How Perk Turned Around a Mobile App That was Losing $76MM a Year

Originally featured in the Austin Business Journal

When it purchased TV-viewing rewards app Viggle earlier this year, Austin’s Perk Inc. inherited a company that was losing millions — more than $76 million in 2015 alone, in fact.

Only a few months later, Viggle is making money and generating new opportunities for Perk (TSX: PER), co-founder and Chief Operating Officer Adam Salamon told Austin Business Journal.

Perk inked an agreement late last year to buy the assets of New York-based Viggle Inc., which rewards users of its app with gift cards and other incentives for watching and interacting with TV shows and music.

After completing the buyout in February, Perk began cutting costs and refocusing the business. At the time of the deal, Viggle employed about 75 people, but Perk only retained 25, eliminating redundant jobs.

“We looked at Viggle as a really good opportunity to highlight our ability to turn around an asset that was valuable but managed poorly,” Salamon said.

Perk executives slashed other overhead expenses at Viggle, which lost more than $76 million in fiscal 2015, or $29.3 million when adjusted for EBITDA. Salamon said Viggle was giving away too many rewards to users to try to get them to tune in.

“It turns out you don’t have to reward people for watching TV, they’re going to do it anyway,” he said.

About three months after the buyout, Viggle was no longer burning through more cash than it generated, Salamon said. Viggle is now cash-flow positive, he added, and Perk is pumping money back into the app while trying to figure out how to best utilize it. One potential cash cow: using Viggle’s television viewership data to help advertisers gauge how well their spots resonate with consumers.

Similar to how Facebook has absorbed Instagram or how Twitter has absorbed Periscope, Perk has integrated the Viggle app into its rewards platform. That gives Perk a unique view of users’ buying habits: executives can see how many people, after watching a certain TV program, use a Perk gift card or Perk-branded debit card (the company has an agreement with Discover Financial Services Inc.) to buy products from an advertiser who aired a commercial during that program.

“We can see, okay, this guy is watching TV and is being exposed to a Burger King ad, now is that person redeeming their perks at Burger King using one of our gift cards?” Salamon said.

Perk paid about $7.3 million for Viggle, including $1 million in cash and 1.37 million shares worth $3.7 million. It was the company’s fourth acquisition since going public on the Toronto Stock Exchange in July 2015 and fifth overall.

The company employed 187 people at the end of last year and reported a loss of $17.1 million on revenue of $49.3 million for 2015 compared with a loss of $2.2 million on revenue of $17.1 million for 2014, according to regulatory filings. It attributed last year’s loss in part to the costs associated with its go-public reverse takeover.