iTrackr Systems, Inc. (OTC:IRYS) - A Potential Groupon Killer

iTrackr Systems, Inc. (OTC:IRYS) is an e-commerce software and services company. The company operates www.itrackr.com - a social networking website enabling consumers to search for products and services at nearby brick-and-mortar retail stores and shops. The product line offered to locally-oriented businesses consists of online customer support applications like TrackiT, PriceiT, and iTrackr (community applications based on a pull/push model enabling consumers to request and search for products and services they are interested in), a group messaging solution to communicate or forward received messages, and MyiTrackr Dashboard (an interface to the iTrackr services; and iTrackr TrackiT Reports that provide commercial subscribers with data provided by the iTrackr consumers).

The company also operates RespondQ, which uses iTrackr's chat software to provide companies with a comprehensive chat solution combining Chat software, Chat sales agents, and Chat sales process. Also, iTrackr Systems offers a hosted ChatTrackr solution, enabling consumers to download software on their Website (a fee-based desktop application).

iTrackr Systems, Inc. was founded in 2006 and is based in Deerfield Beach, Florida.Web Site: http://www.itrackrsystems.com/.

iTrackr Strategic Overview

As counterintuitive as it may seem (on the surface) to describe the uniqueness of a particular company by comparing it to other companies, with iTrackr Systems, Inc., it's the most effective means of explaining the opportunity investors are being offered by a position in IRYS.

As the company describes itself on the website,' iTrackr Systems intends to introduce and commercialize Internet and Mobile social merchandizing technology platforms to retailers and consumers. "Social merchandizing" applies the variety of traditional marketing practices to promote products and services to a community of individuals via social networking technologies. iTrackr is similar to Facebook and FourSquare; however, our members' interests are not in diary or event blogging, but in the timely location of products and services which can be acquired and consumed on a local level when sought by the consumer.'

In simplest terms, think of iTrackr as a combination of Facebook, Groupon, and eBay, only specifically designed to connect small - and perhaps not so small - retail and service businesses with the people in their local communities.

iTrackr Systems, through it's website www.itrackr.com, allows shoppers and consumers to browse offers being made by nearby business, make offers of their own to those businesses, and even facilitate a negotiation of those offers. The offers are primarily discounts and coupons, but they are customized and granted to one particular buyer, rather than offered to any and all takers. The benefit to the consumer, of course, is a lower cost of a service or item. The benefit to the business, however, is a sale that may not have happened at all had it not been for the offer.

A parallel to Groupon is immediately conjured up. It also has an eBay quality to it, in that the price of the service is actually being negotiated (though it's not a bidding contest among multiple buyers). There's even a Facebook feel to it, in that the buyer/seller are sometimes talking one-on-one, and if the buyer allows it, the seller may even be able to view the buyer's profile. Yet, iTrackr - as a business building and marketing tool - is superior to all those other websites.

The chief complaints business owners have with using Groupon are (1) the new business it generates is almost always unprofitable business due to the deep discounts needed to be offered, largely because (2) Groupon keeps such a large cut of that business for themselves, turning low-margin couponed revenue into even lower-margin revenue. Worse, (3) it takes three months for Groupon's clients to collect their money [Groupon rather than the business collects the upfront payments, and then distributes the client's cut by check.]

Though Groupon has been secretive about its payment agreements, it's been cited from multiple credible sources that the Groupon/business deal is usually a 50/50 split. �

Perhaps the most destructive (to the client) aspect of dealing with Groupon at all, though, is that the small business has no control over how many people utilize a particular offer. Stories of businesses being put out of business by overzealous Groupon offers aren't nearly unusual enough. More than once have proprietors arrived at their business to begin what should have been a normal work day only to find dozens, if not hundreds, of customers looking for that special deal the business owner couldn't possibly - let alone profitably - fulfill for all those buyers.

Needless to say, this disadvantageous arrangement is not only bad for businesses, but it's ultimately bad for Groupon due to client attrition. In fact, only about two out of ten Groupon clients return, and more than 40% of its prior customers said they'd never use the promotional service again.

iTrackr Systems circumvents all of the drawbacks of the Groupon offer, and simultaneously adds beneficial features that Groupon doesn't. Namely, iTrackr doesn't split payments for service rendered or products bought - access to the service is provided for an annual nominal fee, and the business owner can use it as little or as much as he likes. And, iTrackr allows the business owner to control the number of coupons/discounts offered, thus preventing a flood of buyers taking advantage of a really good offer.

iTrackr Systems Organizational Structure

Technically speaking, iTrackr Systems, Inc. consists of three separate properties, each of which bears revenue. The focal point of all three pieces, however, ultimately is the iTrackr.com website. Still, it's best to understand all three divisions individually, since they each bear revenue.

iTrackr.com

iTrackr is the flagship property. It empowers the consumer to save through an easy to use web platform.

