I feel Venmo with 83M users is hard to beat. If this is the case, where CDLX is referring to total potential users, then the partner would need to quite large. However, it could be they are talking strictly from a perspective of who sees the offers (despite all Venmo users seeing the QR code offers which are still powered by Dosh), where the number of Venmo debit card users is likely low. If that is the case, Affirm with the Debit+ card is still my best guess (as discussed in the Dosh potential partners section in the Research Notes and in this write-up). There are other clues it is Affirm, such as CDLX is waiting to announce when the partner releases a debit card (heard from investors who spoke with CDLX management). Given Affirm is releasing their new Debit+ card soon, this makes me feel it is them. That also matches the comment of CDLX waiting until the Dosh program launches, which wouldn’t launch until the card launches. Additionally, we have known of the marquee partnership for a long time, but the launch / official announcement keeps getting delayed. That is the same with Affirm Debit+ card launch, which has been announced as a new card a while ago, but with no launch date shared. CEO Max Levchin said in December, “This is one of the very very important products for us. We want to make sure we really get it right. If it takes us longer to get it perfect, we’ll take longer. If it’s beautiful and perfect on day 1, we’ll bring it out to as many people as we can.” The Affirm Debit+ card will likely have many more users than the Venmo Debit Card, and possibly more than the crypto.com card (which I feel has a large number of users). However, the marquee partner could be someone else, such as those listed as “Potential Partners”.

Crypto.com Update and Differentiation vs Table Stakes

One thing to note: Crypto.com decreased some of their cash back on their cards to be more sustainable: “Launched in November 2018, the Crypto.com Visa Cards have grown to be the world’s most popular crypto-linked card program, available in 40 countries. To ensure long-term sustainability, we are introducing a number of changes to the CRO Card rewards programme…” They were able to do so by retaining Dosh cash back: “Introducing these changes to the card program is a difficult decision. We are committed to continue exploring and forging new partnerships to unlock greater value and benefits for our cardholders such as our partnership with Dosh, a cash-back rewards platform in the U.S.” This may prove to be a very valuable data point. One it shows that banks / fintechs / neobanks / loyalty programs can use CDLX / Dosh for the cash back and have advertisers fund those rewards, instead of funding it internally which may not be sustainable. It also shows how CDLX / Dosh can help these partners, and how they are providing value. It is also possible competitors of these banks / neobanks who fund their rewards program will not be able to increase and compete with the high cash back of CDLX / Dosh without sacrificing long-term sustainability, and therefore would need to use CDLX / Dosh as well to remain competitive. Many investors focus on differentiation as an issue with banks / neobanks using CDLX / Dosh, but to me it is not about differentiation, as much as it is about the new higher rewards becoming table stakes. These banks / neobanks need to use CDLX to remain competitive and not lose customers or users to the much higher cash back programs that are only possible by leveraging CDLX with their combined reach for advertisers who then fund the rewards.

4/18/2022

Added Umo, Petal, and Transcard / Smart Hub as suspected partners. These where found based on their terms and conditions stating that Dosh powered the offers. For pictures of the terms and conditions, see here. The only reason I did not add them as confirmed yet is I was waiting for either a terms and condition on Dosh too or CDLX to announce them.

One thing that I found interesting was in the terms and conditions of Petal card is the mention of both Dosh and Collinson. “We use a third-party card-linked offer provider, DOSH Holdings LLC(“DOSH”) and/or Collinson CLO, Inc. (“Collinson”), as our service provider to help us operate Petal Offers." This is the second time I’ve heard Collinson brought up related to CDLX in the last few months. The other time was from some people from Linkable Networks (who was bought out by Collinson) were commenting on my Bridg video. I am not sure if they are the potential partner that CDLX mentioned a long time ago, given the partner was related to product-level offers I believe, or if this is just a coincidence and Collinson is competing more in this same space.

Added Monorail, based on Dosh listed in a terms and conditions, and showing a picture of what looks to be Dosh, and using the same featured offer of 5% back from Target (which is also shown on Line Financial and Dosh’s website, as can be seen here).

Added Target RedCard, based on my discussions in the following write-up.

Added Walmart’s Hazel, who this year acquired fintechs ONE and Even. I added this after CDLX mentioned Walmart’s Hazel in an interview.

• CDLX Mention: “Additionally, as the world of banking and retail intertwine — with the rise of buy now, pay later tools, and retailers offering their own credit cards/fintechs, like Walmart’s Hazel — there is a huge opportunity for banks to create personalized products that put the bank more at the center of their customers’ purchasing lives. Rather than just powering transactions in the background, banks have an opportunity to be the central hub of consumers’ lives.”

• About the Company: “The combined business, which will operate under the brand name ONE, will provide users with an all-in-one financial services app to holistically manage their finances in one place. The company’s products and services will be made available directly to consumers and through employers and merchants, including access to Walmart’s 1.6 million U.S. associates and 100 million-plus weekly shoppers.”

4/5/2022

Added Robinhood as a potential partner, given their cash card.

3/31/2022

Added the new crypto.com partnership to the list.

I also added the associated numbers from previous posts to have a better idea of what remains. I believe there are 12 unknown partnerships that are already under contract.

The partnership with crypto.com makes me believe there is a higher probability of signing Coinbase now. They also have their own card (which I have to keep track of if CDLX / Dosh ever power the offers). BitPay was mentioned during the crypto conference by CDLX, so possibly even a higher probability for them (and also has their headquarters in Atlanta…). BlockFi also has a card.

Wanted to Include the logos for the confirmed partners:

3/13/2022

Forgot to add Spruce to the confirmed list above.

I’ve also been thinking more about the Q4 2021 earnings update regarding 13 live and 19 under contract and scheduled to launch this year. I wanted to determine how many new programs have been signed since the last update.

One thing I did not consider was the Q2 update of "Additionally, we have another 14 neo-bank and fintech platforms coming online over the following quarters". Why this matters is I believe before this we only knew of the 7 existing. Therefore, there was then a total of 21 partners.

Then with the Q4 update, we knew there were 32 total, leaving 11 new signed.

My notes below still hold, where there are 19 known / suspected (remember, I forgot Spruce below) leaving 13 still unknown, with 11 new.

3/2/2022

"With Dosh, now have 13 publishers live with the program and 19 publishers under contract and scheduled to launch later this year." - From the Q4 Earnings call.

I have 16 confirmed, and 18 when including suspected partners.

Does that mean 14 or so unknown new CDLX/Dosh partners?

13 live + 19 under contract = 32 total - 18 suspected = 14 unknown.

However, it could be 19 total instead of 32. If they stopped at “19 under contract” I would more likely think 19 total, but the other comment of “and scheduled to launch this year” makes it seem like a separate 19 partners.

“Additionally, despite a delay, the marquee partner we mentioned last year is scheduled to launch the Dosh program in Q2”. My heart started pounding when Lynne started saying this! I thought for sure it was finally going to be announced. I still think it is Affirm, as discussed in the following write-up. Affirm and their Debit+ card is still not fully live. It is on a waitlist. Someone else mentioned CDLX is waiting until this unnamed partner’s debit card goes live. That does not guarantee its Affirm, but combined with the points made in the write-up linked above, I still think it’s Affirm.

2/24/2022

Update: Dayforce was confirmed. I moved this partner from “Suspected” to “Confirmed”.

2/20/2022

Potential partners:

• Square / Cash App, Chime, Revolut, Nubank, Stripe, Afterpay, Apple Pay / Apple Card, Coinbase

2/6/2022

CDLX acquired Dosh in March 2021. At Q2 earnings, CDLX announced 14 new neobanks and fintechs partnered with Dosh. Given only a few of their names have been officially announced by $CDLX, I have tracked this closely, searching for each one.

At this time, I believe I have identified 12 of the 14 new neobanks / fintechs. It is very possible CDLX has added more since the 14 number was announced, and there are more outstanding than I’m aware of. It is also possible I am wrong on others.

Reason for tracking:

While the acquisition was more as an insurance policy against primary transactions shifting away from traditional banks to neobanks and fintechs, any one of these many partnerships could prove significant in relation to today's market cap.

This is why early on, I thought often about Dosh and the opportunities with even just one of their partners, Venmo. For instance, attempting to think through the best-case scenario with the Venmo partnership.

Additionally, I spent some time thinking how the value of Venmo  could be worth more than CDLX at that time. While some of my thoughts may be different today, and assumptions could be updated, the idea remains the same, and likely could apply to other new partnerships. (Full post here)

Neobanks and Fintechs that I have Found:

Existing Partnerships

Venmo, Ellevest, N26, ADP/Wisely, Jelli, Betterment, Cheese

Affirm Debit+

Unconfirm, but there are many clues it is $AFRM, including $CDLX Q2 earnings when saying:

"The new partners include a contract with one of the most innovative fintechs in the U.S."

Much more significant clues and details discussed here.

Figure Pay

"Pay for purchases, transfer money, earn rewards, and access buy now, pay later loans. All in one easy-to-use account"

Website: https://bit.ly/3H0hm9u

CDLX first tweeted Aug 18, 2021: https://bit.ly/3AlJhy5

First confirmed on their website Aug 30, 2021.

Zolve

"With Zolve you can apply for a U.S. bank account & U.S. Credit Card even before you set foot in America"

Website: https://zolve.com/

CDLX first tweeted Aug 18, 2021: https://bit.ly/3fLGnci

First confirmed on their website Aug 30, 2021.

Line Financial

"Get cash between $10-$1000 to protect you against financial uncertainties, credit checks. Pay later without interest."

Website: https://useline.com/

First discovered on their website Aug 30, 2021: https://bit.ly/341VLOY

Treecard

“The wooden Mastercard® that reforests the planet as you spend. 80% of profits go to reforestation and climate investments. No greenwashing.”

Website: https://www.treecard.org/

First discovered on Sep 16, 2021:

Confirmed 2/4/2022.

Sliide

“A mobile technology leader with a suite of services to enable mobile operators to get more from the mobile economy, is introducing its Cashback rewards program…powered by Cardlytics”

Website: https://sliide.com/

Announced Oct 10, 2021: https://bwnews.pr/3FMT1lP

Wedge

"The first spending app that lets users pay for everyday purchases with any asset using a smart debit card"

First discovered Nov 11, 2021:

First Confirmed Dec 23, 2021:

First Announced Jan 20, 2022: https://www.prnewswire.com/news-releases/wedge-partners-with-cardlytics-to-add-cash-back-to-new-smart-debit-card-301464725.html

Spruce (built by H&R Block)

“Spruce is mobile banking to help you set saving goals, earn cash back offers, and get paychecks up to two days early”

Website:  https://www.sprucemoney.com/

First discovered and confirmed on Dec 9, 2021:

KoraCard

“A card made just for students”

Website: https://www.koramoney.com/card

First discovered and confirmed Dec 17, 2021:

Payfare

“Payfare is a global fintech company offering digital banking, instant payment and loyalty-reward solutions for today’s gig economy workforce.”

Gig platforms include: $LYFT, $DASH, $UBER

Website: https://corp.payfare.com/

First discovered on Dec 27, 2021:

Dayforce

“Get paid when you want”

Website: https://www.dayforcewallet.com/

First discovered on Jan 21, 2022:

Upgrade

“Our goal is to offer our users more value and a better experience than they receive from their traditional bank. We fulfill that goal with affordable and responsible loans and cards, and no fees and high rewards checking accounts.”

Website: https://www.upgrade.com/

First discovered on Jan 21, 2022:

12/1/2021

A few months ago, I wrote a post on why Apple would be the best potential next partner. I believe the larger mention of Apple muted the discussions around all the potential partners for Cardlytics, their unique benefits, and likelihood of occurring. I still think even if the probability of partnering with Apple is 0%, I think there are still some good pieces of information in that write-up.

List of potential partners:

• Neobanks and Fintechs

  • Square / Cash App, Chime, Revolut, NUbank, Stripe

• BNPL Providers

  • Affirm (full write-up), Afterpay

• Mobile Wallets like Apple Pay, or even the Apple Card (full write-up)

• Cryptocurrency Platforms

  • Coinbase

Long Runway of Partnerships

9/17/2021

• PayPal: Why they may still use Dosh / CDLX for their PayPal app

  • Honey more for affiliate marketing (limited TAM…search “Honey” to see other comments)

  • PayPal Sees Value in a “Deals and Offers” Section

  • Venmo Uses Dosh Despite Honey

  • PayPal is Copying Venmo Offers and Dosh

  • PayPal Invested in Dosh in 2018

  • A Way to Incentivize QR Code Payments

  • Utilizing Features of the Other

  • Single Dedicated Resource

  • Access to More Advertisers

  • Higher Future Payment Volume From Venmo

  • Higher Future Engagement Levels and ARPU on Venmo

• Order of Partnerships Matter:

  • Targeting a mobile wallet partner with significant MAUs, such as Apple Pay, may lead to a payment processor partnering with Cardlytics for their advertisers to leverage the even more significant reach.

  • These new advertisers benefit existing Cardlytics MAUs (leading to higher engagement, usage, and ARPU), and could also attract smaller neobanks and fintechs to join the platform to add more offers and relevant offers to their users and increase engagement and signups.

  • The reverse same cannot be said from partnering with a single neobank / fintech or payment processor.

    

• Mobile Wallets

  • Therefore, by targeting a mobile wallet partner with significant MAUs, it may lead to a payment processor (and possibly more than one) partnering with Cardlytics for their advertisers to leverage the even larger reach and targeting ability.

