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Our Inc 500 Brothers?

We were tremendously pleased to make the Inc 500 this year. I actually hadn’t seen the issue until this weekend and it made for interesting reading.

I was most intrigued by other firms in our category of Advertising and Marketing, where we ranked the 24th fastest growing company.

Now, SEM firms have several choices in how they want to run their business. Most firms actually pay their clients’ media bills and are then reimbursed with some mark-up for management. Some of these firm then choose to show a HUGE top line revenue figure despite the fact that most of that money is “pass-through” to the engines. That can distort the ratio of top line revenue to employee making them look more profitable than reality.

We don’t follow that model, and given the current financial crisis I can’t tell you how glad I am about that :-) Our top line is just management fees and consulting revenue.

What intrigues me is that one of the well-known coupon affiliates also made the list, much higher than us in fact. That’s cool, but the numbers reported by Inc for 2007 were startling: $8 Million in top line revenue, and 8 employees. Now, I understand in the SEM world that maybe they were managing $7 million in advertising, made $1 million in commission on top of that and that $1 million would cover the 8 employees nicely.

However, my hunch is that they’re not spending $7 million in advertising. Clicks on “[brand name] coupon” aren’t that expensive. Indeed, I’m not sure what could account for a revenue/employee number approaching $1 million, other than a really profitable business model.

Anyone else find those numbers remarkable?

Comments
7 Responses to “Our Inc 500 Brothers?”
  1. Jeff Cornejo says:

    I disagree that a revenue/employee ratio shows ANY kind of profitability. If anything, a mostly-passthrough model, with high passthrough and small markup, would generally point to a low profitability percentage.

  2. Neilzb says:

    Those numbers are pretty remarkable, but if I had to guess I would say that it’s possible that they are just 8 people ‘outsourcing’ full time, as that would enable each one of the 8 employees to invoice for much more work than they could complete on their own. Of course, that does then put them in the situation where the figures posted are skewed because the money just ‘flows through’.

    Like I say though, that’s only if I had to make a guess. I could be completely wrong and they could have the best business model I have ever seen :)

  3. Could be Neil. I have my doubts. My suspicion is that there just isn’t much work being done, other than taking commission checks to the bank.

    Jeff, I hear you, I just don’t see those folks having any substantial expenses. They’re not buying advertising in any great volume, and cost of goods = 0, so…

  4. That’s pretty remarkable…makes me want to build a coupon site lol.

    Don’t coupon sites take a huge hit in commissions though when the customers they refer use a coupon?

  5. I read the magazine on a flight Sunday and recall seeing iCrossing on there at ~~$100M in revenues, and thought the same thing of them: are they counting media spend in their topline?

  6. Hi Christian,

    I suppose they take the same percentage hit off their commission that the retailer does. To my thinking it’s the retailer that takes the big hit, first paying a commission on a sale they probably would get anyway, then they take the hit from the offer as well.

    Insidiously, often times a customer is about to check out at Acme.com, but pauses to do a search for “Acme coupons”. Clicks on a link, doesn’t find an Acme coupon, goes back to Acme.com and places the order and guess what — the affiliate still gets the commission!!!

    I don’t know why it bugs me so much, but it does.

  7. Chris,

    I wouldn’t be surprised if that’s a real number. Inc says they have 550 employees, so their income would have to be $50 million or so to support that staff.

    Possible that it’s a blended figure with Search marketing service income separated from media for Google, Yahoo and MSN but perhaps not so for the Comparison Shopping Engines.

    We manage close to $100 million in media, so I’m sure they’re doing at least 5 times that much.

    Hope that’s useful!

    George