There’s a chance that the face cream you just bought online was developed by a local ad shop.
Meet ConversionPoint Technologies Inc., an Irvine-based digital marketer that scours cyberspace for the latest trends in health and beauty and then creates products containing the popular ingredients.
The process takes the guesswork out of marketing and leads to direct-to-consumer e-commerce sales, which is ConversionPoint’s real strength.
“We don’t hope—hope is a terrible strategy—we know what consumers want and we formulate a product around it,” said Andre Peschong, the company’s senior vice president of capital markets. “For example, we see a real need for anti-aging skincare treatment that supports hydration and one of the ingredients is retinol A, because people are searching for these ingredients. We’ll go to a [Food and Drug Administration]-certified manufacturing facility and have them create a formula that has all of the aspects that we want—has retinol, supports hydration—and they’ll formulate it, fill the bottles and put them in packaging that we end up creating, and then send the product directly to our fulfillment house … What ConversionPoint then does—which is the most important part—we sell it effectively, focusing on return on investment.”
The products—about a dozen of them, including Reawaken Phytoceramide Eye Cream, fish oil supplement OmegaTrio and FuryRX, a male enhancement formula—are all consumables and sold exclusively online on a subscription basis.
“It’s a formula that works, no different than Amazon’s Subscribe & Save,” Peschong said.
ConversionPoint’s proprietary e-commerce technology DriveBy uses machine learning to improve its digital ad purchases and lower customer acquisition costs.
The company runs “hundreds of ads, each with a little bit different content, different colors, different people, different positioning of that content, on different networks.” It can see which ads and publishing networks—Facebook, Google, etc.—are getting the best response and it cuts off media spending to low performers.
“On a real-time basis we are making sure that we are optimizing the media and only spending money to acquire customers on the best converting ads and e-commerce space,” he said.
The customer relationship management portion of the technology, Comiseo, handles payment processing and customer data management. ConversionPoint also uses its BlueDrone software to automate product delivery and customer re-marketing efforts.
“Even if you lose a consumer through the sales funnel, we get enough information that we can retarget them with another product, another service, whatever it is,” Peschong said.
ConversionPoint was formed last month following the April 28 merger of Branded Response Inc. in Irvine and Push Interactive in Minneapolis. Both had in-house brands and were selling products online, while Push Interactive also focused on lead generation and the development of software that’s now boosting ConversionPoint’s online sales.
“[Push] saw the vision, saw me as a dominant player in the industry, and they wanted to grow the company in a much larger fashion,” said Peter Nguyen, who co-founded Branded Response with Chief Executive Robert Tallack and Chief Operating Officer Stephen Blazick, and is ConversionPoint’s largest shareholder. Nguyen is also the chief executive of Ad Exchange Group, an Irvine-based firm that develops and executes digital ad campaigns but charges clients only when it generates sales. The company’s projected revenue will reach $140 million this year, up from $100 million it posted last year.
“Peter has an incredible ability to see markets form, and how best to address that,” said Peschong, who joined Branded Response in December, after 25 years in investment banking. “Once I saw he was part of this team in conjunction with the other two very experienced internet marketers, I didn’t even blink.”
Nguyen was recognized by the Business Journal in March with an Excellence in Entrepreneurship award.
ConversionPoint’s management expects its sales to surpass $60 million this year and plans to diversify its revenue stream by licensing its technology platform to other e-commerce companies.
“We are in talks with a large fulfilment company that needs to upgrade their technology,” he said. “Our BlueDrone software would plug into their warehouse (system) and completely automate a process that’s currently done by Google Docs, QR codes and spreadsheets.”
The licensing business has “a higher margin and it’s more systematic—you’re getting paid on a monthly basis, on a per-contract basis,” and is expected to account for 30% to 40% of total revenue in the near future, Peschong forecasted.
Management also plans to file for an initial public offering on the NASDAQ within the next 18 months, to get easier access to capital.
“This whole direct internet marketing business is very fragmented, so we have significant opportunities to buy companies that are very accretive to the business, both from the tech and internet marketing side,” he said. “As a banker I look at this as sort of the beginning of a large fundamental shift in the market, kind of like smartphones—nobody is going back to a flip phone. In this case … what you’re seeing is a decline of bricks-and-mortar retail traffic and purchasing that’s shifting to online.”
An IPO would also enable ConversionPoint to ramp up staff and expertise to market and sell other companies’ products—the Estée Lauders of the world.
“Some 20 companies have approached and asked us if we would manage their entire sales funnel,” he said. “It’s a very-high margin business when you are doing it for someone else on high volume. We see the opportunity but unless we have the right people around it and scale, we are not going to do it.”
Peschong also sees the product side of the business continuing to play a significant role, “because we are so good at determining consumer demand, and determining what is selling.”
“Products have a lifecycle of nine to 12 months,” he said. “Once we go through that, there is another hot ingredient—Kombucha this or whatever it is—we go to what consumers are searching for.”
So, that iced tea you bought online, it may have been made by a local marketing shop.
