Tech Transformers

Web link shortening company Bitly eyeing $100M revenues

When Mark Josephson took over as the boss of link shortening company Bitly in July 2013, the company was growing quickly but had no idea how to make money.

Fast forward almost three years, and the company is profitable and eyeing annual revenues of $100 million in the near future.

Credit: Bitly

"There was so much scaling to keep up with hypergrowth of the business, but no real coordinated decision on how to make money," Bitly chief executive Josephson told CNBC in an interview at The Next Web technology conference in Amsterdam on Thursday.

"When I got there we had two salespeople, four account managers and no marketing. Now we have 30 people in sales and marketing. It's not rocket science. We planted a flag in the ground, saying we are going to build software for marketers."

Facebook, Google, Apple dominate

Founded in 2008, U.S. start-up Bitly provides a platform where people can shorten their links. But it has built out data analytics tools that allow marketers to track where that link goes, who is clicking on it, and on what devices.

As Josephson explains, people are using 2.8 devices a day and marketers have the big challenge of trying to track how people are using different platforms. There are big bucks on offer with global internet advertising revenue set to increase from $135.42 billion in 2014 to $239.87 billion in 2019, according to PwC.

But despite the increase in the number of platforms available to advertisers, Josephson said big players such as Apple, Google and Facebook have created fragmentation in the market.

What's working with Bitly
What's working with Bitly

"Marketers are supposed to know the entire customer journey but huge chunks are blind to them," Josephson said.

Those three technology giants all have their own advertising products, but are "siloed", according to Josephson. Facebook's Instant Articles - which allows publishers to host stories natively on the Facebook app - is an example of this. But instead of giving marketers the data, it is funnelled through Facebook. Ad blockers built into Apple's Safari browser as part of iOS 9 are another example of this cited by Josephson.

Bitly believes because the link spans multiple platforms it is able to give advertisers a better picture of what users are doing and potentially disrupt the advances of the major technology giants.

$100M revenues in future

And it seems to be paying off. The company turned profitable in 2015, saw 40 to 50 percent year-on-year revenue growth last year and creates 400 million links a month generating about 12 billion clicks.

It has 10 million monthly users on its free service and 1,000 paying customers, including half of the Fortune 100, according to Josephson.

On average, a subscription costs $1,000 per month. Over the course of a year this would be about $12,000. Bitly typically signs brands up to one or two year subscriptions and it costs $12,000 to acquire one customer. So the majority of customers are profitable straightaway, Josephson said.

Bitly is also looking at its eleventh consecutive quarter of so-called net negative churn - when the growth of revenue from existing accounts outweighs the negative impact of customers leaving. This is a key metric for subscription businesses. Josephson said the start-up can be a $50 million to $100 million revenue business in up to four years. Bitly is eyeing revenues of $20 million this year.

While Bitly is on the right path, it clearly won't be plain sailing. Twitter has developed its own link shortening tool while other start-ups like Clkim also operate in the same space.

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‘Bought not sold’

So how does Bitly plan to continue the momentum?

Josephson's plan is selling up to existing customers so that Bitly is not only used in email marketing for example, but in everything from text messages to apps. It has also introduced new features recently such as encrypted links.

On top of that, the CEO is eyeing expansion. Eighty percent of Bitly's users are outside of the U.S., but it currently only has operations in New York, San Francisco and Denver.

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Josephson said that in 2017, Bitly will likely start opening new offices internationally and launch localized language versions of its links. Currently the links are in English.

Like many start-ups, Bitly is venture-backed but its latest funding came in 2012 when it raised $15 million. There have been a lack of exits for private technology companies recently, particularly in the public markets. Josephson sees Bitly as an acquisition target, but on its own terms.

"Ultimately we are acquired. That is the logical exit and I'm not blind to the responsibility to provide a return. But we want to be bought not sold," Josephson told CNBC.

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