  • These new advertisers could then in turn attract smaller neobanks and fintechs to join the platform to add more offers and relevant offers to their users and increase engagement and signups.

  • For those reasons, partnering with a single large mobile wallet may be the single best next partner for Cardlytics.

  • The following illustrates how this all comes together, as well as additional benefits within Cardlytics:

  • (open imagine in a new tab to more easily read)

    

• Neobanks and Fintechs

  • Cardlytics can continue to target the neobanks and fintechs through Dosh. Potential partners like Coinbase, Revolut, Nubank, Chime, Monzo, etc. would add a decent number of MAUs, however, most users within the neobanks and fintechs are not using them as their primary bank or spending account at this time, nor would the addition of their MAU base lead to a significant number of advertisers joining the platform that in turn would benefit the existing Cardlytics MAU base.

• Payment Processors like Stripe, Adyen, Square

  • A payment processor could lead to significant benefits for existing Cardlytics users and banks, by leveraging their large number of merchants that use their payment processor.

  • Merchants who use the payment processor could benefit from having integration with Cardlytics, making it easier to directly advertise and target many potential customers, have certainty in results, done in a brand safe way, and where users are engaged directly with the advertisements (as opposed to other platforms, where users are engaged with other content, and ads are slipped in and not desired).

  • Square would bring the benefit from both the user side from Cash App, and possibly the advertising side from Afterpay merchants, which directly leads to additional benefits day one. Cash App users would benefit from Cardlytics’ existing advertisers, and Cardlytics’ existing advertisers would benefit from the additional Cash App users. Square and Afterpay merchants would benefit from advertising to more than the relatively limited number of Cash App users by advertising to the bank channel users, and Cardlytics existing users in the bank channel would benefit from the additional offers from Square and Afterpay merchants.

Affirm

12/5/2021

21. (Official Post)

New Innovative Fintech Partner, Affirm?

Clues that Affirm is the new innovative fintech partner of Cardlytics / Dosh, and the benefits of a BNPL partnership.

Introduction

Over the last year, there has been both some level of fear and uncertainty around buy now pay later (BNPL), and what that means for Cardlytics in terms of a new payment type and the potential for a new advertising competitor.

Additionally, there has been quite a bit of speculation regarding “one of the most innovative fintechs in the U.S” that Cardlytics / Dosh partnered with, mentioned at the Q2 2021 earnings call.

After months of questioning, there are now some signs that the new partner is one of the BNPL players, Affirm.

New Innovative Fintech Partner

During the Q2 2021 earnings call, there was mention of 14 new neobank and fintech partners. Specifically called out was a new partner who is “one of the most innovative fintechs in the U.S.”:

“Additionally, we have another 14 neobank and fintech platforms coming online over the following quarters. The new partners include a contract with one of the most innovative fintechs in the U.S.” - Lynne Laube, CEO, Cardlytics, Q2 2021 Earnings Call

The key identifying words:

• Innovative (not largest)

• Fintech (not neobank)

• U.S. (not the world, nor in another country)

BNPL

The word innovative stands out the most. Given the significant number of market-wide discussions around BNPL this year, this seems it could fit the definition of innovative.

Evidence that Cardlytics would partner with a BNPL player was indicated during the 2021 Cardlytics Investor Day presentation, when discussing the slide, “Looking forward, 2022 and beyond”:

“We’re continuing to evaluate, with product and our bank partners, additional value-added enhancements and services that will deliver even more value for our bank partners and their customers.

We’re exploring synergies with bank-funded loyalty programs, bank-driven commerce experiences, and providing offer construct support for new financing vehicles, the likes of buy now pay later, that will benefit both our bank and advertising partners.” - Farrell Hudzik, Executive Vice President of Financial Institutions, Cardlytics, Investor Presentation

This was one of the first times I had heard BNPL mentioned by Cardlytics.

Even if this was not meant to be in regards to new partners, it was at least a sign that Cardlytics was working on building out the capabilities to work with BNPL.

Around August 17th, 2021 (a couple weeks after the Q2 2021 earnings call and the mention of a new innovative partner, and a couple months after the investor day presentation with the mention of BNPL), Cardlytics tweeted about Figure Pay, who provides BNPL loans. Looking at their website, you could see their rewards were powered by Dosh. (For more detail, this was discussed in the last write-up and video). At first I thought this may be the innovative partner, given the use of BNPL. However, I feel that given Figure Pay is a lesser-known company, Cardlytics would not have specifically called out this partner as the innovative partner. Therefore, it is more likely that Figure Pay is a part of the 14 new neobanks and fintechs mentioned. This has led myself to continue wondering (and hoping) that the innovative fintech was someone else.

Affirm

Affirm could possibly be the partner Cardlytics is hinting at, given Affirm’s app has cash-back offers, and given Affirm’s new debit card.

The largest reason why Cardlytics could be partnering with Affirm is due to Acceleration Partners, who works with both Cardlytics and Affirm.

More importantly, on September 20, 2021 (based on this tweet), Acceleration Partners but on a webinar series. In this series, both Cardlytics and Affirm gave presentations. Maybe one could not take too much from this, since there were other presenters as well.

However, during the presentation with Affirm, towards the very end, the host asked at the 37:16 mark,

“Anything new, exciting, you wanted to touch on?”.

Affirm’s Director of Marketplace Partnerships responded:

“I mentioned the in-store fork, which is this like omnichannel experience that we’re really looking to deliver, connecting online and offline. Its also like the incrementality word, probably something that we’ve always heard, and because we are a payment network as well, and have this affiliate program, I think this could be really interesting to think about this in the future, so it is a bit of a teaser I think, you know, if you partner with us, or are looking to partner with us, the things we are thinking about is how do we leverage the payment data that we have to connect online and offline.

Rewards and incentives. So we are gonna [trails off, stops] we’re running a small cash-back test right now with a handful of merchants which we are going to look to expand. And again, those cash-back transactions, is like, if you think about 0% APR financing offers and cash-back and the consumer rewards behind that, and consumers having the ability to feel really compelled to make a purchase, we really believe its going to generate additional conversions and higher AOVs, because consumers feel really compelled to shop via Affirm. So there is going to be an expansion that's coming up on that." - Kisney Lopes, Director, Marketplace Partnerships, Affirm, Acceleration Partners Webinar Series

The keys here are that Affirm’s Director of Marketplace Partnerships mentions incrementality, online and offline, payment data, a new cash-back program, announced it as a teaser (with Cardlytics presenting the next day) and how there will be an expansion coming up related to that.

On the same day of this presentation, September 20, 2021, Affirm added a new web page on cash-back deals, that still says:

“Note: At this time, Affirm Cash Back is a new rewards experience that Affirm is testing out and is currently limited to a small percentage of customers. If you do not see Affirm Cash Back in your Affirm app, it is not available to you at this time but we are excited to be able to offer it to you in the future.”

In terms of the testing, Acceleration Partners works with brands such as Adidas and StubHub. Both Adidas and StubHub have options to pay with Affirm at checkout. Additionally, both Adidas and StubHub have offers now on Cardlytics (and I believe both are fairly new to Cardlytics). Maybe a coincidence, but it is possible these are two of the brands that are a part of the test that Affirm is talking about.

Then within the separate Cardlytics presentation the next day, the host asked at the 33:45 mark,

"When we think about buy now pay later, of the likes of Klarna and Affirm, how do you see, if at all, buy now pay later fitting into your audience, and does Dosh specifically partner with those players, or is at all separate? How do you envision that?"

Evelyne Forester, Vice President of Agency & Channel Partnerships of Cardlytics responded:

"Yeah so we don't…I mean that is a massive segment that’s growing so much. We don't partner with them today [emphasized today], although that is something that is certainty top of mind and I believe on [stops, smiles] our organization is actually separated into ads and bank. The bank team are the people that run all our relationships with the major banks, etc. So that, I believe is something that is top of mind, but not an area that we or Dosh is actually working in today. But lots of opportunity there." - Evelyne Forester, Vice President of Agency & Channel Partnerships, Cardlytics, Acceleration Partners Webinar Series

Not much given, but when watching the video, it almost seemed as if she stops herself from saying something else. Regardless, it is a sign of Cardlytics looking into this area.

Summary

In isolation, most of these facts mean very little. However, together you have:

• Affirm with their app and new debit card

• Lynne Laube mentioning a new innovative fintech partner during the Q2 2021 earnings call

• Cardlytics mentioning looking into BNPL during the June 2021 Investor Day

• Cardlytics and Affirm both working with Acceleration Partners

• Acceleration Partners put on a webinar series in September 2021, with both Cardlytics and Affirm presenting

• In the Affirm presentation, Affirm’s Director of Marketplace Partnerships mentions incrementality, online and offline, payment data, a new cash-back program, announced it as a teaser (with Cardlytics presenting the next day) and how there will be an expansion coming up related to that.

• Then the next presentation was Cardlytics, so the order could be a sign as well (given the previous points in the Affirm presentation)

• In the Cardlytics presentation, Cardlytics is specifically asked about partnering with a BNPL partner, like Affirm or Klarna, and gives at least the indication it is something “certainly top of mind”.

Given the above, and given Cardlytics is presenting tomorrow at the Raymond James 2021 Technology Investors Conference, it seems possible that if Cardlytics and Affirm are partnering together, we could hear about it soon.

Benefits to Cardlytics

A partnership with a BNPL player like Affirm would likely remove the fears of increasing payments shifting to BNPL, that Cardlytics does not currently capture.

Given BNPL is typically used with big-ticket items, like with merchants such as Peloton, this could add higher ARPU offers for Cardlytics.

A partnership would also remove the fears of a BNPL player like Affirm getting into advertising on their own, leveraging their SKU-level data. By Cardlytics partnering with Affirm, Cardlytics would not have to worry about that extra competition, and would also benefit from likely getting access to that SKU-level data.

In all, I think a partnership like this would be further proof of the value of Cardlytics’ scale, where Affirm would be leveraging Cardlytics’ large dedicated resource of employees, experience with handling / analyzing / measuring payment data, and relationships with many advertisers.

Closing

If the new “innovative fintech” that Cardlytics is partnering with is Affirm, I think many investors, including myself, would be very pleased.

At the end of the day, the new innovative fintech partner could still be someone else, but most signs point to Affirm, which would be a great partner for Cardlytics.

Who is the Best to Partner with Next?

9/17/2021

Who is the Best to Partner with Next?

22. The goal is to figure out the best next partner for Cardlytics. All potential partners are worth partnering with at some points and will increase the value for all constituents in the Cardlytics ecosystem.

However, I want to exclusively focus on who will bring the most value to existing users, and have the largest cascading positive impacts (such as leading to the most additional partnerships, reducing the time, energy, and money spent on individually pursuing each one).

Neobanks and Fintechs

Cardlytics can continue to target the neobanks and fintechs through Dosh. Potential partners like Coinbase, Revolut, Nubank, Chime, Monzo, etc. would add a decent number of MAUs, however, most users within the neobanks and fintechs are not using them as their primary bank or spending account at this time, nor would the addition of their MAU base lead to a significant number of advertisers joining the platform that in turn would benefit the existing Cardlytics MAU base.

Therefore, although focusing on the neobanks and fintechs collectively helps bring on new advertisers and reduces the risk from a shift from traditional banking to neobanks or fintechs, I do not see any single partnership leading to a substantial gain in MAUs or significantly benefiting existing Cardlytics MAUs from new advertisers.

Payment Processors

If smaller neobanks or fintechs do not lead to the most value to existing Cardlytics users given their addition will have a lower likelihood of adding advertisers, it may be better to direly target partnering with larger partners with a significant merchant base. This would lead to directly adding many more marketers to advertise on the channel, which benefits existing users.

There are affiliate marketers and ad agencies that could add a decent number of advertisers to the channel, but I believe they will all eventually come via self-service (and may already be doing so).

The number of small and medium businesses could advertiser through self-service, but they need to discover this as an option. This could occur through integrating self-service in the banks of business bank accounts, and therefore this option is already possible for Cardlytics to explore (no partnership needed).

Therefore, the best option is partnering directly with the companies that have a significant merchant base, and integrate the self-service capabilities into those merchant platforms, allowing them to advertise to all of the existing 167M Cardlytics users.

Payment Processors like Stripe, Adyen, Square

A payment processor could lead to significant benefits for existing Cardlytics users and banks, by leveraging their large number of merchants that use their payment processor.

Merchants who use the payment processor could benefit from having integration with Cardlytics, making it easier to directly advertise and target many potential customers, have certainty in results, done in a brand safe way, and where users are engaged directly with the advertisements (as opposed to other platforms, where users are engaged with other content, and ads are slipped in and not desired).

I first thought of a payment processor partnering with Cardlytics given the MasterCard / Cardlytics partnership in 2015.

Austin Swanson @Swany407

I wonder if Stripe and Cardlytics could partner and do something similar. Before, $MA was leveraging $CDLX's advertisers to improve MasterCard's user experience. Instead, CDLX could integrate their self-service for Stripe merchants to advertise to users in CDLX bank channel.

Given the number of partners that Stripe1 and Adyen2 uses, a partnership with Cardlytics seems reasonable.

