Estimates of Quidco's turnover / growth - can you check this research?

[affiliatebusiness]

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First off, I'm a regular user here but I have registered a fresh account and am visiting from a different IP address. This is because I've seen negative messages in the past when users ask questions about other sites or businesses, and I don't want my company to be tarred with that brush.

The team I work with is pitching a new business concept around affiliates and cashback in the UK. My boss has asked us to evaluate some of the competitors in the space such as RPoints, TopCashBack, Mrs Cashback etc. I've been tasked with checking out Quidco. We've been asked to find out estimates for their member numbers, amuont of business delivered to merchants, amount paid to members, turnover, profit and growth rate. The reason I'm posting is because some of you may be able to help analyse the data I've picked up so far, and double check whether it makes sense.

(Incidentally, does anyone have sources where we can get this kind of information on these sites? So far we only have Google and Companies House to go on as sources! If any companies in this space would like to volunteer the information then it would save us all a lot of trouble!)

No prizes for noticing that there are a lot of ifs here. It's all estimates. We don't know how many of their users reach the £5 mark every year and we don't know whether there are hidden incomes (bonuses, hidden affiliate tiers) that Quidco doesn't pass on to customers, although given that their accounts show that the vast majority of their income goes straight back to customers.)

The other thing we don't know is what happens to revenues from Hot Uk Deals. The accounts for Maple Syrup Media are listed "trading as Quidco", not Hot UK deals, and there doesn't seem to be any sign that the Hot UK Deals income is listed. Maybe they file personal accounts for Hot UK Deals revenue and don't need a limited company because they have no liabilities with that site. But Quidco shares affiliate links with Hot UK Deals (look at their Deal Monkey site), and presumably Quidco's higher affiliate tiering will have positive effects on the affiliate income Hot UK Deals generates.




So, Companies House has abbreviated accounts for Maple Syrup Media, trading as Quidco, for the year ending 31st July 2006. Wikipedia says the site was launched in May 2005, so the accounts should give a picture of the site's first year of operation:


: Quidco had shareholders' funds of £8,835, of which £1,000 was share capital

: The company had £552,411 of assets - all of this except £1,000 of this was "cash at bank"

: Of the cash at bank, £545,196 of this was "amounts falling due within one year" - presumably this is money due to members, which would be paid out in the next month?

: The "net current assets" is the assets minus the amounts falling due, ie £7,215.




Can we assume this represents their takings before expenses? That £7,215 is a rough indicator of what they got to keep in a month in the middle of 2006? If so, we can start to make estimates of their member numbers at that time, and their turnover / profit:


: £7,215 divided by £5 allows us to make an estimate of the maximum
number of new active / earning members in July 2006, ie 1,443

: 1443 multiplied by 12 would help us make a very rough estimate of active / earning annual members in 2006 = 17,316

:. £545,196 multiplied by 12 makes an estimated amount paid out to members of £6.5 million in 2006

: £552,411 multiplied by 12 would make a rough estimated turnover of £6.62 million in 2006

: £7215 multiplied by 12 would make a rough estimated income before expenses / tax of £86,580 in 2006



Next we need to figure out growth rate, but because there are no accounts for 2007, we are trying to estimate them. This is where it gets tricky because all we have is what we can find on Google, like figures Quidco has mentioned to the press, and guesses based on the employee numbers it has published.

In February 2008:
http://www.netimperative.com/news/20...-xmas-shoppers

The article says "Online cashback cooperative Quidco has announced it has paid out more
than £2.7million to its members in November and December - the highest
ever payout to its consumers over the festive period." This adds up to about £1.35 million per month paid to members in the busiest months, or a maximum of £16.2 million paid to members in 2007.

We think from the accounts in Companies House that they paid out around £545,196 in July 2006 to members, or £6.5 million per year in 2006. So the growth between 2006 and 2007 in terms of payouts would be 2.49 times growth.



The same piece says "More than 165,000 members made purchases via Quidco in November and December, with the top ten most popular sites visited receiving a sales boost of over £9.5m"

If the top ten sites got £9.5 million in November and December 2007, that's £4.75 million per month. Okay, so they don't give the entire value to merchants, but maybe the top ten sites accounted for 80% of income, and besides these are two of the busiest months in the year, so it seems fair that it wouldn't be too much of an underestimation to say £4.75 x 12 months = £57 million to merchants in 2007.

