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Seeking to capitalize on the successful initial public offering of fellow e-mail marketing firm Constant Contact Inc., ExactTarget Inc. has registered for its own public offering. Indianapolis-based ExactTarget seeks to raise $86.3 million, according to regulatory documents filed Friday, Dec. 14. "The IPO market is kind of like spam," quipped Tom Taulli, founder of DealProfiles.com, an online service that tracks IPOs and mergers and acquisitions. "When something works, you get a lot more deals just like them." Shares of Waltham, Mass.-based Constant Contact, which went public in October, rose 79% in their first day of trading. The IPO closed at $27.64 after pricing at $16; it closed Monday at $20.85 per share. Like Constant Contact, ExactTarget provides Web-based e-mail marketing software that allows businesses and organizations to create, send and track permission-based messaging campaigns. While Constant Contact focuses on small businesses and operations, ExactTarget caters to midsize companies. And although it generates roughly the same amount of revenue as Constant Contact, ExactTarget makes money. For the nine months ended Sept. 30, ExactTarget reported net income of $2.1 million on revenue of $34.2 million. By comparison, Constant Contact recorded a net loss of $7.2 million on sales of $34.6 million. One reason for that is Constant Contact is spending more in order to capture business among smaller enterprises. The company spent $27 million on R&D and sales and marketing in the first nine months of 2007, compared with $19.7 million for ExactTarget. For that same nine-month period, Constant Contact improved its revenue by 82% over the year-ago period, while cutting its net loss by 40%. ExactTarget, meanwhile, showed a 55% improvement in revenue, while net income was up 14% compared with the first nine months in 2006. Forrester Research Inc. expects the U.S. e-mail marketing sector to grow from $2.7 billion in 2007 to $4.2 billion in 2010, representing a compound annual growth rate of 9%. Julie Katz, an analyst with Forrester, said both ExactTarget and Constant Contact are well respected in the industry, though ExactTarget faces heavy competition in the enterprise sector, with many larger businesses already have established marketing campaigns with specific e-mail software vendors. "There's a lot of opportunity with small- and medium-sized businesses because fewer of them have adopted e-mail marketing," she said. "But the vendor landscape in the enterprise space is somewhat saturated." Taulli said being profitable should help ExactTarget if it proceeds to go public sometime next year. He said any downturn in the economy could crimp demand for e-mail marketing technology because corporate customers often cut their advertising spending during a business slowdown. "I don't think profitability is the single factor they're going to look at, but it does set ExactTarget apart from other companies that are going public," he said. "People are going to look at how the growth rate is tracking, if they're keeping costs in line and if the profitability is still intact." Thomas Weisel Partners LLC will act as sole bookrunner for the IPO, while William Blair & Co. will serve as co-lead manager. Wachovia Securities, Pacific Crest Securities and Canaccord Adams Inc. will act as co-managers on the IPO.  Deal Video
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