Size and Impact

To get an idea of the impact and importance of a partnership with a payment processor, if we take their estimated payment volume, and if we assume 50bps of that revenue could be spent in Cardlytics as billings, minus 30% for consumer incentives to arrive at Cardlytics revenue:

• Adyen: $367B * 50bps * (1 - 30%) = $1.28B in CDLX Rev

• Stripe: $350B * 50bps * (1 - 30%) = $1.23B in CDLX Rev

• Square: $106B * 50bps * (1 - 30%) = $0.37B in CDLX Rev

• Total: $823B * 50bps * (1 - 30%) = $2.88B in CDLX Rev

Although Square currently processes less payments, they would bring the benefit from both the user side from Cash App, and possibly the advertising side from Afterpay merchants, which directly leads to additional benefits day one. Cash App users would benefit from Cardlytics’ existing advertisers, and Cardlytics’ existing advertisers would benefit from the additional Cash App users. Square and Afterpay merchants would benefit from advertising to more than the relatively limited number of Cash App users by advertising to the bank channel users, and Cardlytics existing users in the bank channel would benefit from the additional offers from Square and Afterpay merchants.

Conclusion for Partnering with Payment Processors and Digital Payment Companies

These partnerships would increase the benefit to existing users from additional offers and more relevant offers, increase overall revenue, and increase the odds of other smaller neobanks and fintechs joining the platform to increase the value for their users.

However, there is still likely a single partnership that will increase the odds of any given payment processors joining (or multiple, instead of one at a time) and then multiple neobanks and fintechs partnering (i.e., cascading benefits from one single partnership).

Mobile Wallets

I have concluded that small neobanks or fintechs may not directly lead to large payment processors with many merchants partnering with Cardlytics (given the small incremental user base to the large user base Cardlytics already has), but the inverse may be true (more advertisers could attract the smaller neobanks or fintechs partnering with Cardlytics).

In addition, partnerships with any given payment processor may not lead to a significant partner such as a mobile wallet partnering with Cardlytics (the smaller advertisers may not be a deciding factor for a larger mobile wallet to join), however, the inverse may be true.

For example, it is unlikely that partnering with a fintech like Coinbase would significantly increase the attractiveness and odds of a payment processor like Stripe wanting to partner with Cardlytics (adding 50M+ is not that much in relation to 167M to be a deciding factor, let alone how many of those Coinbase users would have access to the offers, since likely limited to the Coinbase debit card at this time). Also, a Stripe partnership doesn’t necessarily attract a mobile wallet provider like Apple to partner with Cardlytics.

However, partnering with Apple could dramatically increase the odds of Stripe wanting to partner (as well as other payment processors like Square) due to larger reach / different customers to target / more understanding / more awareness / higher credibility / more discoverability, etc., and then Coinbase wanting to partner (as well as other neobanks and fintechs like Chime, Nubank, Monzo, etc.) due to significantly more advertisers for engagement, signups, and spend.

Therefore, by targeting a mobile wallet partner with significant MAUs, it may lead to a payment processor (and possibly more than one) partnering with Cardlytics for their advertisers to leverage the even larger reach and targeting ability.

These new advertisers could then in turn attract smaller neobanks and fintechs to join the platform to add more offers and relevant offers to their users and increase engagement and signups.

For those reasons, partnering with a single large mobile wallet may be the single best next partner for Cardlytics.

The following illustrates how this all comes together, as well as additional benefits within Cardlytics:

Interesting Note: Other companies that generate revenue from advertising have a similar benefit between more data leading to more advertisers and then back to more data (seen in the graphic above, and connected with the blue arrow). Also with these other channels, more users can lead to more content and then more users. What is different about Cardlytics is the advertising is the content in the channel. Users continually benefit from more advertisers, where on other platforms, the ads are not the desired content and do not directly benefit from the advertisements.

(See the section on Google Pay vs Samsung Pay vs Apple Pay below for more detailed comparison, and why Apple is the best to partner with)

A partnership such as with Apple also benefits everyone in the ecosystem: Apple, consumers, advertisers, existing bank partners of Cardlytics, and Cardlytics.

Therefore, Apple like is likely the best next partner for Cardlytics.

Closing

Targeting a mobile wallet partner with significant MAUs, such as Apple Pay, may lead to a payment processor partnering with Cardlytics for their advertisers to leverage the even more significant reach. These new advertisers benefit existing Cardlytics MAUs (leading to higher engagement, usage, and ARPU), and could also attract smaller neobanks and fintechs to join the platform to add more offers and relevant offers to their users and increase engagement and signups. The reverse same cannot be said from partnering with a single neobank / fintech or payment processor.

Therefore, money, time, energy, and focus, even if only for a few years, should be spent on partnering with Apple, the best next partner. With 600 employees, there is no reason a small team cannot work on this. If the value is even $2.5B / year (discussed above, and ignoring the likelihood of other partnerships and their corresponding benefit), if it lasts 10 years, that is $25B in revenue, and approximately $10B in cash flow. If there is even 1% chance of this occurring, then Cardlytics could spend $100M on this bet. For 5 years attempting to land this partnership, with 10 employees out of the 600 working only on this, they could afford to pay each a $2M salary. Cardlytics could also hire top talent, or create a larger team with smaller salaries, with that $100M budget.

Beyond leading to other partnerships, an Apple partnership would benefit everyone: Apple, consumers, advertisers, existing bank partners of Cardlytics, and Cardlytics, and therefore should at least be considered by Cardlytics.

Google Pay vs Samsung Pay vs Apple Pay

23. 9/17/2021

Google Pay

I do not consider Google Pay as a potential partner. They are primarily in the advertising business, and already place offers in their mobile wallet. They do not need to leverage Cardlytics’ advertisers or reach, since they have all the advertisers who are already using Google. I do not see them as a threat. Rather, I see Google Pay offers as a way to add to the market, increase the understanding card-linked offers (CLO), increase the number of advertisers incorporating purchase data results into their models (such as a prior in Marketing Mix Models or Bayesian Hierarchal Models), and therefore is a benefit to Cardlytics.

Samsung Pay or Apple Pay

To decide between the remaining Samsung Pay and Apple Pay, I wanted to compare transactions, activity, usage, etc.

One impressive statistic was “Mobile wallet usage grew by more than 50% in 2020 among the three pays – reaching approximately 2 billion transactions. During this period, Apple Pay continued its dominance, accounting for 92% of these transactions.”4 Although this is limited to debit transactions, the difference is significant enough to give some weight to Apple being a more important partner, if only one was to be targeted.

This is likely in part due to Apple Pay also having higher enrollment, activity, and transactions per card for debit cards among the mobile wallets:

Source: https://www.pulsenetwork.com/public/debit-issuer-study/

In attempt to get a sense of total transactions, and not just debit transactions, I found the following from the Q1 2020 Apple transcript:

“For Apple Pay, revenue and transactions more than doubled year-over-year with a run-rate exceeding 15 billion transactions a year.” - Tim Cook

This was prior to Covid and the accelerated adoption and usage of mobile payments.

This data is enough to tell which mobile wallet is the best to target (Apple).

Interesting Note: It looks like at some point within the last year, Samsung Pay dropped their rewards program. If this is still the case, it may be an easier case for Samsung Pay to partner with Cardlytics.

Apple Pay

The statistics above do not provide information that could give a sense of how much value Apple could bring to Cardlytics on a standalone basis (i.e., not accounting for second order effects).

I have found very little data on Apple Pay, given how little Apple shares.

I have seen some figures of 383M worldwide Apple users prior to Covid and the accelerated adoption (looks like as of December 2018)5. One website estimated Apple Pay has been enabled by an estimated 500M users worldwide6. This seems reasonable, given 383M at end of 2018, and then the increased adoption with Covid.

Using that figure, even at something small and possible like $5 of incremental ARPU (incremental to the underlying duplicate banks with Cardlytics offers, to reflect increased awareness and usage from being more accessible and discoverable in a mobile wallet like Apple), that is at $2.5B in revenue for Cardlytics.

If we assume the same activity rate as debit cards at 44%, there would either need to be about $11 for the equivalent $2.5B revenue, or if still $5 for those active users, revenue would still be $1.1B.

Although the $1.1B is slightly less than the revenue from partnering with an individual payment processors, an Apple partnership could increase the odds of getting any one or all of them to partner with Cardlytics. And as mentioned before, this is due to their substantial user base, dramatically increasing the attractiveness for payment processors looking to provide value to their merchants (even if just from an optics or credibility sense). These new advertisers could then increase the odds of the remaining neobanks and fintechs partnering with Cardlytics to provide those offers to their users. In total, there would be significantly more revenue earned by Cardlytics, all of this from the single partnership.

A partnership such as with Apple also benefits everyone in the ecosystem: Apple, consumers, advertisers, existing bank partners of Cardlytics, and Cardlytics.

Therefore, Apple like is likely the best next partner for Cardlytics.

Partnering with Apple

9/17/2021

24. While the following discussions are focused on Apple and adding users, many of the benefits discussed could be interchanged with other potential partners.

Introduction

As discussed above, the reason partnering with a mobile wallet provider like Apple is so beneficial is due to the large reach, and integration with many current users.

It also seems as if Apple is looking to add more to their payments, according to the earnings call in Q4 20207:

“Apple Card is doing well, and Apple Pay is doing exceptionally well.

As you can imagine, in this environment, people are -- less want to hand over a card, so this contactless payment has taken on a different level of adoption in it that I think will never go back. The U.S. has been lagging a bit in contactless payment, and I think that the pandemic may well get -- put the U.S. on a different trajectory there.

And so we are very bullish about this area and view that there are more things that Apple can do in this space. And so it's an area of great interest to us.” - Tim Cook

There is also an opportunity for Apple to use Cardlytics to increase the attractiveness / number of offers on the Apple Card8. This would lead to more signups and higher usage, especially given the current offers are fairly limited, or low in amount (3% or less).

However, the number of Apple Card users is significantly less, compared to integrating with Apply Pay and offers seen and accessible by a substantial number of users. If Cardlytics partners with the Apple Card, I am not sure they would also partner and integrate with Apple Pay that opens up to other cards (but they may add the Apple Card only offers to the Apple Pay section).

Therefore, I feel more benefit would come from Apple Pay (Apple’s mobile wallet), with the offers discoverable and available for everyone.

Apple Pay

With Apple partnering with Dosh / Cardlytics for Apply Pay, the offers could work for any card or linked bank, as long as the payment is made with Apple Pay.

This increases the incentive to use Apple Pay to make purchases.

The Apple Pay option could be similar to Google Pay or the Dosh app, where the offers are over the top, and apply to any card chosen. This is also similar to the Venmo QR code offers, where the payment must be made via Venmo QR code, but any underlying card or bank account can be used.

In this case, based on what information is accessible, the offers may be less targeted, and more similar across users (seen on Dosh and Venmo). These are then blanket offers for everyone, and have lower amounts compared to customized, targeted offers which allow for higher amounts and then have better results as well (like in the banking channel).

I think there would be significantly less benefit if personalized offers required logging into your bank account like Nectar Connect and open banking. There needs to be as little friction as possible, such as Cardlytics offers working on already linked cards within Apple Pay. Therefore, worst case with Apple Pay would be that offers are less targeted.

However, I am sure there is a way to get this to work, especially since it benefits everyone, including the end user.

Apple Benefits

With this partnership, Apple benefits from increasing the incentive to make purchases with Apple Pay, and from the corresponding increase in payments made with Apple Pay.

Based on Apple's new updates on iOS 15, it would seem they are trying to further increase the number of payments made via Apple Pay. Instead of only making it easier through system and platform updates, adding Cardlytics offers would give users a financial incentive to complete purchases via this method.

Using Cardlytics over creating their own Apple ad solution has the same benefits as defaulting to Google search over their own Apple search. Apple could leverage Cardlytics’ scale, data, existing advertisers, dedicated resources, and existing system, while getting paid to do so.

Given additional MAUs in the ecosystem benefit everyone, and would benefit Apple, I feel very few additional banks, neobanks, or fintechs would partner with an Apple only ad solution. Therefore, I think there is a benefit to having an independent party handle the ad solution for Apple.

Using Cardlytics would also lead to the most new advertisers (not just Cardlytics’ existing advertisers). This is due to the larger total reach with Apple + Cardlytics. This in turn increases the attractiveness of Apple Pay to users, leading to higher usage than an Apple only solution.

Apple could also benefit from using a partner like Cardlytics who also emphasizes privacy for their users (no PII collected or access, no demographics received or used for targeting, data kept within the banks, and not reliant on tracking users with cookies9). Similarly, like in the bank channel, there could be an option to opt-out of offers. In some capacity, this is similar to Apple allowing users to turn off what is shared with advertisers.

Apple Users Benefit

First, Apple users would have offers available to them to save money.

By making it available to all Apple users, regardless of their primary bank / card (instead of restricting offers to only the Apple Card), it allows for the highest number of Apple users saving money.

Further benefits to Apple users comes from attracting more advertisers. Integrating with Apple Pay leads to the most potential MAUs, which leads to more advertisers (or potential partners with a large merchant and advertiser base) being attracted to advertising on Cardlytics and Apple Pay. More advertisers leads to more offers and more relevant offers for users.

In addition, if the offers are easily accessible in the Apple Pay section, they are more likely to be discovered by users than within a bank app. This also leads to more users who own businesses seeing and understanding CLO offers, further increasing the advertising pool for users to redeem offers and save more money.

Advertisers Benefit

Current advertisers of Cardlytics benefit from advertising to new users, more users, more data, etc.

Mentioned above is how more advertisers benefit more users. The inverse is also true. More users increases the attractiveness of advertising on Cardlytics and Apple Pay (larger reach, more data, more users of a targeting group, etc.) for new advertisers or for current advertisers to increase their ad spend (increasing offer amounts or number of customers targeted).

