February 10, 2022 - 9:03pm EST by
2022 2023
Price: 69.56 EPS -1.13 -.27
Shares Out. (in M): 33 P/E n.m. n.m.
Market Cap (in $M): 2,314 P/FCF n.m. n.m.
Net Debt (in $M): -42 EBIT -55 -9
TEV ($): 2,272 TEV/EBIT n.m. n.m.

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  • idea w/o fincls or valuation
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Cardlytics is an advertising platform where advertisers/marketers can offer discounts to consumers, primarily through digital banking channels on 7 of the top 10 banks in the US with 160M MAUs. Advertisers can target customers with the help of CDLX technology/data analysis based on their anonymized purchase history, with information similar to what you could find on a bank statement. This gives advertisers a great way to target people that are not current customers, but potentially could be based on their transaction history. For instance, if someone frequently goes to a BP gas station, with a Shell nearby, Shell can see those transactions and incentivize the consumer to get gas at their pumps instead. The consumer sees the offer in their bank app and activates the offer by clicking it. They use that card to complete the purchase. Once they complete the transaction, they will get a notification the offer was used. After a period of time, a credit will be applied to their bank statement based on the offer amount.


CDLX powers this on behalf of the banks and it brings a great deal value to all members of the ecosystem - advertisers, consumers and banks:


Advertiser benefits:

  1. They are able to place ads in a brand safe environment and launch campaigns in a very measurable way without building complicated attribution models
  2. They are able to target individuals in their category that potentially have the propensity to switch and do not shop there and over ability to go in depth on targeting is vast
  3. They have to only manage one partner (CDLX) in this particular advertising channel

Consumer benefits:

  1. Offers are solicited given the individual has to redeem themselves and are saving money in categories or things they would already buy
  2. Frictionless and seamless they get discounts without physically carrying around coupon
  3. Easy and centralized location for all things retail, dining, travel, etc.

Bank benefits:

  1. Ability to earn revenue from monetizing data and serving ads on their apps
  2. Increased use of app/online banking platform - overall increase in customer spend and retention through these offerings

Unit Economics:

On average, $1 spent by advertiser, 30 cents goes to consumer (offer/discount), roughly split rest for cdlx/banks

Income Statement impact: $1 “billings”, 70 cents revenue, 35 cents paid to banks, small incremental computing expense with each offer redeemed


CDLX is a making of a natural monopoly in a new, unique, largely under penetrated channel in a ~$250B advertising market. A natural question to ask is: why don’t banks do this themselves given they have all of the data? They already tried it in the past; reach matters a ton in advertising because advertisers incur some amount of fixed costs to manage each channel and consequently are not interested in small/limited channels. On flip side, CDLX has some level of fixed costs to build and run the system as well as manage the advertisers. CDLX is able to run tests and collect data over the long term - continuing the flywheel of more advertisers -> more consumer engagement -> more data -> more advertisers. CDLX is also building a self-service platform for ad agencies to re-sell to their customer as well as allowing those customers to do their own targeting. Much more efficient to distribute the product if you have reach given level of fixed costs. Advertisers want to be where the consumers (MAUs) are (banks), banks want to be where all of the advertisers are (CDLX). Banks also get the benefit of the consumer spend and customer retention. Non-trivial amount of technology has to be built on both sides (banks and cdlx) over time for integration, etc. Makes it very hard for someone to move CDLX aside given upfront tech spend and level of trust required. CDLX’s founders come from banking backgrounds so that level of trust was easy to build at that first but has become a flywheel as the concept proved out over multiple banks.


Let’s say you are a marginal advertiser on the bank channel. Without CDLX, a bank wouldn’t be able to service that advertiser at their size, as a consequence chase won’t have their offers and they won’t be able to advertise on that channel. As a result, there would be less offers flowing through the bank’s system, less customer spend, less data, potentially more attrition and less ad revenue in that channel. Also the banks would have to incur the fixed costs cost to build and maintain technology and of the sales relationships.


One advantage that CDLX will have in the future is that big retailers like TGT do their discounting budget at the category level, e.g, want to do 15% of home decor and $1 off private label tomato soup. A 10% overall offer would erode category margins especially like grocery (4% margins). Integration work with large retailers in the future and current self service build out is another reason why banks won’t be able to switch in the future or build out their own.


Growth Levers:

  1. Channel will get bigger  and overall monetization will get bigger due to network effects - 100-150M more MAUs as they sign up more banks and other platforms such as Venmo
  2. Network effect - Add more MAUs, through other partners making it more attractive for advertisers, which will increase ads / offers on the platform, which will increase usage and activation by MAUs, leading to increased revenue, which leads to more banks and digital platforms wanting to be a part of the system, and so on.
  3. Implementation can be improved - more engaging, alerts - Main lever will be increasing revenue/MAU - maybe more offers, categorized, pictures, etc.
  4. Self-service tool - will allow ad agencies and their customers more flexibility in launching own campaigns and measuring them. Increasing network effects from this as well
  5. Over time charge advertisers more for placement, reach, etc. moving forward as channel spend and UI changes
  6. Take rates can also increase as more data allows advertisers to optimize roi spend, could decrease from 5x to 3.5x
  7. International banks
  8. Real estate planning data monetization (way long term) 
  9. Measurement business like Nielsen 


  1. Assume $60K average wallet spend
  2. Consumers just move 0.5% of wallet (i.e., Lowes vs. Home Depot, Hilton vs. Marriott ) = $300
  3. Results in $10B of revenue ($35 ARPU x 300M MAUs); $300 wallet share captured with 5% of average offer redeemed = $15 redeemed (30% of total advertiser spend), given 70% of advertiser spend is booked as revenue so we estimate $35 ARPU
  4. We view that the stock has upside to $25B+ market capitalization


  1. Consumer engagement/advertisers does not return back to normal even though CDLX was a covid loser (less advertising, better consumer balance sheets) - stock will continue to de-rate and burn cash
  2. Policies around consumer banking data could completely hamper their ability to perform in this channel and the channel broadly
  3. Bringing in new categories, especially higher ticket (travel, etc.) may not pan out


I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.


 Increase in promos as companies try to drive traffic in 2022 as they lap stimulus spending. Higher customer engagement with discounts. Bringing in high ticket items to platform.

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