So if we estimate that merchants made £57 million via Quidco in 2007, and take their figure of £26 million for 2006, this means Quidco has experienced 2.19x growth in terms of retail contribution.



In December 2006
Rob Manuel » Blog Archive » Can you really get cash back for everything you spend online? Quidco said: "Number of users isn't a public number sorry. I would say it's a bit irrelevant anyway. It's kind of like talking about website"hits"" "If you need a number the public one we use is £26 million bought through partner merchants by Quidco members so far in 2006."

So if £26 million was the amount bought at merchants, and the takings before tax and expenses at £86,580, then Quidco in 2006 took an amount equivalent to 3% of the merchants' win. (This figure seems really small - I would have thought the overall percentage through affiliates they would get would be nearer 8%... unless the £26 million claim was an exaggeration, which may explain it.)

If Quidco's final income is still equivalent to 3% of the merchants' win in 2007, then it would be 3% of our estimated 2007 figure of £57 million, ie Quidco's final takings before expenses would be £1.71 million in 2007. This would be growth from 2006's £86,580 of 19.75 times!




What if we double check these against the member numbers? Quidco have told the press that "More than 165,000 members made purchases via Quidco in November and December". This is a huge growth on our estimated active annual membership of 17,316 for 2006: 9.5 times growth in one year! Compare to RPoints which launched two years before Quidco and has taken five years to get to 100,000 members. Yes, Quidco has overtaken RPoints in Alexa, but it only did so from around April 2007, and even so its increased daily reach is only 0.002% above RPoints.

If Quidco's claim of 165,000 active members is true, and being generous and saying that the company gets £5 from each of those, its takings before expenses would be £825,000 in 2007. Again this is a huge jump from £86,580 in 2006 - 9.5x growth in just a year.



Unless anyone can think of any better ways, the only other way I can think of to double check the figures is to look at the size of their team. Given that Quidco has had a lot of stick on forums etc for not keeping up with tracking complaints etc, it seems fair to guess that they will be trying to take on as many customer support employees as they can afford.

They have two directors, full time - let's assume they take £30k each

They said in the December 2006 article above that they had two additional customer service people and a couple of programmers - let's assume that these are all part time, earning 10k each

On Dec 5th 2007 the site said they're taking on three new member support staff (let's assume those are all paid £14k each) and interviewing for two more member support places (again let's assume £14k each) and interviewing for a dedicated member support supervisor (let's assume £20k for them.)

Also on December 5th they said they were taking on a community support liaison part time - let's assume 8k.

On Jan 8 they advertised for a sales and marketing manager at 25-36k, and a sales support exec at 19-25k. Let's average those out at 50k between them.

Total staff size would be 15 during 2008, and estimated cost for these is £220,000.



To summarise what's written above:

: The estimate of Quidco's growth in payouts to users between 2006 and 2007 is 2.49 times

: The estimate of Quidco's growth in merchant contribution between 2006 and 2007 is 2.19 times.

: Accounts at Companies House seem to suggest that their income before expenses in 2006 was £86,580.

: Estimated staffing costs for 2007 / first half of 2008 including directors = £220,000.



If the figures claimed by Quidco in the February 2008 article are true, I'd estimate that translates to being 9.5 times growth from 2006 to 2007. Is this realistic? If Quidco was making £825,000 a year, wouldn't they employ many more staff, to squash the customer service complaints? Wouldn't they make more aggressive moves, such as advertising?

What if, instead, their growth is between 2.5 and 3 times? This would be far more in line with the estimates in points 1 and 2 above. It would mean that they take anywhere from £250-£300,000 before expenses, and would allow them to pay their staffing costs plus development costs.

It would make their active membership something more like 50-65,000 - which would again make sense, because it would be smaller than RPoints, and smaller than Hot UK Deals (which has been going longer and is at 80,000 forum members).

Are our estimates too conservative? They seem more sensible than the numbers that Quidco would have you believe. But I admit that there are a lot of potential pitfalls in these estimates, so I will be really interested in seeing your feedback.

[affiliatebusiness]

Lots of people have read this thread but no opinions on the estimates. Can anyone help?

[Barry]

I can't even get my head around my own accounts let alone work out someone elses

[ChrisJohnson]

Ignore the comissions, as they're all being passed back i don't think you can use estimated commission earnings for this analysis.

I think the payment structure may be tighter than you've estimated, £5 debit may need to include advertising, bacs setup/business cheques so i would not include the users first £5. It's the second year that the revenue is going to be better as they do not need to set these up for return customers.