With a Cardlytics partnership, advertisers would also benefit from only having to learn and use one self-service platform for advertising based on purchase data. The platform would allow advertising on both Apple and the banks at the same time.

Existing Partnered Banks Benefit

By adding Apple, even more advertisers would use the platform, increasing the number of offers in the existing Cardlytics-partnered bank channel as well, which increases engagement for their users and the banks’ revenue share. A reason is from the simplicity of advertising on both Apple and the banks at the same time.

If the banks felt they were losing engagement due to Apple Pay offers, the banks could use their revenue share to increase the attractiveness of their offers in relation to the same ones on Apple Pay. In this situation, it may require the offers to default to the underlying bank (which differs from Dosh superseding Cardlytics offers, based on my own experience with duplicate Dunkin’ Donuts offers).

To make both the banks and Apple happy, the banks could make their higher offer "Apple Pay Only" where applicable (such as when they are a duplicate). This leads to using the underlying bank card from the existing Cardlytics partnership (since the user saves more money), but also using it through Apple Pay (since the offer is Apple Pay only). Banks, Apple, and Cardlytics all win in this scenario.

There are still places where Apple Pay is not accepted or used. I do not think I've used it at a gas pump or at a sit-down restaurant. Although this could change over the next 5 years, for now, there will still be offers that are only relevant at the bank level, not Apple Pay. In addition , it could also be that Apple Pay offers are too crowded, or more expensive if auction based. This could lead to advertisers wanting to only place offers in the bank channel, or different offers in the bank channel, where the offers on the underlying bank card will still work when paying with Apple Pay (I have tested and confirmed this works). Therefore, there will not always be overlapping of offers, nor a risk of no offers being placed in the bank channel due to Apple Pay offers.

Cardlytics Benefits

As everyone else benefits and uses the system more, Cardlytics also benefits.

Larger scale, more users and MAUs, more data, more eventual advertisers, higher revenue and ARPU, higher accessibility leading to more awareness of offers in general and higher engagement, and more.

Not only does partnering Apple lead to attracting more advertisers on an individual basis, but it could also increase the attractiveness for companies like Square or Stripe for their merchants to advertise to more users. This could then lead to more neobanks and fintechs looking to leverage the additional advertisers that have joined Cardlytics due to Apple.

Utilizing Apple without a Partnership

9/17/2021

Apple Notifications

25. Cardlytics could take advantage of Apple iOS 15’s updates with notifications10. These updates include: notification summaries, larger imagery on notifications, time sensitive notifications.

With larger app icons for both push notifications and the summary, it may be an opportunity for offer specific notifications, and have an image other than the bank app to highlight the specific offer.

The time sensitive alerts may have improvements for location and time-based notifications. It is possible that these time sensitive alerts are added so they do not group in the notification summaries. This could be needed for Cardlytics, if someone is shopping at Target, and there are associated offers that the user should be aware of immediately, rather than hours after they are done shopping. (Related Idea: Maybe there is notifications that groups offers. With the Target example, the notification could be for all Target offers, instead of only one SKU level offer. When you open the app, you see all those related offers grouped together, rather than searching to find them. The new UI and categorizing at the store level will help.)

Apple Widgets

Cardlytics could also take advantage of widgets. This would allow users to view and activate offers without opening a bank app.

This could either be bank sponsored widgets or through a Cardlytics/Dosh app.

Widgets would be more for aware and heavy users of offers, due to needing to manually add.

Bank Partners (Existing, Confirmed, and Potential)

1/10/2023

26. I recently came across a very good source for finding potential CDLX partners, including banks, third-party content providers, fintechs, and even strategic partners.

The source was from Evelyne Forester announcing her new position as Head of FI Partnerships at CDLX as of 2 weeks ago on LinkedIn. Seeing who is liking and commenting on the announcement could be a clue that CDLX has spoken with them in the past or even today, leading to a slight chance of a future partnership.

I did not want to consider those who liked the post and either worked at CDLX in the past, lived in Atlanta, or who worked with Evelyne in the past at another employer. Therefore, seeing a like or comment without these conditions makes it more likely they only know or only worked with Evelyne from the perspective of partnering with CDLX. It doesn’t guarantee a future partnership, given they could know Evelyne from past interactions to see if a partnership could work with CDLX, only for it to not work. But that is where I found it even more interesting when multiple people from another company liked the post. Additionally, I think this is a good way to consider potential future partners, given many existing CDLX partners / users liked the post, such as from BofA, Wells Fargo, US Bank, Vayner Media, Horizon Media, LiveRamp, and more including advertisers like Casey’s, Paramount, etc.

There are some very interesting non-bank potential partners that I discuss in the “Other Partners” section directly below this section (including some I have never considered, such as Visa, Roku, and Shopify.), but here I want to focus on potential new bank partners. Make sure you scroll down to view those additional potential partnerships after reading this section.

For bank partners, we know that CDLX is in talks with multiple top 20 U.S. banks, and looking to grow more internationally in the future. Therefore it would make sense why a non-CDLX bank is liking this post related to the new head of FI partnerships.

One bank I have wondered if we would see a partnership with and one where an employee liked the LinkedIn post was from BNP Paribas, where “BNP Paribas is a major international bank headquartered in Paris, France. It is one of the largest banks in the world, with operations in more than 75 countries and a strong presence in Europe, the Middle East, and North Africa.” The director at BNP who liked the post works in Queens, and has not worked anywhere with Evelyne. Therefore I do not see where there would be a relationship outside of a CDLX partnership to explain her liking this post. However, their role at BNP is “Director, Compliance Independent Testing at BNP Paribas”. So, I am not sure if it would someone dealing with partnerships, given the other major banks who liked the post hold titles related to partnerships, card services, rewards, etc., and based on similar jobs at BNP and the job description it doesn’t seem to relate. I still think they are a potential partner, but maybe not one CDLX is currently in talks with.

Maybe a partnership with a high probability is Discover. The “Senior Executive Relationship Manager, Global Tech and Digital Partners” at Discover liked and commented on the post. While the liking and commenting could more be a function of the past relationship from both working at PayPal, you have the potential now where both know each other and are in a position related to partnerships, making it more likely to see something occur. Additionally, while it could just be random (but seems way too random), in late October CDLX tweeted, "The future of financial services is more collaboration. Collaborating with one another in the interest of the consumer”- Discover’s Amir Arooni. Just seemed like a weird think for CDLX to tweet, especially given about partnerships, and from Discover.

Someone from Fifth Third Bank liked the post, but they previously worked at CDLX so I don’t think them liking the post is as indicative of a future partnership. The difference between this and Discover is the the Discover employee is a Senior Executive dealing with Digital Partners, where the Fifth Third Bank may just be liking it from knowing Evelyne at CDLX.

Although I do not see it today, I am quite sure someone from Ally liked the post in the past. Maybe I’m just misremembering, but I had it written down. Maybe they changed jobs so it doesn’t easily show now. I will be including them as potential partners in the list below, along with some others.

While not related to the liking of this LinkedIn post, someone from Credit One Bank recently viewed my LinkedIn profile. Maybe they were researching CDLX after knowing or hearing something related to a partnership.

In total, I added Ally, BNP Paribas, Fifth Third Bank, Barclays, Navy FCU, First National, and Credit One as potential bank partners to the list below (Discover and others were already on my list).

As a reminder, scroll down to the “Other Partners” section below for additional potential partners. You might find it more interesting than these bank partners, especially given multiple employees from the same companies liked the post.

2/6/2022

Current: Larger ones in pic

Potential: AmEx, Capital One, Citi, and I believe Discover all have their own offer sections Likely: AmEx was close but didn’t want to share data I believe. Citi mentioned wanting CDLX but couldn’t for integration. I’ve heard Capital One was possible

In regards to Citi, CDLX IR they parted ways given their credit portfolio is less transactional in nature, and Citi said integration heavy. As of the last time I saw Citi offers, Citi had Rewards Network offers (not sure from directly working with them or via Figg)

I’ve heard the AmEx comment multiple times. Most recently it was during the Jan 2022 conference.

Capital One was a recent guess by one of the large ad agencies using CDLX. That is all I ever heard, so maybe not much can be taken from that. However, I found it interesting an ad agency would suspect that, as well as have a guess, unless they heard / saw something.

Discover always seemed like a great partner, especially with their size. However, I’ve never heard it mention once. Neither by CDLX, nor by other investors. There could be a reason they are not a likely partner that I do not know about.

CDLX Other Partners Existing, Confirmed, and Potential)

1/10/2022

27. As stated above in the bank partners section on 1/10/2023:

I recently came across a very good source for finding potential CDLX partners, including potential partnerships with banks, third-party content providers, fintechs, and even strategic partners.

The source was from Evelyne Forester announcing her new position as Head of FI Partnerships at CDLX as of 2 weeks ago on LinkedIn. Seeing who is liking and commenting on the announcement could be a clue that CDLX has spoken with them in the past and could be there is at least a slight chance of a future partnership.

I did not want to consider those who liked the post and either worked at CDLX in the past, lived in Atlanta, or who worked with Evelyne in the past at another employer.

In terms of potential strategic partnerships, one that I found interesting was two employees at Visa liked the post. One is the “Senior Manager, Global Partner Marketing”, and the other is “VP, Strategic Digital Partners Lead, NA Client Services”. As a reminder, CDLX has partnered with Mastercard in the past for Mastercard’s bank partners. Maybe CDLX is looking to do the same with Visa. I likely wouldn’t have given much weight to this if it wasn’t for the fact it was two (not just one) person from Visa liking the post, and both with jobs related to partnerships, and especially knowing CDLX has done this in the past with Mastercard.

The next potential partner is extremely interesting…Roku. Not just one person from LinkedIn liked the post, but THREE: “Senior Manager, Sales Enablement”, “Product Marketing - Intl Ad Tech lead”, and “Senior Counsel of Business & Legal Affairs”. The senior counsel of business and legal affairs is very interesting, given I wouldn’t think he would be involved unless there was something close to being signed, but his role seems more related to employees. Still, not sure why THREE Roku employees would be liking this post, especially ones with no apparent former relationships with Evelyne.

Others that liked the post included:

• Shopify (liked by someone with the role of “Product Partnerships”) - this would be interesting from the perspective of SMBs

• The Trade Desk (liked by someone with the role of “Data Partnerships Director”)

• PubMatic

• MiQ

• FlexOffers

• Prizeout (co-found and also the CEO liked it)

• Locala (two employees liked it)

• TAP by Button (liked by someone with the role of “VP, Global Partnerships”)

• Roundel (Target) was also on there, which I really like to see since it could be very big with Bridg in terms of Retail Media Networks, like Karim has mentioned at the last conference.

• There were many more, but I was less sure what the company did and how a partnership would fit.

2/6/2022

• Local Offers / Third-Party Content Providers

  • Rewards Network (discussed in the Bridg write-up, BofA write-up, and BofA Update write-up)

    • Already Confirmed

  • LuckyDiem

    • Possible. Used by Others

Bridg Partners and Clients (Existing, Confirmed, and Potential)

28. Previously this section only discussed Bridg partners (like POS partners). I expanded this to include Bridg users/clients (such as those that could eventually place product-level offers), given at this time we do not know for certain many, and the list is growing and will continue to grow.

(#162): 4.11.2023: Potential Bridg Clients

Potential: Albertsons

Below on 10/7, I had Albertsons as a potential Bridg client. One reason was due to seeing an individual who worked at Target / Roundel where they even mentored Bridg, who was now Head of Products and Innovations at Albertsons. Given this + Albertsons advertising in CDLX, I thought they could be a potential partner.

I believe this probability has increased since then, given Bridg used Albertsons as an example in a post on 1/18/2023 called “How grocers can leverage data to perfect the omnichannel experience”.

• “For example, grocery chain Albertsons recently announced over a dozen tech-based initiatives and tools to better connect the online and in-store shopping experience”

• “Albertsons, for example, reported relying heavily on technology investments and customer data to create and launch their suite of tools.”

They would be a very good partner for product-level offers on the new user experience.

Potential: Hershey Company

I mentioned on 10/7/2022 below how Hershey could be a potential client of Bridg, given they are a client of Horizon Media who uses CDLX + Amit Jain was liking many posts from Hershey.

Since then, Bridg posted 1 month ago where a Bridg VP joined a Hershey VP to discuss at a conference how to grow first party data. Therefore, I think this makes Hershey being a Bridg client more likely.

Potential: Love’s Travel Stops

I mentioned on 10/7 below how there were other potential gas and convenience clients, such as Casey’s, who also used CDLX.

Recently I saw a Bridg VP like a Love’s post on LinkedIn (who also liked many Casey’s posts). I didn’t give it too much weight, given the Bridg sales team could like prospective clients, not just the ones they already have. However, I think the odds are higher, now that I’ve seen they also advertised in CDLX (which I did not previously know).

Potential: Lowe’s

As mentioned below on 10/7, I still believe Lowe’s was the "large home improvement client", that Bridg signed. Multiple Bridg employees continue to like posts on LinkedIn related to Lowe’s.

I feel Lowe’s as a Bridg client could have a sizeable impact in CDLX, with being able to place category-level and product-level offers (which is where their ad budgets reside).

10/7/2022 - Bridg Clients: Confirmed and Suspected

The following are all based on recent observations.

