A Vancouver financial technology (fintech) company has signed a marketing deal with Postmedia worth at least $50 million as part of a revenue-sharing agreement.
Mogo (TSX:GO) CEO Dave Feller said his startup was looking for a media partner with significant reach to get its name out there to new audiences.
Postmedia owns newspapers across Canada including The Vancouver Sun, The Province and 24 Hours. Its digital assets include Canada.com and canoe.ca.
“Traditionally, when you’re out there spending money on marketing, there’s no guarantees,” Feller told Business In Vancouver.
“Whereas this (deal) to a certain degree is a performance-based model.”
Mogo will pay Postmedia a performance-based revenue share of 4% of its existing revenue and 11% of its incremental revenue in exchange for $50 million in "media value."
The three-year deal also includes an option to renew for an additional two years if the two sides agree.
“On the minimum side we’re talking about 50-million-dollar’s worth of marketing, which is effectively what we raised in our IPO in June (2015),” Feller said.
“Relative to the size of our business today, this is really a massive deal.”
Mogo sold 5 million shares at $10 each to raise $50 million through an initial public offering last spring.
Its share prices have since fallen from its all-time peak of $10 and now sit at $3 as of 10:45 a.m., Monday.
However, its share price was up 4.90% this morning after the Postmedia deal was announced.
Feller said Mogo and Postmedia would soon hammer out details on what the marketing partnership includes, but he expects to see a mix of traditional ads, events and sponsored content.
Postmedia cut 90 jobs across the country last week and announced it would be merging the newsrooms of competing papers in Vancouver, Calgary, Edmonton and Ottawa as part of ongoing spending cuts.
When asked if he was concerned the reduced number of reporters could lead to a decline in audience reach, Feller said it was ironic traditional media was having challenges monetizing at the same time digital audiences were growing.
“They (Postmedia) have a massive reach,” he said, adding this is an opportunity for his company to get its name out to millions of readers.
“We actually believe media itself, especially trusted brands like the Financial Post, are more relevant now than ever in a sea of online content.”
Feller would not comment on whether the deal includes provisions preventing Postmedia from entering into a similar revenue-sharing agreement with another company.
Mogo specializes in loaning money to young people through electronic transfers.