I would have thought the Revenue Share for bingo & casino retailers would be their biggest earner. Sending the volumes and passing the 100% commission is nothing when the 35%-ish Rev Share is earning you big bucks.

Affiliate Bonus schemes are in place too, cash rewards for achieving x amount of sales.

Re: Hotukdeals and Quidco. Best of luck working that one out

[ian-d]

Being that a number of 'non-members' have come on here before to give wild claims and accusations about quidco, even some going as far as trying to suggest they are fiddling the vat (maybe thats what this is aiming at!), i'll not share what information i have, as i cannot see exactly what your intentions are. What i will say is that your figures are far too conservative, and membership levels much higher than you've predicted.

[affiliatebusiness]

Hi

I registered a new account precisely to avoid the kind of accusation you are now making. I have no ulterior motives other than that we've been asked to do a competitor analysis and work out what kind of potential there is for our own business.

If you have sources for this kind of research please let me know...Alexa is the only reference people seem to use, but it's not that helpful in a business plan.

Quidco's accounts are a matter of public record. Nothing in here whatsoever to suggest that Quidco is doing anything untoward - were that the case (and it's not) HMCE could easily find that out for themselves and wouldn't need a web forum!

That said, I still find it surprising that they could have reached 165,000 active members by December 2007, given the way that the above calculations work out. I think it's an exaggeration.

[drivetowin]

Competitor analysis I can understand. What I don't understand is how that tells you what kind of potential there is for your own business - it doesn't at all.

Take a theoretical example. I think I want to sell widgets - so I dig around and find that the top widget seller sells 100,000 widgets a year. So I think 'ah, so potentially I could sell 100,000 widgets a year' - well I would be wrong - why? - because just because the top widget seller sells 100,000 widgets does not mean the market for widgets is 100,000 (though true I guess it indicates the market potential is at least 100,000) but, and it's a big but, even given that my potential is only 100,000 if I can persuade everyone who buys from the top widget seller to buy from me instead - how likely is that to happen - depends on the quality and price of their widgets against the quality and price of my widgets.

The point I'm trying to make is that whether Quidco have 165,000 members, 16,500 members or 1,650,000 members makes diddly squat difference to the potential for YOUR business - there are at least 20,000,000 potential members of a cashback programme in the UK, so whatever the figures, all of the existing providers have but scratched the surface.

[affiliatebusiness]

Together with the team I'm part of, I've been involved in writing a few business plans, and it does help to know what one's potential competitors have achieved. If you know how much your competitors earned in how long, and what their growth rate was, it's a benchmark by which your investors can measure the likely return on investment.

Also your point about the market being potentially 20 million strong is simplistic - this is a niche area of business and some people on this forum have already said that the cashback market is monopolised, some that it's oversaturated. How can you tell this is the case without knowing the numbers of users of these services? This is why I was asked to get some research, and I'd like to say thanks to those of you who offered feedback.

[drivetowin]

If you are planning to merely do what the existing players are doing then I would say don't even bother and go away and do something else - the 100% cashback model appears to be the model more and more players are adopting, so unless you have deep pockets to fund a real marketing push against them (and I'd estimate you would need a budget of at least £250-500K) then don't even go there.

There is still plenty of room in the cashback arena imho, but, you need to think 'outside the box'.

[HomerJ]

...there are at least 20,000,000 potential members of a cashback programme in the UK, so whatever the figures, all of the existing providers have but scratched the surface.

Spot on estimate, eventhough I think it is probably little bit on the conservative side. We have done market research on this for the last few years and believe there is still potential.

Affiliatebusiness, I think drivetowin knows what he is talking about. I may not know as much as him, but we do have some experience in the industry. Our company runs 40+ cashback sites and we know the game a bit. The market is definitely not "saturated".

Company's house data doesnt tell the full story as you know anyway, but I dont think it is a good idea to analyse someone's data like this on a forum. It would make more sense doing this if they are a public company and are selling shares.

Good luck with your project and if you need any more help with your research, we would be happy to help with - except in analysing other people's company's house data

[GreasyPalmNeil]

Hi AffiliateBusiness,

Do we know each other?

Personally, I don't think your top end member figures are too far out, but the net profit forecasts need some adjustment.

I'm sure neither of us would want to give too much away publically...

If you'd like to get in touch then we can have a quick chat and explore if there are any opportunities for us to work together?

Regards

Neil Durrant
neil < AT > greasypalm.co.uk