“Banks will support us getting product-level offers, but we need 5-6 marquee clients in a variety of categories: grocery, convenience, restaurant, home improvement, etc.”

I think Bridg may already have some of these clients to fit these categories, as we will discuss.

Confirmed: Dollar General and Schnucks

I saw a former employee who in their LinkedIn profile put they were on the Dollar General and Schnucks team at Bridg. Dollar General is more interesting, and I did not know they were a Bridg partner.

Potential: Home Depot and Lowe's

We know Bridg signed a "large home improvement client" last year. While I thought it could be Home Depot given their consistent placement of offers in CDLX, I saw multiple Bridg employees liking some posts on LinkedIn regarding Lowe's lately. Both would be nice for CDLX to have though.

Potential: Hershey Company (and I mention confirmed clients of Starbucks and Panera)

Hershey is not only a client of Horizon Media (who uses CDLX), but Bridg CEO Amit Jain has also liked multiple posts lately regarding Hershey (including regarding their work with Horizon Media, which is maybe how the relationship was formed, given CDLX works with them).

While Jain likes many posts, he does like Bridg client posts quite often, including Panera and Starbucks (both confirmed Bridg Clients). Hershey has a very large ad budget (with nearly all of their ad spend going to TV), which although budgets may not mean much it still could mean if CDLX is showing incrementality for them that they could spend a lot with CDLX.

Potential: Regal Cinemas

Jain has also liked multiple Regal Cinemas posts on LinkedIn. Regal would match the announcement in Q4 2021, “And like we mentioned last quarter, Bridg is entering the entertainment sector with its product. We signed a large movie theater chain this quarter. This makes us the only performance-based channel in this industry.”

Potential / Confirmed: Taco Bell (mention of loss of Chipotle)

We know Taco Bell was confirmed as a partner of Bridg (they were always mentioned alongside Chipotle, but we heard Chipotle dropped Bridg for Microsoft, but maybe they would come back / also use Bridg for product-level offers given Chipotle still uses CDLX). I just haven’t heard anything in a long time on Taco Bell, but I see Amit Jain liked a Taco Bell post on LinkedIn this year, so maybe they are still active.

Could be one of the first restaurant product-level offers in the channel. I don’t think I’ve seen a CDLX Taco Bell offer, but CDLX had them in their Investor Day deck (using the new ad server offer capability of doing time-of-day offers): 

Potential: Safelite AutoGlass or AutoZone

I listened to an interview with CDLX and Horizon Media yesterday, where Horizon said they have an auto service client where they did geo lift testing to gain comfortability with CDLX beyond incremental ROAS from Nielsen.

Horizon said that the geo lift testing proved CDLX to them. But there was a small comment that made it sound like they may have also used Bridg, saying the client / advertiser took the data CDLX was able to provide to validate the purchase details on their end. Maybe just general timing / amounts / locations data, but it stood out to me since they said it was separate from the “national and geo-targeted campaign impression level data” that Horizon Media put in their MMM tool to prove the results. And it stood out since it was CDLX sending data to that client who could use their own data for validating purchase details.

Even if it is not Bridg related, I liked seeing someone do this geo-lift testing and CDLX still proved to work. I remember the Panera interview saying they wanted to do this given how much more comfort it provides, but they had not done the testing yet.

And if it is Bridg related, it could be an interesting data point if they are using it more for the attribution and data side.

My first guess was it is Safelite AutoGlass given the Horizon Media VP who did the presentation just liked a Safelite post on LinkedIn + all the CDLX offers + Safelite AutoGlass has been placing many offers (which have high cash back). If Bridg is involved, I'm less sure where Bridg comes into play for the product aspect (given only a few repairs they perform),

AutoZone could also be possible. While they are less “auto service” and more “auto parts” in my eyes, I guess the auto parts are used for auto service. Some reasons:

• AutoZone has their own “AutoZone Media Network”, so would explain why they wanted so much proof and had such a good understanding of advertising

• If Bridg involved, makes more sense given the Media Network and given they have some many SKUs

• AutoZone was a large advertiser in 2019 in CDLX, but dropped off. Maybe this explains why they then did all the tests to prove CDLX. Maybe there was a change of who is making the decisions for ad spend and wanted more proof before continuing to spend in CDLX at those levels, especially during covid.

• Small point, but Bridg in a recent presentation called out many Retail Media Networks. While maybe it is more a list of the biggest ones, I found it interesting to see AutoZone (given this discussion)

Retail Media Networks (Rite Aid, Home Depot, Best Buy, Albertsons, and Target)

In the webinar that I mentioned above where Bridg lists different Retail Media Networks, Best Buy and Lowe's are included. Again, likely listing the largest Retail Media Networks, but I found it interesting given I thought they could already potentially be clients of Bridg. We also know Rite Aid had product-level offers in Dosh, and still haven't received confirmation on who sourced that offer, so it is interesting seeing them listed.

Bridg looks to be targeting these Retail Media Networks (given this webinar and their blog posts). I see where Bridg can help them with expanding their data and their universe of identifiable customers beyond just loyalty members, but it would seem these Retail Media Networks would have a very large crossover benefit for CDLX as well. This is from all the in-place relationships with advertisers to place offers (e.g. all the brands/CPGs using Roundel to place offers through Target), and where you could simply add CDLX / the bank channel as one of the channels for the advertisers to place offers (e.g. Roundel offers search / Target.com, social, display ads, CTV, and more, so could add the bank channel / CDLX to that distribution list). Maybe one issue is it could be one more potential rev share partner (or rather, where you have to pay the Retail Media Network). However, if CDLX is using Bridg and Bridg data, that could possibly lower rev share with the banks (given the language in the 10-K and Lynne’s comments), and maybe those just offset. Or maybe the advertiser will simply fund it, but then it still becomes a function of iROAS.

Funny enough, I went back and found that this was discussed on Tegus. Maybe this is where CDLX acquiring Quotient could also make sense, given the relationships with the brands/CPGs, and 1000+ employees, and given $220M market cap. Maybe a partnership would be enough, but given that others including Figg partnered with QUOT, it would be nice to just keep it to CDLX and have all 1000 employees focused on CDLX (such as using their salesforce to explain to their advertisers how CDLX's iROAS has certainty from RCT, rather than relying on MTA or other models, and get them to understand they should first focus on CDLX to get the free + 100% certain money from the true incrementality). But maybe a partnership does the same without having to raise equity / debt and take on their cash burn.

Related Note #1: The VP of Sales at Bridg who gave the webinar worked at Target for about 6 years and then another 8 years at Roundel (so all with Target for advertising, but I believe there was a rebranding) of which the last 4 years were as the Head of Sales for Target Product Ads.

Related Note #2: After typing that, I did a search for "Bridg" and "Roundel" and found the following. I'm not sure if this Accelerator program resulted in Target using Bridg, but it could be possible. This also could also explain why Bridg's VP of Sales who worked at Target for so long even knew about Bridg. Possibly explains the single CDLX Target offer I saw last year as well. I included that this individual now works at Albertsons, since maybe it is more likely they will use Bridg too now.

Potential: Casey’s General Stores

Casey’s has been placing a lot of CDLX gas-only AND online-only offers in the bank channel lately. Amit Jain has liked Casey’s posts both recently and even last year (so multiple posts, showing not a one off LinkedIn like).

I don’t know how much of an overlap there is with Casey’s and their more Midwest locations vs Chase and their branches / where the majority of their customers live. Meaning, if Chase wants a large fuel and convenience client doing product-level offers (given the comment by CDLX that banks will support product-level if CDLX has 5-6 marquee clients in categories including grocery, convenience, restaurant, home improvement, etc.) I’m not sure it will be significant enough, and maybe Bridg would need or is looking for another in this category.

Potential: Firehouse

I've seen Firehouse Subs in many accounts. I've felt they have a higher chance of being a Bridg client given Relevant Mobile built their app and Bridg acquired Relevant. Additionally, Jain has liked a post from the Firehouse Subs CEO.

Potential: Home Depot, Best Buy, Dollar Tree

Chase Flash Deals were also done last year. More logos this year. Could be a coincidence, but I've wondered if Home Depot and Best Buy are Bridg clients given the number of offers from them lately, but maybe they are just leaning into CDLX a little more, or maybe I just think I see their offers more.

Also Dollar Tree was a new advertiser to me here. Given Dollar General is a Bridg client, maybe that makes for an easy sale of Dollar Tree.

Walmart

I’ve said this elsewhere, but wanted to include given the discussion of potential Bridg partners. Walmart has used CDLX before, but only for things such as Walmart+ or Pickup & Delivery only. This is the first one I’ve seen for online purchases. Maybe it isn’t too different from the Pickup & Delivery only offers, but it shows Walmart continues to spend with CDLX and try new things. This compares to Target where I haven’t seen a Target offer in CDLX in one year and Target has not tried different types of offers like Walmart. Therefore, Walmart may be more open to trying product-level offers first, and possibly in the near future. But then again, maybe Target is more likely to be first, if not already a Bridg client, given the findings above.

2/20/2022

2/6/2022

For Bridg, I think the only integration partner that is listed on a website is with PAR: https://partech.com/project/bridg/

Bridg acquired Relevant Mobile in April 2018, where there were some integrations with others.

Not sure if any are used by Bridg besides PAR: https://www.relevantloyalty.net/integrations

12/28/2021

The following SKU partners may be more for CDLX, and less as a Bridg partner. There was mentioned by CDLX of partnering with another SKU provider, even recently, as of the time of this comment.

• SKU: Banyan, Quotient, Catalina

Could it be a different provider was used for the Dosh Rite-Aid Offers (discussed more here)?

12/28/2021

• POS Systems (full write-up): Toast, PAR, NCR, Square

Partnering with Olo

2/18/2022

Intro

29. I have been revisiting Olo, and thinking through this some more.

Again, as mentioned on 2/7/2022 below, check out Richard Chu’s deep-dive on Olo for the full picture.

As context, Richard mentioned Olo to me an an alternative to some of the POS venders I suggested as integration partners in my CDLX / Bridg post. This could make a lot of sense, given $OLO's reach + growth + possibly no 30% fee. I ended up tweeting that, and Richard replied “Think a partnership could be interesting given Olo’s view of aggregated SKU data and penetration. Because Olo generates revenue per order, it would be a win-win as their clients drive more orders through CDLX”

Below is more detail on Olo and a CDLX/Bridg + Olo partnership:

About Olo

From his post, "Olo, which is aggregating POS (point-of-sale) systems and food delivery providers which are aggregating restaurants"

According to their Q3 2021 earnings: "over 500 existing, brands across approximately 76,000 active locations"

Bridg / CDLX Integrating or Partnering with Olo

If OLO can continue to scale and increase the percentage of restaurants that use Olo, they may become a better first partner for CDLX / Bridg.

Even without any growth in number of brands or locations, this would already make OLO a significant partner in size in relation to the POS venders I mentioned in my post on CDLX / Bridg.

Why Cardlytics Would Benefit from Partnering with Olo

While the original context of my mention of POS venders was for SMBs using the partnership from a self-service standpoint, a partnership with Olo still can be highly beneficial from not having to integrate with POS systems directly.

One reason is it would allow for more integrations at one time. Instead of using Bridg and bringing on one client at a time, you could do one partnership, such as $OLO, that would quickly allow each $OLO user to become a Bridg user.

Another benefit is given some of the POS venders do not have open APIs, and therefore have up to 30% fees to access and use their data, if Olo does not have these same high fees, they would like be a better partner to get this data. Based on what I see online, it looks like Olo has an open API, and therefore likely no fee.

A partnership would also increase awareness of $CDLX / Bridg, by seeing $CDLX or Bridg listed as an integration partner.

Olo and Restaurants Benefit from a CDLX Partnership

Olo benefits from more transactions and therefore more revenue. Restaurants benefit from more revenue, making loyal customers more loyal, and acquiring new customers.

Like the POS venders, $OLO partners with many technology partners, including for data analytics, loyalty and marketing, making it more probable that $CDLX / Bridg could also be an integration partner. https://partners.olo.com/

Olo Acquired Wisely

One wrinkle could be Olo's acquisition of Wisely, "a leading customer intelligence platform that enables restaurant brands to personalize the guest experience to maximize customer lifetime value".

On the surface, it seems Wisely has some of the same benefits as Bridg, giving insight into more than just loyalty program members. I found it interesting that Wisely mentions seeing 100% of customers, but maybe this just means 100% of transactions, and not have the ability to match, have visibility, and target 100% of customers.

Regardless, given Wisely's website mentions, "Wisely clients own their data", this leads me to believe that data from one store is not shared with others.

Therefore, there is still the benefit of CDLX, and knowing share of wallet for targeting purposes.

Additional benefits of using CDLX, even with Wisely, is giving restaurants the ability to advertise in the banking channel with certainty in results, brand-safe environment, highly engaged users, etc.

More Information

If you are interested in more information:

My post on CDLX / Bridg

Richard’s write-up on Olo

2/7/2022

Potential Partners: Olo

Richard Chu had an excellent write-up on Olo, going over the business in detail. I included some highlights from Richard’s deep dive where it could relate to CDLX / Bridg. I strongly recommend reading the write-up directly to get the full picture.

About Olo:

“Olo enables restaurants to own their customer by building their own digital ordering experiences, aggregating third-party marketplace orders, and leveraging cheaper white-label delivery options”

…

“Olo, which is aggregating POS (point-of-sale) systems and food delivery providers which are aggregating restaurants.”

