Giftify Announces 75% Growth as Flywheel Kicks Into Gear

Just as we thought we’d seen it all, the Giftify, Inc. [NASDAQ: GIFT] growth story took another major turn with the company announcing a 75% year-to-date sales growth in its CardCash.com affiliate channel.

This is much bigger news than first meets the eye, depending on the perspective you view it from.

On the one hand, the story doesn’t look like a big deal when you “put it into perspective”. That is to say, while the “number” itself (+75%) is certainly big, we’re still talking about a single marketing channel for a single brand under a much bigger umbrella (Giftify operates multiple other platforms/businesses, notably Restaurant.com). So the significance of this story in terms of company-wide sales is relatively minor — a long way from the 75% headline figure.

On the other hand, there’s another perspective to this story that most investors have been missing (go on, admit it, how many of you are tracking small, cumulative news items across multi-month periods?). This perspective is the overall Giftify growth story that we picked up on a couple of weeks ago.

That story basically goes like this:

• Giftify has been quite busy over the last 6 months — marketing initiatives, smart acquisitions, etc.
• Each of these initiatives has paid off in its own “big but small” way (similar to this 75% affiliate channel growth story)
• Cumulatively, each of these “small” initiatives is adding up to something much bigger than a single-channel/single-product growth story.
• As a result of this steady stream of incremental improvements, we’re starting to see the early signs of a big, fundamental change in Giftify’s overall results (for the better).
• The company’s Q2 results (which we looked at a couple of weeks ago) confirmed this, with the company pulling off a significant turnaround and a mild earnings surprise (full details here).
• Given the company’s expected trajectory, we expect to see a significant earnings surprise in the coming quarters.

And this is where this latest news — a 75% growth in the company’s CardCash.com affiliate channel — fits in. That is, it’s yet another uptick in what’s becoming a long series of upticks, including everything from a 916% boost in category sales following its GLP-1 campaign through to a Zip Co. partnership that brought BNPL to Giftify’s CardCash.com platform.

However, that’s only the start of the story here, and, over the long term, this affiliate channel growth could be one of the more significant stories in this ongoing series. In fact, if Giftify continues to hone its offer on this front, it may just be enough to further improve our already optimistic outlook for the company.

CardCash.com Affiliate Channel Growth — A Game-Changer for Giftify, Inc.

To give a quick crash course on what is meant by “affiliate channel” here, this “channel” refers to affiliate marketing. For the unfamiliar, this is when a company pays a performance-based incentive to people promoting its products. For instance, a YouTube creator might get a kickback every time someone uses their “code” to purchase a product. Or a blogger might get a kickback every time you purchase something using one of their links. (Ever noticed how everyone has Amazon links? This is why.)

This performance-based structure means that affiliate channels are (potentially) one of the most lucrative in terms of ROI for a company, save for publishing content and praying to the search/social media algorithm for visibility. Simply stated, if the company doesn’t make a sale, the company doesn’t pay a cent, aside from the nominal cost of administering its affiliate program.

To put that into perspective, Google search ads, on average, deliver an ROI of about 2:1, or about 200% (i.e., $2 in revenue for each $1 spent on marketing). Affiliate marketing, on the other hand, beats this by about 7x, delivering (on average) close to 15:1, or about 1500% (i.e., $15 in revenue for each $1 spent on marketing).

Already, based on this alone, the significance of Giftify juicing its affiliate channel for more growth should become apparent. This is zero-risk, guaranteed upside marketing with extremely predictable costs and significant ROI. And, if Giftify continues to juice this channel for more growth, we should expect to see plenty more of this low-cost, high-ROI growth in the future.

But this is only half of the story.

While everyone talks about the raw ROI of affiliate marketing, there’s an often overlooked element here that, if leveraged, converts the channel into a full-blown growth multiplier. And this is an effect that Giftify is perfectly poised to leverage.

To explain this, we first need to look at the incentive structures in place here. Specifically, the incentive structures for the affiliates — their performance-based commissions. As most affiliates must continue to make sales in order to continue earning, the vast majority of affiliates are exceptionally receptive to anything that can help them make those sales. Particularly promotions.

This is the point where a well-managed affiliate channel can convert from a simple growth channel to a full-blown, company-wide growth multiplier. For instance, let’s say Giftify had focused on growing its affiliate channel ahead of running its GLP-1 weight loss drug campaign. If the company had done this, a simple email/message to its affiliate partners giving them a heads up would have likely multiplied the already ludicrous returns Giftify saw from this campaign. With affiliates receptive to anything and everything, so long as it will help them boost their sales, many would have picked up the promotion and promoted it themselves, thus boosting the number of channels (and thus overall visibility) of Giftify’s campaign. And all that without Giftify spending a single dollar more than it did.

