Dizgo provides instant coupons, advertising via text messages

BOULDER – Mindy Janke looks for quality discounts in Boulder, but she hates going into multiple stores to find the right prices. She would rather the information find her.

Janke may get her wish.

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Boulder’s Dizgo – “discounts on the go” at www.dizgo.com – is launching a patent-pending, ontology-based cell phone text-messaging service in October 2007 at the Pearl Street Mall. Shoppers can use the service to instantly locate discounts for the products they want to purchase.

For example, if Janke was looking for jeans, she sends a free text message to Dizgo’s numeric code with the keyword “jeans.” Seconds later, Dizgo returns a list of relevant discount offers from retailers in the area.

“It’s a virtual coupon book on the phone. Dizgo is revolutionizing the way retailers do business,´ said Jeffrey Kohn, who founded Dizgo’s along with Tomas Kaplan and Jeff Cahoon.

When Kohn’s wife forgot coupons she was planning to use for shopping, he pondered how to solve the problem that would resonate with consumers and retailers alike.

With a background in managing digital-mobile technology strategy, Kohn knew that 16- to 35-year-olds are the target market since they are fluent in text messaging. “Retailers have a tough time reaching that group. They don’t read ads, don’t listen to radio or TV ads and don’t clip coupons.”

Dizgo’s surveys found that getting discounts would influence where consumers went to shop, and retailers wanted to create real-time demand during slow periods. Stores can write an ad for a product that wasn’t selling well that day, log into Dizgo, and the ad is immediately activated to consumers who search for keywords related to the retailer’s business.

Retailers jockey to be first on a consumer’s cell phone search list by deciding how much they want to spend per ad. Each time a consumer requests a keyword and sees the offer, Dizgo deducts the cost from the retailer’s advertising budget.

“We think it will bring in 10 to 15 percent of a retailer’s monthly advertising spending,” Kohn said. “They only pay when the ad is seen, unlike the Yellow Pages. The retailer has control over who sees the message.”

“It’s a great way to control our advertising. For instance, I can sell leftover fatty tuna for $1 apiece between 2 and 4 p.m. If I have a Dizgo account, I pay $1 for every hit I get,´ said Jessica Brookhart, manager of Boulder’s Hapa Sushi. “Once the fatty tuna is sold out, I can shut off the ad and don’t pay anything after that. I can push items that don’t sell well that day. It’s strategic for me.”

With sweat equity and $3,000 in personal investments, the founders developed a prototype in January after conducting consumer surveys and researching the market. They found their three competitors are growing momentum, with one of them closing $10 million in Series B venture capital.

“The difference is the way we provide service. They require software configuration to the phone, and they don’t have the concept of real time,” Kohn said. “Our system allows us to predict what keywords the consumers will use.”

Dizgo’s prototype won $5,000 for second place in the Business Plan Competition at the Bard Center for Entrepreneurship in the University of Colorado at Denver.

“This gives us access to a network of advisers and potential investors,´ said Kaplan, Dizgo’s business development manager. The financing will help fund Dizgo’s initial advertising, patent legal work, hardware, salespeople and Web site maintenance and security. The company is seeking $150,000 in angel financing to help create consumer awareness and break even. This equates to having 100 retail advertisers in a single market, with 300 consumer requests a day.

“I think people will do it,´ said David Hose, managing partner at Boulder-based Ideas and Plans, a strategic advisory service that works with mobile companies. “There’s a set of early adopters that love text messaging. Advertisers get direct feedback rather than having an ad in the paper or Yellow Pages. There is a connection between the merchant and consumer.”

Hose said the main issue is educating the users on the product.

“How will people know they’re available? You have to get people use to the idea of texting for coupons every day.” He said viral marketing – word of mouth – is vital for this kind of business.

After launching in downtown Boulder, Dizgo plans to expand retailers to Denver’s 16th Street Mall, LoDo, Cherry Creek North, Fort Collins’ Old Town and Colorado ski resorts.