Describing Olo’s 3 main modules:

1.      Order: Helps restaurants to build a seamless white-label digital ordering interface through mobile or web applications. Olo also offers a coupon manager to enable restaurants to create and manage in-app promotions, integrations with third-party rewards programs, and order management via Expo. This is the most commoditized part of their offering but also the most popular. Clients can either pay a fixed monthly fee or a reduced fee with a fixed number of monthly orders with an additional fee per excess order.

2.      Rails: Aggregates orders from all food delivery services like DoorDash, UberEats, or GrubHub into restaurants' POS systems, saving restaurants the need of having several different tablets collecting orders from these marketplaces and synchronizes menus, item availability, and prices in real-time. Also allows restaurants to prioritize orders during peak periods. Olo charges the aggregators a transaction fee for the privilege of serving an Olo client. Each order also counts towards the order limit mentioned above with the ordering module.

3.      Dispatch: Aggregates couriers from all third-party food delivery services to assign delivery orders depending on whoever offers the lowest rate and fastest delivery at any given location and time, thereby making aggregators compete for Olo’s clients’ business and lowering the frictional cost of fulfilling a delivery order in the process. Olo charges both aggregators and restaurants a fee per transaction. Olo's dispatch network covers 97% of their customers’ US restaurant locations.

Visibility into all digital transactions regardless of channel:

“In summary, Olo acts as middleware that connects a restaurant’s custom-built systems with an increasing range of third-party applications. This is a powerful position as it gives them a unique view of every digital transaction for a brand, regardless of the channel.”

Olo acquiring Wisley:

“With Olo, brands can see everything from order history to product mix to contact information. However, until now there has been no way to leverage that to identify the top 20% of customers that represent 60% of sales and figure out how to better engage with them. In November 2021, Olo acquired Wisely, a vertical customer data platform (CDP) for $187 million in a cash/stock transaction. With first party data from clients, Olo can get insight into digital and non-digital orders, email open and click thorugh rates, reservations, etc. to form a unique profile of each customer, and help restaurants better understand customer lifetime value. Clients can then leverage that to drive higher ROI marketing campaigns, such as targeting your high value customers with more attractive coupons.”

Additional notes:

According to their S-1: Olo is used by restaurants such as :

Out of those above, the following are already actively using CDLX: Five Guys, Red Robin, IHOP, Jimmy John’s, Subway

Therefore, the benefit of partnering with Olo could be twofold.

One is integrating with Olo and increasing the odds of these restaurants seeing Cardlytics / Bridg within Olo, and inquiring more to be able to use it, such as by asking who is in charge of marketing / advertising to look into Cardlytics / Bridg.

The other benefit is from those already using CDLX, it may make it easier and quicker to have integration with Bridg for product-level offers.

Growth from Adding Smaller Clients

1/16/2022

30. Cardlytics could experience a substantial amount of growth due to Bridg is the small and medium-sized business (SMB) space.

Supposedly according to Deutsche Bank and citied in a WSJ article on July 1, 2020, SMBs accounted for 76% of all spending on Facebook. This gives an idea of the positive impact SMB content could have on Cardlytics, who also relies on advertising spend.

There are multiple ways Cardlytics could go about adding SMB content to the channel. However, one specific area where Bridg could help significantly is by partnering with POS venders (such as the ones where Bridg is already connected to, or already partnered with), to allow SMBs to use Cardlytics’ new ad manger with self-service to place both store-level offers and product-level offers in the banking channel.

Partnering with POS Systems for SMB Content

1/26/2022

31. One initial area of confusion for myself was my incorrect idea of these POS systems, where I thought any reference to POS was in reference to ordering or checking out at a store.

I did not know they have evolved into more of a platform that integrates with different technology and 3rd party partners. This transformation was even mentioned by the Chief Strategy Officer of Northgate Market during NCR’s December 2021 Investor Day.

As an illustration, here is a graphic of NCR’s Commerce platform related to their NCR Emerald Point of Sale Software, with other solutions that Northgate Market utilizes (NCR’s Emerald POS is for retail and specifically grocery, NCR Silver is for small retail businesses and restaurants, and NCR Aloha is for larger restaurants. Aloha is the only NCR product listed under Relevant’s website (the company Bridg acquired in 2018 and is discussed more later), likely given Relevant was focused on larger restaurants at the time (their website does not look updated since 2018)).

Merchants can connect to 3rd party applications via APIs (as seen in the top right of the picture below).

For Square, there is even an app marketplace of all the different apps that a Square seller using a Square POS system can use with their business.

The 1-minute video in the footnotes may help with visualizing what is possible and where Cardlytics can fit into this platform.

Therefore, it is possible for Cardlytics to partner with these POS venders to allow their POS system users to connect to Cardlytics via APIs to be able to place offers in the bank channel.

This would allow Cardlytics to connect to a staggering number of SMBs in an environment where these merchants are thinking about all aspects of their business, and looking to easily leverage existing connections with their POS system.

Cardlytics often highlights how their offers are with users in the bank channel, where they are most thinking about their money. Connecting to POS platforms would then be the other side, where you connect with SMBs in an environment where they are most thinking about their business and increasing sales and returns

Cardlytics’ Plans for SMB Content

1/16/2022

32. Cardlytics has explicitly addressed their plans for future stages of growth by bringing local and SMB content to the channel (a focus of 2023), through self-service and the ability to connect via APIs.

As discussed in a recent write-up and video, a competitor of Cardlytics laid out what would be needed by Cardlytics to get local and SMB content, or simply, what would be required to onboard a significant number of retailers and restaurants. Below is a quick recap (additional details, such as current progress and condition of the tech, is included in the section under growth, under “What is Needed for Massive Scale”):

• New Ad Server and New UI: Needed for product-level offers and new user interface (for richer imagery and organization for local offers and product-level offers)

• Self-Service and Machine Learning: Needed given Cardlytics cannot work directly and hands-on with a very substantial number of businesses. Already 100% of new campaigns are on the new ads manager which has the self-service component, and machine learning targeting was built into the new ad server for hands-off targeting.

• Partnering: Cardlytics will not be able to add each SMB one at a time. This is why Cardlytics has already built into the new ads manager the ability to connect to partners via APIs. Cardlytics could use this ability to connect via APIs to partner with the point-of-sale (POS) providers (such as those where Bridg is an integration partner), use the machine learning and self-service for automation, and then use the new bank self-service tool for regulation (where the regulation aspect was discussed during investor day).

It could be that Cardlytics is looking to partner with more third-party content providers who already have a large number of local or SMB content, connect to them via APIs, and place their same offers in the channel, like what they are doing with Rewards Network (as mentioned in the January 2022 meeting).

Even if that is the exclusive plan as of today, I believe it should not be difficult to connect via APIs to POS systems, given Bridg and their ability to connect to 90% of POS systems. It would simply require full self-service for them to be able to place offers in the channel.

Also, given the ability to connect to partners via APIs is within the new ads manager, it may possibly allow Cardlytics clients within the new ads manager to be able to quickly become Bridg clients by easily syncing to their POS systems.

Important Point

This ability to connect via APIs within the new ads manager could also eventually (if it can’t already) go the inverse direction. Instead of Cardlytics and Bridg clients connecting to the POS systems to bring in that data, it could be that it will allow Cardlytics to partner with POS systems and allow those retailers and restaurants using the POS system to connect to Cardlytics’ new ad manager via APIs, allowing those SMBs to connect and place offers on their own. The partnership between Cardlytics/Bridg and the POS venders would be what allows for a pre-existing (or prefab) integration, to more quickly and easily allows POS system users to use Cardlytics/Bridg, instead of manually signing up each POS systems user.

Said differently, this connection could work one direction, where enterprise clients (such as those who use advertising agencies) who are already using the new ads manager (since “100% of our campaigns are running on that new platform”) can use APIs to connect to their POS systems to bring in that SKU-level data using Bridg.

However, it should be just as easy to go the other direction, especially since the original context of APIs was local and SMBs when discussing that Cardlytics “built into the news ads manager an ability to connect through APIs to be able to partner with other people and bring that content”. More specifically, we could see Cardlytics partner with the POS platforms, of the likes of NCR, PAR, Toast, or Square, and allow users of their platform to easily connect to Cardlytics’ new ad manager via APIs (utilizing established integrations from the new partnership), and place offers in the bank channel using the self-service component and other automations.

Bridg Connects to Most POS Systems and Has Existing Partnerships

1/16/2022

33. Bridg comes into the picture given Bridg is “capable of connecting to 90% of point-of-sale systems in the U.S.”.

This would allow all the SMBs that are using a POS system where Bridg can connect (or is already connected) to leverage Bridg / Cardlytics, and place offers in the banking channel using the new ads manager with the self-service component and other automations (like targeting using machine learning, instead of hands-on help from Cardlytics).

Cardlytics can leverage Bridg, given they already know how to connect to POS systems. Even better, Bridg is already partnered with at least one, as PAR is still listed as a partner on PAR 's website. Cardlytics also knows how to get Bridg data and product-level offers to the bank channel from the merchant using Bridg (based on product-level offer testing now live at U.S. Bank). Therefore, Cardlytics can complete the journey from merchant to POS to Bridg to Cardlytics to the bank.

The merchant also benefits from the combined insights and targeting, as well as being able to place product-level offers, all leading to higher levels of ad spend and at higher gross profit margins. Bridg brings the “know how” and existing partnerships, making the partnerships for Cardlytics much more possible and likely.

I’m not sure without Bridg (who has already worked and connected to POS systems) that Cardlytics would consider this, and if they did, it would likely take a considerably longer time to accomplish.

Key to Unlocking a Significant Number of SMBs

1/16/2022

34. The largest reason for myself even considering the possibility of a partnership with POS systems is the fact Bridg’s main job is connecting to POS systems. On top of that, Bridg is already integrated with the likes of PAR. However, I originally questioned, if Bridg can connect to POS systems, and already partners with them, why do we not see more revenue from Bridg, or hear about significantly more Bridg clients. I believe the answer is self-service.

I do not believe Bridg had a self-service component to their system when they were on their own. This is likely why Bridg was not able to unlock the substantial number of merchants using the POS systems already integrated with Bridg (and the corresponding large scale) until after Cardlytics acquired Bridg (where Cardlytics has now developed the self-service component and automation capabilities, and continues to enhance them to be fully self-service).

Just like with Cardlytics, it would be near impossible for Bridg to manually do campaigns for the substantial number of merchants, let alone with Bridg’s much smaller employment base. This is likely why we would only hear about a few marquee Bridg clients, and did not hear any mention of a significant number of clients using Bridg to advertise. By combining Bridg and Cardlytics, and leveraging benefits of both, both in employee resources and technology such as self-service and automations, I think together Cardlytics and Bridg will be able to unlock all these merchants and the associated scale.

Additionally, regarding the new ads manager, “100% of our campaigns are running on that new platform”. Therefore, given Cardlytics has went live with product-level offers using Bridg data at U.S. Bank, that also likely means that Bridg and the POS connected data is possibly already running through the new ads manager, which has the self-service component. However, this is likely handled either directly by Cardlytics/Bridg or an agency. Therefore, this leads me to believe the only remaining thing required for this unlock is a partnership / integration, and have a fully self-service component to new ads manager (allowing POS users to find and connect to Cardlytics/Bridg on their own).

High Likelihood of a POS Vender Partnering

1/16/2022

35. With major platforms such as PAR, NCR, Toast, or Square (to name only a few who are somewhat more well-known and public companies, $PAR, $NCR, $TOST, and $SQ), all have a large number of partnerships for their POS users. For example:

• PAR: Already has over 200 integration partners.

• Square: Already has over 700 partners connected to their platform.

• Toast: Already has over 150 partners in their partner ecosystem.

This not only shows that partnerships are common, but also that is much more likely for a POS vender to partner with Cardlytics.

Additionally, I see Bridg is listed on PAR 's website as an integration partner.

Likelihood of POS Wanting to Partner

1/16/2022

36. I believe the likelihood of any POS partnering with Cardlytics is extremely high. The simple reason is either the POS system is open for use with open APIs and no associated costs, or they are closed APIs but only given they require a partnership with an agreement to share revenue (similar to the Apple App Store).

PAR

For PAR, given their APIs look to be open to connect to, it should be all but certain for Cardlytics to work and allow their POS users to use Bridg and also Cardlytics.

The finding that sparked a lot this thinking in this post was from finding Relevant’s website. Bridg acquired Relevant Mobile, “a POS-integrated mobile app, loyalty and rewards program developer” around April 2018.

At least as of 2018, Relevant/Bridg was integrated with many POS systems with a significant number of enterprise and SMB users, including NCR's Aloha and PAR's Brink (I have chosen to focus on these two in particular given both are public companies, $PAR and $NCR, and both are fairly well known in the POS space. I know Oracle Micros and Revel have been mentioned and discussed by others, but I did not explore they for the purpose of this write-up).

Although at first I thought that since these POS systems were listed on Relevant’s site, I thought maybe this was regarding Relevant’s app technology, rather than the Bridg’s marketing side. However, I see Bridg is listed on PAR 's website as an integration partner. This may also indicate Bridg is still a partner, but could also be outdated.

However, on April 16, 2021, PAR posted a video celebrating their 200 integration partners. I highlighted in the top left what looks to Bridg, indicating they are still integrated.

When zooming in more, it more looks like Bridg.

Given that these two are/were both already integrated with Bridg, I believe they have a higher likelihood to be working with Bridg/Cardlytics in the future, especially if the integrations with Bridg are still active.

