On Tuesday, Pureprofile is expected to close out the $18 million acquisition of lead generation business Cohort. The purchase is being funded by a $14 million institutional placement and another $3 million via a share purchase plan.
Originally published: AUSTRALIAN FINANCIAL REVIEW, 6 NOV 2016
Paul Chan was spending more than half his time in Silicon Valley and Los Angeles in the late 1990s. He watched the dotcom bubble and it was after it began to burst the young entrepreneur decided to start Pureprofile.
Prior to that, Mr Chan founded his first business when he was 21, a real estate leasing company that was bought by a development company who took him to Silicon Valley to build a property portal.
Pureprofile was born out of Mr Chan watching companies raising money in the US, but still having challenges with marketing. He came back to Sydney in 2000 to found the business.
"Pureprofile came out of the idea that the internet is two-way and the ability for people to participate is possible ... why guess when you can ask? We still fundamentally believe that today," Mr Chan told The Australian Financial Review.
Mr Chan believed that profiles and the data in them could be an asset. Users are able to earn cash or get things like free digital news subscriptions by answering questions to allow for better targeted advertising.
"People have an aversion, at some point, to paying ... and they have an aversion to irrelevant advertising."
Pureprofile has run a small number of profiles of News Corporation's metropolitan news websites, giving users who answer surveys free subscriptions. The business is also in talks with music streaming service Spotify.
On Tuesday, Pureprofile is expected to close out the $18 million acquisition of lead generation business Cohort. The purchase is being funded by a $14 million institutional placement and another $3 million via a share purchase plan, as revealed by the Financial Review's Street Talk column.
Mr Chan said Cohort was complementary to Pureprofile and programmatic advertising business Sparc Media, which the business bought last year. He says 90 per cent of Cohort's revenue comes when users register, while 100 per cent of Pureprofile's revenue, pre the acquisition, comes from post-registration.
With the addition of Sparc and Cohort, Mr Chan said Pureprofile now had the beginning, middle and end of the purchasing funnel covered.
"We're constantly looking at companies, probably more than a dozen a month. We're highly targeted and it must be aligned to the strategy," he said.
Mr Chan sees huge potential for overseas expansion, the business already has offices in New York and London and generates 45 per cent of its revenue overseas. Cohort also has offices in the UK and US and makes 10 per cent of its revenue overseas. Its raft of clients include Disney, Telstra, eBay, Red Bull and Porsche.
He said Pureprofile won 100 new clients last year, while Cohort had 160 clients and there was very little crossover, giving the business an opportunity to upsell its offering.
On Thursday, the Productivity Commission released a draft report on the data economy, proposing to give consumers the right to access their own data, opt out of data collection and authorise third-party access.
With users opting in to Pureprofile to share their thoughts, Mr Chan said the Productivity Commission's report was important.
"It comes down to the proposition; we have been spending years testing and perfecting different methods. You make it very clear the user is in control," he said.
"Our strategy is very much about being a consumer-first company ... some within the industry are not always transparent with consumers. We think there's huge opportunity with taking that [consumer-first] approach."
NovaPort Capital portfolio manager Alex Milton said he was impressed with Pureprofile's history, experience and its long-term approach.
"It was a well thought out strategy and it was a differentiated strategy," Mr Milton, who met Pureprofile pre-IPO last year.
He said Pureprofile has invested heavily in being able to gain in-depth knowledge of consumers, making it much more valuable to advertisers.