I can tell you that, personally, I don't really listen to advertising. Of course they will tell you that they are the best; what else are they going to say? What means a lot more to me is hearing about something from people who I know and trust. If they say its good, I am much more willing to give a product a shot. Extole takes the idea of generating word of mouth and turns it digital.
The social advocacy platform has raised $7.6 million in funding, it was announced Wednesday. The investment was made by Extole’s current investor roster including Shasta Ventures, Norwest Venture Partners, Redpoint Ventures and Trident Capital.
Extole had previously raised $5 million in series A financing, from by Trident Capital with participation from Redpoint Ventures and Norwest Venture Partners. In February 2012, the company raised a $10 million Series C round of funding from Shasta Ventures with participation from the three existing firms: Norwest Venture Partners, Redpoint Ventures, and Trident Capital. This latest round brings Extole’s total funding raised to date to $29.6 million.
The money will be used to fuel growth, accelerate the product and investment in platforms. This includes building up the company's backend security system, Jim Barnett, Chairman of the Board at Extole and General Partner at Shasta Ventures, said in an interview with VatorNews. There is a high risk of fraud, and the company needs to reassure their customers that the referrals they are seeing are real.
San Francisco-based Extole, which was founded in 2009, allows brands to offer rewards to customers in return for them referring said brand to their friends.
For example, a customer can give a coupon to a friend for 20% off, and, if that friend uses that coupon, the person who referred them will also get a 20% coupon. Or, a brand might give a reward to a customer who refers a specific number of people. Rewards can either be cash or coupons.
Barnett calls what Extole does, "digital word of mouth marketing," and he says that data has shown that incentivized word of mouth works much better than non-incentivized, meaning that people are much more likely to get the word out if there is something in it for them.
Referrals can either be sent through e-mail or social media. Interestingly, Barnett says that the referral-rate on e-mail is much higher than that of social media, simply because people are more likely to be selective as to who they are going to send an e-mail to, as opposed to sending out a mass message on Facebook. It is also less clear how many people actually see the referral on social media.
What separates Extole from other similar service, such as SocialTwist, is the "robustness of its backend," Barnett says, which includes tools for security and anti-fraud; optimization; and processes for managing rewards. The company also offers its clients analytics and insights into the effectiveness of their rewards program, including the number of shares, sharers, clicks and conversions, to help brands better optimize their program.
Extole's customers include T-Mobile, Shutterfly, Redbox, Travel Channel, Zazzle, kate spade new york, SkyMall, and Seamless. The company's 150 clients are half larger enterprise companies, and half medium sized, or "corporate sized" companies.
While the company is not profitable, Barnett says it could be if it was not focused on growing and building a valuable company. Being able to raise capital, he said, shows that the company is in a good position.
The way Extole gains revenue is through a software as a service model, where companies pay an yearly fee, in addition to an implementation fee, that can be renewed annually.
(Image source: http://extole.com)