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Cardlytics ($CDLX): Product-Level Offers Update

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


For all my notes on CDLX, check out my Qualitative and Quantitative “Research Notes”:


For those interested, this post is also available on YouTube, Apple Podcasts, and Spotify.


Market Cap as of 12.28.2021: $65/Share x 33M Shares ~ $2.1B Market Cap.


Introduction

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:


Lynne Laube, Co-Founder and CEO, Cardlytics, December 2021 Raymond James Technology Investors Conference, SKU, Product-Level Offers, Bridg, TAM, Market Size, CDLX, Swany407, Austin Swanson

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.


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:


Lynne Laube, Co-Founder and CEO, Cardlytics, Q3 2021 Earnings Call, product-level offers,  SKU, Dosh, U.S. Bank, CDLX, Swany407, Austin Swanson

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:


Lynne Laube, Co-Founder and CEO, Cardlytics, December 2021 Raymond James Technology Investors Conference, Bridg,  SKU,  Product-level offers, U.S. Bank, CDLX, Swany407, Austin Swanson

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:


Dosh, Cardlytics, CDLX, Product-Level Offers, SKU, Rite Aid, Swany407, Austin Swanson

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


Dosh, Cardlytics, CDLX, Product-Level Offers, SKU, Rite Aid, Swany407, Austin Swanson

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


Dosh, Cardlytics, CDLX, Product-Level Offers, SKU, Rite Aid, Swany407, Austin Swanson


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:


Lynne Laube, Co-Founder and CEO, Cardlytics, December 2021 Raymond James Technology Investors Conference, SKU, Product-Level Offers, Bridg, TAM, Market Size, CDLX, Swany407, Austin Swanson

Follow-Up


If you have any questions or push back on any of the above, please contact me. I would enjoy discussing more.


-Austin Swanson (Swany407)


Twitter: @Swany407


More Detail

I discussed this topic in more detail in the following video:



New Innovative Fintech Partner, Affirm?


New Observations, Upcoming Earnings Calls, and Updated Allocations

Substack Write-up and YouTube video:


The Best Potential Next Partner, Apple:


Future Possibilities


Valuations & Intrinsic Value


Thoughts Following Q2 2021 Earnings and Price Decline


Opportunities with PayPal

Best Case Scenario with Venmo



Investor Day Presentation (Includes discussions on Venmo)

I discussed Venmo Offers in detail in the Cardlytics investor day write-up and video:


Venmo Offers Valuation

I discussed Venmo Offers and valuations with additional detail in the following write-up and video:




Detailed Write-Up and Valuation

If you are looking for more detail on this company and the investment thesis, I have created a write-up, which is free to read via Substack. The write-up is formatted in bullets to more quickly skim and read sections of interest.


I also discussed the investment on YouTube.


Additional Resources and Links

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis. Please see the Disclaimer page for more details.


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