FreeMonee, a San Mateo, Calif.-based startup that enables merchants to drive traffic to their stores by crediting consumers’ debit and credit cards, has raised another $34 million.
The round, which brings the company’s total funding to $45 million, was led by Charles E. Ryan, current Chairman of UFG Asset Management and former Chief Country Officer and CEO of Deutsche Bank Group in Russia, and included existing investors Redpoint Ventures, Sutter Hill Ventures, Opus Capital Ventures and Pinnacle Ventures.
Founded in 2009, the company works with 100 different merchants (from 30 different categories) and four financial institutions, to give consumers free, no-strings-attached gifts in the form of credits to their credit and debit cards. With the “gifts,” consumers can purchase items of their choice from the merchants offering the gifts. In return, retailers get more store traffic and sales, without slashing prices.
“This is not a twist on couponing. It’s the first time that merchants are able [attract] consumers on demand without discounting,” said Gadi Maier, CEO, president and co-founder of FreeMonee. “They can bring [as many] people [as] they want, when they want them, where they want them.”
With the new funding, the company said it plans to continue pursuing its mission to “change the economics of advertising” by expanding to include more merchants and banks and building out the platform’s underlying technology. FreeMonee’s ‘gift underwriting engine’ analyzes transaction data from financial institutions to match hundreds of thousands of merchant gift options with the customers who are algorithmically determined to be the most likely to redeem them based on their purchase history. For example, the company previously told me that it has found correlations between golf, charitable donations and travel, so a consumer whose past transactions include airline tickets and donations to nonprofits might be interested in new golf clubs and offered a credit to Sports Authority.
When FreeMonee receives the purchase history from the banks, the transaction data is entirely stripped of personally identifiable information to protect consumer privacy. But given sensitivities around personal information and lingering distrust of the financial industry, financial institutions and partners may feel that they need to tread carefully. U.S. Bank(s USB) and CapitalOne(s COF) have publicized their partnerships with FreeMonee, but two other banking partners have not publicly disclosed their participation. Still, by linking their cards with merchant rewards, financial institutions may be able to give consumers another reason to bank with them.
FreeMonee said the incentives lift sales by 400 to 700 percent and that for every $1 spent on a FreeMonee campaign, brands’ return in sales is $6 to $8.