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Constant Contact acquires Boston-based CardStar to help small businesses run loyalty programs

Posted by Scott Kirsner  January 19, 2012 06:00 AM

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The acquisition talks between Constant Contact chief executive Gail Goodman and Andy Miller, founder of the mobile app start-up CardStar, began to get serious last summer.

First, Goodman had a drink with Miller at the MITX Innovation Awards last June. (She was there to pick up an "Innovation Hall of Fame" award for building the Waltham company into a major force in digital marketing for small businesses, with 900 employees; CardStar took home two awards, too.) Then, she was on a panel with Miller as part of FutureM week in September. What started out as vague discussions about how Constant Contact might partner with CardStar,  which makes an app that lets consumers store their frequent-shopper card info on mobile phones, turned into conversations about how Constant Contact might acquire the small Boston start-up.

"The two teams started to get really excited about the potential as the weather got colder," says Goodman. By early December, they'd agreed on the terms — which aren't being disclosed. The purchase is being announced this morning. It is Constant Contact's third acquisition since 2010, as the company seeks to diversify beyond its core business of helping its customers conduct e-mail marketing campaigns.

Miller says that CardStar's app is available on six mobile platforms, including Android, iPhone, and Windows Phone 7. Users can enter the account numbers for their various loyalty programs — at pharmacies and bookstores, for instance — and their phone's screen then displays a scannable barcode that can be used instead of a physical card. Retailers can also offer coupons and special deals through the app. (I test drove the app in 2010.) "We don't talk about download numbers," Miller says, "but we do talk about active unique users. Those are people who've installed the app and used it at least three times." CardStar has more than two million of those; about 85 percent are in the United States. The company raised about $1.75 million in funding, from Verizon Ventures, LaunchCapital, and others.

Goodman says Constant Contact will maintain the CardStar brand: "Their consumer base is a big help to us. We've always felt like loyalty was something we'd need to have an application in. But the question was, how do you make it simple enough for small businesses?"

I regularly use the CardStar app when I shop at CVS, but I asked Goodman how it might work with an independent local business, like a bagel shop.

"Maybe they used to give you a punch card, and you had to carry it around in your wallet," she said. "We're gonna say, 'Forget about the dog-eared card. You can sign up for the store's loyalty program on the same app where you have your CVS card and your gym membership card.' There's an easy way to hold your phone up, and the person at the bagel shop can either scan it or type the number into their point-of-sale system. If they're doing something like, buy five bagels and get the sixth one free, they can deliver that reward right to the app. And we can also let you know that it's waiting through e-mail, because we're pretty good at that. And you might want to let your friends know what you earned through social networks."

Miller will become Constant Contact's director of mobile products, and three other CardStar employees will join the company, including chief technology officer Danny Espinoza. But other key players, like chief operating officer Michael Bratt and vice president of business development Stuart Hilger, aren't making the move.

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Scott Kirsner was part of the team that launched Boston.com in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.

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