The Giftify Outlook Just Keeps Getting Better

If Giftify manages to leverage its now significantly larger affiliate channel as I outlined above, this latest news takes on a much greater significance. In effect, what we could be seeing is a company transitioning from flashy, but narrowly-focused growth hacks, towards high-impact growth multipliers. And, if this is the case, then Giftify’s outlook becomes even more optimistic than we originally anticipated.

To illustrate what I mean here, take a story I covered a month ago as an example — Giftify’s TakeOut7 acquisition. Here, I noted it was much more than a simple product-line ‘expansion’. Instead, when read within the broader context (the company also announced the launch of its RMC — Restaurant Management Center — in parallel), the TakeOut7 acquisition was a signal that the company was moving to a deeply integrated offering. That is to say that, even if the company was acquiring new products, it was simultaneously moving away from product sprawl and towards deep system integration.

This was a deeply significant move in a space that’s seeing a massive drive towards consolidation as restaurants seek to reduce “tech sprawl” — a trend that’s seen other companies fetch premium valuations (e.g., Olo’s [NYSE: OLO] $2 billion valuation).

If we now compare Giftify’s recent focus on driving growth in its affiliate channels, we can see a new narrative emerging. That narrative is of a company that’s moving away from simply pulling on levers that help drive incremental growth (e.g., its Travel Discounts campaign in the lead up to summer) and more towards pulling on levers that multiply growth. To circle back on the power of Giftify’s growing affiliate channel, that same travel discounts campaign could become exponentially more powerful once a growing army of affiliates gets behind it and boosts its reach.

Here, we can also apply the emerging growth multiplier pattern to Giftify’s semi-recent partnership with Zip Co. to introduce BNPL to its CardCash.com platform. That is, on the surface, it looks like an incremental sales driver (i.e., higher conversion rates), but when paired with other initiatives, that incremental effect ultimately becomes a multiplier effect.

To further illustrate this point, imagine we were heading into summer right now and CardCash.com re-ran its same travel discounts campaign. Immediately, it would benefit from enhanced reach at zero additional cost thanks to its stronger affiliate channel, ultimately multiplying the total traffic from that campaign. Then, when that traffic arrives on the CardCash.com website, it should convert at a higher rate (and potentially with a bigger basket size) owing to the BNPL option.

In short, what we’re starting to see from Giftify is the rollout of compounding growth multipliers that will likely take the company to an even higher level than we already expected.

Revised Giftify Outlook

The last time I looked at Giftify’s consumer-facing business was back in early June, about 3 months ago. At that time, my conclusion was that “As the company continues to execute and the results begin to bubble up through its quarterly reports, we fully expect the broader market to sit up and take notice, potentially setting Giftify up for a strong, upward revaluation.”

In other words, it was a positive, albeit slightly low-key outlook — nothing that would really make you feel like you were missing out on too much if you didn’t run out and buy the stock on the spot.

This time around, however, my outlook has shifted significantly more positive, particularly in light of Giftify’s Q2 results, which offered confirmation that its growth initiatives in the earlier months of this year were already paying off (slightly ahead of schedule).

Now, to be clear, this doesn’t change much in terms of Q3 outlook — much of this news has arrived too late to matter significantly here. However, from Q4 onwards, once the multiplier effects really start to kick in, I expect to see significantly stronger results from the company — results that are strong enough to do more than just make the “market sit up and take notice”. Ultimately, what we could be looking at is a serious candidate for a sustained, long-term rally that should tip into true multi-bagger status.

With that said, this revised optimism does come with one caveat — if Giftify suddenly loses its current momentum (part of my optimism is based on the expectation that there’s “more to come”), then I return to my previous ‘low-key’ optimism. That is, we should still see some results that make the market sit up and take notice, but maybe not enough to drive a sustained rally.

In any case, neither of these options is bad — we’re simply left with a fork in the road, where the left-hand path leads to “good” things and the right-hand path to “exceptionally good” things. And, so long as Giftify can deliver new growth initiatives over the coming months, then there’s every reason to believe we’re already on the left-hand path to “exceptionally good” outcomes.

__

(Featured image by Burak The Weekender via Pexels)

DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.

This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.