PAR has over 200+ integrations, showing their willingness to partner with others, likely through their “open API for seamless 3rd party integrations”.

PAR also recently acquired Punchh, who is focused on loyalty and engagement. My first thought with PAR spending $500M on this acquisition (for reference, their current market cap is $1.3B as of 1/14/2022) is they would likely rather push Punchh than a 3rd party provider like Cardlytics / Bridg. Researching more, I found Punchh at least started with developing mobile app loyalty programs. Punchh’s name likely came from being more like a mobile punch card, based on their images on their site.

If their focus is more on loyalty programs, then Cardlytics and Bridg would be nice compliments to their program. It is very possible that Cardlytics could help with adding new customers to then use the loyalty programs using Punchh, and could help monitor when Punchh-linked loyalty customers are still spending elsewhere, where Punchh doesn’t see. This would be similar to why Starbucks who has a great app and loyalty program, still uses Cardlytics. Even more specific, and even more powerful when Bridg is used, is how Starbucks and their large loyalty program, they only see and can engage with the 12% of customers who are in their loyalty program (in an earlier footnote, I explain why this may be slightly higher now, but still relatively low). This is why they are a client of Bridg, who enables them to see and engage with 90% of customers. When combined with Cardlytics, they can know their share of wallet in the industry, and infer what they are buying elsewhere based on the Bridg data. Therefore, Punchh shouldn’t stop Bridg and Cardlytics from being referred to PAR Brink POS users, given their complementary benefits.

Additionally, the focus of Punchh seems to be currently more in the enterprise restaurant side, rather than SMB space. Punchh then in a way is very similar to Relevant, the mobile app creator for restaurants that Bridg acquired in 2018. There is likely not much stopping Punchh expanding from just enterprise restaurant clients to non-restaurants (as I also see they work the Casey's General Stores, a chain of gas stations / convenience stores) or even smaller players like SMBs.

While a fully integrated partner likely would be easier to use compared to an external 3rd party to connect to (like Cardlytics and Bridg), if returns are better elsewhere, and if they can provide differentiated benefits (like those discussed above and experienced and used by Starbucks), then there would be no reason to not and suggest Cardlytics and Bridg to PAR Brink POS users.

Square

Similar to PAR, Square’s API also looks to be open, making it much easier for integration. It looks like Square just requires approval. Square already having 700 partners connected to their platform, so it must be fairly easy to become a partner.

I think the only difference is Cardlytics would want to be a Managed Partner, where Square assigns someone in the company to work directly with Cardlytics. The Managed Partner program is for more established software companies, which Cardlytics falls under.

It seems Cardlytics could also help with Cash App (similar to Venmo) and possibly Afterpay (even more interesting is if Cardlytics is partnering with Affirm, as mentioned in the this write-up and video). Therefore, if each of these partnerships are independent (similar to Cardlytics / Dosh only helping Venmo and no other areas of PayPal), then maybe success with Square and their merchants will increase the odds of a Cash App and/or Afterpay partnership.

NCR

Although NCR requires approval and requires partnerships for using the APIs, I believe it is very likely for them to want to partner with Cardlytics, given they earn a 30% fee on the related revenue (from my understanding), which would likely be the ad spend. Therefore, I cannot think of why they would not want to partner.

NCR markets their ways to use data for marketing, including in their NCR Advanced Marketing Solutions (AMS) which is an “is an offer management platform that utilizes data from multiple sources to deliver targeted promotions and incentives” where they discuss couponing and “relevant offers…tailored for each customer”. While they may use their first party resources to help their POS users, NCR has also integrated with digital coupon solutions such as Inmar, and integrated with digital customer engagement solutions such as Birdzi, all showing the desire for the ability to leverage the data collected by the POS systems and use it for advertising, such as through partnering.

Additionally, NCR is headquartered in Atlanta, Georgia, the same headquarters as Cardlytics. Maybe this serves no additional benefits with the higher use of online video communication like Zoom, but I thought I would at least through in that fact.

It has also been rumored that Chipotle is a large client of Bridg. Based on the information in NCR’s 2021 investor day presentation, it looks like Chipotle uses NCR’s Aloha, at least for some of their stores. Also, on the Relevant’s website, they list restaurant clients such as Firehouse Subs, and Texas Roadhouse, who are also listed as enterprise restaurant users of NCR Aloha below. This makes me believe an integration or partnership has existed. We have also seen Buffalo Wild Wings, McDonalds, Chick-Fil-A, Red Robin, and Starbucks all use Cardlytics, and therefore could have a higher probability of placing product-level offers in the channel if the integration with NCR still exists.

Toast

Like NCR, although there is approval required for an integration / partnership, I do not foresee any issues given Toast earns fees from using their APIs (discussed in the next footnote).

Not only has it been mentioned that Toast is/was a partner of Bridg (but I do not see them listed as an integration partner on Toast’s website), but Toast also has a very large partner ecosystem. Toast already has 150 partners, and intends to expand technology and channel partners. In the S-1, Toast discusses their growth strategy, which includes to “Further develop our partner ecosystem”.

This shows Toast is looking to add more partners to their already 150 partner ecosystem. Toast is not in the business of ads, which is why they partner, and would not try to build out an ad platform themselves.

In Toast’s S-1, when discussing competitive strengths, within the section on “Powerful partner ecosystem”, they state:

Cardlytics mentioned already building in the new ad server the ability to connect thought APIs to partner. While the context was for third party content providers without the use of self-service, the ability could be extended to partner with POS systems like Toast, given they use APIs to connect (and given Bridg connects to POS systems). Specifically, restaurants utilizing the Toast platform access technology partner network through the API module, where “Toast has curated a portfolio of approximately 150 restaurant technology partners that utilize Toast APIs to deliver a broad range of specialized solutions”.

How to Partner with POS Venders and Why It’s Required (about APIs and Costs)

37. From my understanding, both the POS venders and Cardlytics will have their own APIs. To have seamless connection between the two, you need an integration.

If the POS’s APIs are open, it may allow for custom integration, where Cardlytics or Bridg could simply connect to these POS systems without working with the POS vender.

However, where the APIs are closed, you may need approval or a partnership in order to connect and have a connection (sometimes called prefab integration, compared to custom integration). These POS venders with closed APIs usually also have costs associated with using them. However, it is unclear if this cost, which is usually a percentage of revenue, would be similar to the banks’ revenue share, or if Cardlytics would require the cost to be funded by the merchant (which I have heard some 3rd parties doing). My guess is it could be paid by Cardlytics. However, one benefit is if Cardlytics is used this additional SKU-based data from the connection using Bridg, the bank FI share should decrease. Therefore, in the case where the bank’s contribution decreases from 100% to 50%, and their FI share decreases proportionally to their decrease in relative contribution to the delivery of the services, then their FI share may decrease from 57% on average today to 29%, a decrease of 29%. This makes it much easier then to pay the 30% required by POS venders like Toast and NCR).

Toast

“The Toast REST API allows developers to access and integrate the functionality of Toast with other applications. Public documentation is not available; API access comes with account service and partner approval.” Source.

For cost, Toast used to charge $20 per month per location for unlimited integrations. However now, fees have increased to 30%, where “any customer using Toast that then integrates to a third party partner commands 30% of ongoing revenue in perpetuity” where the agreement states and makes clear who pays the 30%.

This looks to be confirmed by Toast’s S-1.

PAR

PAR mentions an “open web API”, which may explain why they have “40+ custom API integrations”.

In terms of costs, based on PAR’s Q3 earnings call, it doesn’t seem as though PAR currently charges to access the API and extract the data to third parties, unlike other platforms, given someone (Adam Wyden) asked if they will start charging access to their APIs. This could make PAR a very good partner, especially with Bridg already being a partner, since economics could be significantly better compared to other POS venders who instead charge for the connection.

NCR

NCR (at least Aloha) does not look to be open. I believe they require approval of a partnership and also have a 30% ongoing fee, which is the same as Toast. Source.

Square

We heard Cardlytics mention wanting to partner with Square and Cash App. I think they would be two separate partnerships. The Square app partnership, for Square sellers to place offers in the bank channel, should be very easy, with self-service, automations, and ability to connect via APIs (all created and/or in progress). I think the only thing needed will be to make it 100% self-service and automated, and have the new UI to better organize the offers (which given the new ad server is need for Bridg as well, then that should be no problem).

However, a more formal partnership with Square may be needed. I noticed in this YouTube video that when discussing how Square will work with Square sellers and help them setting up solutions, that although they mention 3rd party solutions, marketing and loyalty is always from Square Solutions (examples below). Therefore, Cardlytics may need a more formal relationship with Square, or at least a stronger managed partnership (discussed in another footnote below) to increase the odds of Cardlytics being recommended by Square to use by merchants. Maybe the Starbucks loyalty example (with increasing insights and targeting from 12% of customers in their loyalty program to 90% of customers including those outside of the loyalty program) may help illustrate the benefit and increase the odds of a partnership.

In terms of costs, the APIs look to be open and free. Square mentions they make their money from their transaction fees.

Everyone Benefits from a Partnership with POS Systems

1/16/2022

Cardlytics Benefits

38. The largest benefit to Cardlytics by partnering with a POS platform like PAR, NCR, Toast, or Square would be unlocking the possibility for a staggering number of restaurants and retailers to be able to use Cardlytics. This was likely not previously possible by Bridg alone without automation and self-service, and likely why we only ever heard Bridg mention marquee clients who they were able to help manually.

To get an idea of the numbers and how many SMBs use these POS systems:

• Toast: Toast reportedly has 48K+ restaurant locations (Toast’s S-1 mentions 48K locations using Toast, and, “As of June 30, 2021, over 33,000 locations on Toast utilized our partner ecosystem”). For context of number locations, according to Toast’s Q3 earnings presentation, there are 860K locations in the U.S., and 22M globally. In terms of sizes, “A majority of our current customer base consists of small- and medium-sized businesses, or SMBs”.

• Square: Square’s point of sale has “already worked for more than 2 million businesses globally”, and “Our sellers represent a diverse range of industries (including services, food-related, and retail businesses) and sizes, ranging from sole proprietors to multi-location businesses.” Specifically for sizes, “We are also increasingly serving larger sellers, which we define as sellers that generate more than $125,000 in annualized GPV.” However, from the table below, we can see that still 70% of Square users are earning less than $500K, fitting most definitions of an SMB.

• NCR: With NCR, according to investor day, currently the majority of their restaurant revenue comes from larger enterprises (more than 50 sites) compared to SMB restaurants (less than 50 sites). In terms of NCR’s platform sites for restaurants, there is a more 50% / 50% mix of enterprise vs SMB compared to their contribution to revenue, with roughly 10K enterprise sites and 10K SMB sites (it sounds like not all platform sites had or used payment sites). However, the focus seems to be switching to SMB. NCR expects that out of the additional 45K restaurant sites they expect to add, 75% will come from new SMBs on the platform, making SMB a meaningful portion of NCR users.

  • This switch in focus to SMBs from enterprise clients was also called out during PAR’s Q3 earnings call, where it was mentioned that NCR may be abandoning their Aloha POS product for new enterprise clients. In the NCR December 2021 investor day presentation they mentioned “recently investing a lot, rearchitecting Aloha and integrating it in with our NCR Commerce Platform”. Therefore, existing NCR Aloha users are likely still on and using NCR, just no new users. And this is fine, given the real benefit for Cardlytics is the additional SMBs NCR could add, which is now the focus.

• PAR: According to PAR’s Q3 earnings report, there were 14.9K active sites using their Brink POS (more detail on difference with updated numbers in investor day presentation below, under PAR Active Sites). PAR’s previous investor day presentation mentions 500+ brands using PAR products, so there should be SMBs using PAR in addition to just enterprise clients.

  • PAR Active Sites:

  • Q3 earnings says there are 14.9K active sites. The updated investor presentation from January 2022 says there are 50K sites. However, the difference is likely due to Punchh sites being added. We only want Brink POS sites (even those Punchh customers could also benefit from Cardlytics and Bridg as discussed in an earlier footnote).

• PAR Q3 Earnings: https://www.partech.com/wp-content/uploads/2021/11/PAR-10Q-2021-Q3-Filed.pdf

  PAR Investor Presentation: https://www.partech.com/wp-content/uploads/2022/01/Investor-Relations-Deck-011022-final.pdf

Given the number of restaurants and retailers between these POS systems, there is potential for Cardlytics to increase revenue significantly. In terms of the amount of ad spend that restaurants or retailers could spend within Cardlytics as billings, one approximation is figuring out their total revenue and taking a percentage that could be reasonably assumed to be spent on advertising and specifically Cardlytics / Bridg:

• Toast: Toast reported Nine Months Ended September 30, 2021 Gross Payment Volume (GPV) of $39.9B. Annualizing that leads to $53.2B of GPV. Assuming this represents total revenue of their POS users, and if we assume 50bps could be spent as billings with Cardlytics to help the restaurants or 10% of restaurants spend 5% of revenue (explanation in footnotes23), and ignore any further growth in Toast, that would be $266M of billings, or $186.2M of revenue (at 70% revenue-to-billings). Cardlytics’ 12/31/2020 full year revenue was almost exactly that amount at $186.89M. Therefore Toast alone could double ad spend in the channel, ignoring additional growth by Toast or from adding PAR, Square, NCR, and more. The 50bps is also from an example of a restaurant Cardlytics client and before the combined insights and targeting, product-level offers, and solving attribution problem. Therefore, the spend of these Toast users could be even higher, as well as at higher gross profit margins, given the use of Bridg data (decreasing the FI’s relative data contribution and consequently their revenue share).

• Square: Square’s seller ecosystem in 2020, “processed $103.7 billion of Seller Gross Payment Volume (GPV)”. Once again assuming this can be used as an approximation of total revenue for their Square sellers, at 50bps, or 10% spending 5%, that would be $518.5M in billings, or $362.95M in revenue for Cardlytics, or nearly double Cardlytics 2020 revenue of $187M. While the Square seller ecosystem may contain some type of transactions that would not be typical of those advertising on Cardlytics, I believe most businesses could still advertise on Cardlytics, and this serves as a good approximation, given it is only an estimation and to give an idea the scale of Square and what it could mean for Cardlytics.

Additional benefits from partnering with POS systems over other partners:

• App Stores / Marketplaces / Visibility: By being a partner with one of the major POS systems, it increases the odds of an SMB finding Cardlytics / Bridg as a solution for advertising.

• One Software Solution: Many retailers and restaurants want to only use one platform for all their business needs. Therefore, these SMBs are more likely to use Cardlytics as an advertising solution if it is integrated with their POS system. I believe the POS system is the central and vital piece of technology (hardware and software) to their business. Given all the other solutions integrated with the POS systems, most if not all of their business needs can be met directly on that platform. If Cardlytics isn’t connected, those SMBs may not use Cardlytics and use someone else (availability misweighing tendency and effort minimization tendency).

• In-House Advocates: Having Cardlytics integrated increases the odds of being mentioned by the POS platform as the solution to the merchant’s needs. At NCR’s 2021 Investor Day by the Chief Information Officer of Northgate Market mentioned “I have one person I go to, no matter what my store needs are, and they can take care of it”. For Square Managed Platform Partners, they are given a dedicated partner manager within Square, who serves also a “champion” within the company. Therefore, it is likely these in-house company representatives can tell the client about a solution like Cardlytics.

  • Square App Partners (increases probability of SMBs using CDLX)

    There are different levels of the app partnerships. Cardlytics would likely want to be approved for a managed partnership, and be a “Managed Partner”, where a Square employee is assigned to work directly with Cardlytics, and is their “champion” within the company, and can help set up conversations with others within Square.

• Source: YouTube Video

• Agencies / Consultants / Partner / External Advocates: Some POS providers work directly with consultants / partners. Square says, “our consultative approach extends to our partner ecosystem. Our job is to help sellers build the right solution set to support their goals. Often, that includes a partner app.” Therefore, if they know about Cardlytics / Bridg as a partner app when/if its connected and integrated with Square, and if they know about its success with other merchants, these Square Solution Partners could recommend it to others as well.

  • Square Solution Partners (increases probability of SMBs using CDLX)

    From my understanding, Square has different versions of this, including “Solution Integrator Partners” who help Square Sellers know what is possible and help them find the right solution. With these Solution Partners, “they are seen as experts on Square APIs and are trusted partners in creating custom bespoke solutions for this seller group”. Also a part of Square’s Solution Partners are agencies that help sellers develop their business through Square, using all aspects of the Square ecosystem.

    Three categories of Square Solutions Partners.

• More detail on the three in this YouTube video

• Bridg Data and Product-Level Offers: Since these sellers would likely use Bridg to connect to the POS systems (maybe this is why there is already the ability to connect via APIs in the new ad manager), it would allow merchants to have the enhanced insights and targeting ability from using both Bridg and Cardlytics, be able to place product level offers, and solve the attribution problem, all leading to higher levels of spend at higher gross profit margins (since using Bridg data as well).

• More Unique Local Offers: Right now, many loyalty programs have the same local offers as each other, from all using the same offers from channels like Rewards Network. These offers from POS users, such as restaurants and retailers, would be much more unique, given it requires integration with the POS system and self-service. This leads to more differentiation that Cardlytics can offer to banks and users.

POS Venders Benefits (PAR, Toast, Square, NCR, etc.)

For POS systems that provide payment solutions and collect revenue from transactions, increases in transactions and sales due to Cardlytics/Bridg will lead to increases in revenue for these POS venders.

A partnership could also lead to higher retention and expansion of the retailer and restaurant base who are using the POS systems. According to their S-1, these are all goals of Toast.

For Toast and NCR, third party partners have to pay 30% commissions on the related transactions, similar to the Apple app store, or the bank revenue share agreement. Therefore, these POS venders can significantly benefit financially if they get a 30% cut of the advertising billings of merchants using Cardlytics.

At least with Toast, restaurants also pay Toast a monthly software service free to access the technology partners. Therefore, a Cardlytics partnership may increase the value for existing restaurants using this service, leading to less attrition of the software service fee, and possibly adding more restaurants to the fee.

Retailers and Restaurants Benefit

These retailers and restaurants would likely be connecting their POS through Bridg, and therefore also benefit from the combined insights and targeting from being a client of both Cardlytics and Bridg (such as those illustrated by Starbucks, whose loyalty program, while one of the biggest, only has a small fraction of the visibility and targeting ability as Bridg and Cardlytics, which is why they use both Bridg and CDLX). They would then also benefit from being able to place product-level offers.

An additional benefit for retailers and restaurants would be from also using Cardlytics, which would enable the ability to advertise in the bank channel with Cardlytics’ 171M MAUs (or at least within their specific locations).

This is a significant benefit for someone like Square, who if they did the advertising on their own, their Square merchants would be limited to the Cash App users, which is significantly less than the 171M in Cardlytics (which ignores Venmo and more neobanks and fintechs). Even if the advertise is only located in one city, and cannot benefit from Cardlytics’ 171M, Cardlytics is much more likely to have access to many more users in their specific city, compared to Cash App users. Additionally, my initial guess is that there are very few Cash App users who also have a Cash App debit card to be able to make payments (I do, but that was only to track their Boost offers).

Additionally, most stores only see data related to transactions from their own store, and not that of others. As with the larger clients, the benefit is being able to advertise to customers who shop in their category but where their store is not earning as high of a percentage of that wallet as they would like. This includes customers who are not a frequent or loyal customer of their store, and also loyal customers who could be spending more (some advertisers focus a lot on new customers, but there are many existing customers that they are not aware of that spend even more elsewhere who would be good to advertise to).

Likelihood of Merchants Using Cardlytics / Bridg

A question I asked myself, “Although POS vender partner with many 3rd parties, and Cardlytics looks to be willing to do so, will merchants even use the Cardlytics when it is connected to their POS system?”

As discussed by SimpleTix, who has their app within Square, it has allowed them to be more visible to Square Sellers given SimpleTix is in the Square App Marketplace, “Their marketplace has given us the opportunity to be visible to their customers”.

According to Square, 850K of their Square Sellers use one of their app partners.

Given the significant benefit to merchants of being able to advertise based on transactions and SKU data to 171M users with a trusted bank channel, I believe many merchants would eventually want to test and learn to take advantage, and increase the sales at their business. Like most new types of advertising, such as when social media advertising first came out, it may take some time to learn. However, the speed of learning is likely faster given the similarities to advertising in social media, as well as these merchants already using digital tools in their store or restaurant via the POS platforms, increasing the odds of having a basic understanding of technology.

It may be more likely for a POS platform user to use Cardlytics if Cardlytics / Bridg is integrated. Integration or easy connection increases the odds of discovering the option to advertise with Cardlytics, and increases odds of using given higher perceived trust from being partnered with the POS platform the merchant is already using.

As mentioned earlier, having Cardlytics integrated increases the odds of being mentioned by the POS platform as the solution to the merchants’ needs. At NCR’s December 2021 Investor Day, Chief Information Officer of Northgate Market mentioned “I have one person I go to, no matter what my store needs are, and they can take care of it.”

There are also Square partners who help the merchants find solutions and create bespoke integration solutions. If they are aware of Cardlytics working well in one area, they are more likely to recommend it to another one of their clients. I also believe they have direct economic incentives tied to their merchants, so that should increase the odds of Square partner mentioning Cardlytics if it helps their business and works.

Even more specifically, having it integrated increases the odds merchants will use Cardlytics given the desire to use one software provider for many different technologies. This was iterated at NCR’s 2021 Investor Day by the Chief Strategy Officer of Northgate Market. (see the Bridg write-up for more detail)

The desire for restaurants and retailers to use the additional capabilities of the POS platforms makes rational sense, as discussed above, but as an actual use case, there is Save Mart, who used NCR with the integrated Inmar Digital Coupons discussed earlier, for targeted promotions and loyalty. Source.

The desire for restaurants and retailers to use and to connect via APIs was also made clear by the CIO of Wendy’s during NCR’s 2021 investor day. Source: NCR’s 2021 Investor Day Presentation, Wendy’s Conversation, starting around 45:17: YouTube video link

These examples show there are both desire and actual use cases of connecting via APIs for other applications and to use additional integration partners within the POS platforms, attempting to leverage existing partnership connection on the POS platforms for simplicity.

One way I’ve thought about this, for an SMB to use Cardlytics, if they do not do it through a POS platform, the issues are:

• The SMB may not find Cardlytics and never start using

• No one to tell them about it. No Square consultant for instance.

• No one from company to advocate for it (such as the NCR user saying how NCR suggests solutions). This could be similar to the bank self-service, where the bank is helping their clients / users, rather than Cardlytics. With the bank, it could be at the higher level with Chase helping an IPO client, or it could be at the small business space. Here is the POS vender who would be suggesting solutions to help their POS system users. Therefore, without that, an SMB may never find Cardlytics.

• Also lose out on the benefits of SKU, such as the combined insights and targeting, and product-level offers.

Banks / Neobanks / Fintechs Benefit

Banks would get more of the content they have been requesting, such as local content, and product-level offers.

Engagement would likely increase, as long as the new content is organized within the new user interface (which Cardlytics wants to add before placing product-level offers and SMB content, and where both the new user experience and product-level offers need the new ad server).

Users / Consumers Benefits

Users would save more money by receiving offers from more retailers and restaurant, more relevant offers due to SKU data and product-level offers, and possibly in higher amounts (due to things like different margins on different products and better targeting capabilities).

Summary of Why Partnering with POS Systems is Possible and Likely

1/16/2022

39. As a summary of why this is all possible and likely:

• Cardlytics specifically stated they plan to add SMB content

• They plan on doing so by partnering (where POS systems like Square, PAR, and Toast already have 700+, 200+, and 150+ partners)

• Bridg is capable to connecting to 90% POS systems in the U.S., and is already an integration partner with at least one (PAR)

• They plan on using self-service for SMB content (which is needed for an SMB in using a POS to be able to use Cardlytics/Bridg on their own)

• They plan on connecting to more partners via APIs (where POS systems can connect to 3rd parties through APIs, such as Toast, which states, “Toast has curated a portfolio of approximately 150 restaurant technology partners that utilize Toast APIs to deliver a broad range of specialized solutions”)

• Cardlytics already built and continues to work on a self-service component in their new ads manager, machine-learning targeting in the new ad server, a new UI for richer imagery and organization of local and product-level offers, and the ability to connect to partners via APIs. By already building this technology, it makes it both a reality and closer in time until it occurs.

• Cardlytics said they plan to test and learn first, where Bridg is already integrated with a POS platform (at least PAR, maybe more) who has direct connection to SMBs who use their POS platform for all functions of their business (the comment regarding testing could be more in regards to Rewards Network content that Cardlytics is already pushing, but given the existing integrations with PAR, there shouldn’t be much else needed to at least test)

• Cardlytics has already successfully used Bridg to place product-level offers in the bank channel, showing a complete connection from Bridg to the banks.

• Partnering benefits everyone: Cardlytics, POS venders, POS users / merchants, banks / neobanks / fintechs, end users and consumers.

• Cardlytics said “I don’t think investors appreciate the power of Bridg and Cardlytics’ data combined, and what we’re going to do there, and how much we are going to scale Bridg.” This shows there is something Cardlytics plans to do with Bridg that will lead to significant scale, such as the SMBs.

• To top it off, the timing matches up between multiple comments, such as

  • “What we’ve publicly stated is we will have 50% of our MAUs connected to a new ad server by the end of 2022, and the remainder by the end of 2023.”

  • “We certainly have plans to introduce SMB in the platform, but that’s really probably going to be more a 2023 exercise”

  • “The Bridg acquisition, I have said repeatedly, investors are going to look back two years from now and say, ‘how did we miss this thing’, because it’s a gold mine”

  • Altogether you have:

    • CDLX is attempting to get 50% of MAUs on the new ad server by the end of 2022 (with the remainder by 2023), which would allow for half of MAUs to get local/SMB content in 2023, since the new ad server is needed for the new user experience which can organize local content from SMBs. Additionally, the new ad server allows for Bridg data (and product-level offers) which would be needed if SMBs are connecting to Bridg / Cardlytics through a connection with their POS system (since Bridg connects to POS systems).

    • CDLX has explicit plans to introduce SMBs in 2023 (which is likely why they need 50% of MAUs on the new ad server by the end of 2022, or before 2023).

    • CDLX says Bridg, not just Cardlytics, will have recognizable impact two years from (or the end of 2023), which is after the new ad server is connected to 100% of MAUs, and a year after using SMBs on the new ad server which can also use Bridg data

    • I could be off base, but it would be quite the coincidence if these were not all related, coupled with the rational sense explained in this entire SMB section.