Clients/business owners can deploy deals to all consumer profiles based on identified interest within a 25 mile radius of their operation. And, the consumer can request a specific and personalized deals directly via any business with an iTrackr.com profile provided they are also located within a 25 mile radius of the consumer's home address. The net result is the creation of local business loyalty, saving patrons money and eliminating the need to join daily deal email lists that do not cater to individual needs and wants. The future of savings is based on the wants, needs and defining characteristics of each consumer rather than a shotgun-scatter approach, and iTrackr caters to this.

RespondQ

RespondQ offers an enormous array of chat/sales solutions for both the Enterprise-level and single site user. Through their Chat Communications, RespondQ is the first in its class to offer a Full Service and Pay-for-Performance model to qualifying site owners.

Don't doubt the viability of RespondQ as a stand-alone enterprise either. Some of its current clients include AT&T, Time Warner, Cox Cable, Brighthouse, Comcast, and Verizon.

RQSupport

RQ Support provides a fast, easy and affordable solution to any technical challenges most small business now face. Members gain direct access to a dedicated team of tech support professionals. These pros are available to help set up new equipment and software or resolve issues with PCs, home networks, scanners, printers, Internet connections, smartphones, digital cameras, digital video recorders, small business networks and more.

IRYS Opportunity Overview

Amazingly, the internet-based 'daily deal' coupon industry is worth a whopping $6.5 billion per year - and that's despite it being done the wrong way. With a company like iTrackr Systems doing it the right way, charging a flat annual fee for the service and then letting clients control the size and frequency of any deals made, the revenue potential of the industry could explode.

On that note, one of the keys to iTrackr's success is the price point being offered to local businesses.

Access to the iTrackr social network only costs small business owners between $179 to $360 per year, depending on the term of the commitment. Whether the business uses it once per week or once per hour, the cost is the same. Needless to say, business owners find that kind of flexibility and certainty - not to mention a very affordable price - unusually refreshing.� �

How many small businesses are there in the United States? The estimates vary, but iTrackr has a database of 12 million 'qualified' small businesses to which it's already started to unveil the business-building opportunity. Conservatively saying only 1% of those businesses choose to utilize the service, and assuming an average annual paid-membership fee of $270 (the mid-point of the annual cost structure), would still mean 120,000 clients paying $270 per year, on average, translating into annual revenue of $32.4 million. And bluntly, that 1% penetration rate isn't optimistic enough. A 5% penetration rate would be more realistic, which translates into annualized revenue of $162 million.

Or looking at it from another angle, carving out 1% of the already-existing daily coupon industry's annual revenue of $6.5 billion would translate into $65 million. Capturing a mere 5% of that amount would mean sales in the $325 million area.

No matter how one approaches is, that's not bad for an $18 million outfit, and that revenue is on top of the revenue it's already generating with its RespondQ and RQSupport enterprises. Those two properties have generated $374K in sales for the past four quarters, which isn't earth-shattering, but it's cash flow that will smooth out any bumps in the road while iTrackr gets up to full speed.

Don't rule out the notion that IRYS could truly bring an end to Groupon as the industry leader - stranger things have happened. MySpace was the dominant name in social networking when Facebook was a mere curiosity. Now Facebook was what MySpace wanted to be, and MySpace is a fading memory.

Our realistic long-term revenue projection is something on the order of $120 million. Assuming a normal price/sales ratio of 2.4, this would imply a company valuation of $288 million... a sixteen-fold increase. Even if iTrackr continues to finance its expansion with stock and/or debt (as is the suggested plan), even doubling the number of outstanding shares suggests an eight-fold increase in the stock's value is possible.

It sounds dramatic, and is, but the numbers crunched above are plausible. More important, with revenues being generated at that level, one can presume positive net profits would follow, since this is a high-margin, highly-scalable business.

Bottom line: Small cap speculators should act now to fully maximize the potential upside of this relatively unknown idea. The primary leash on the stock so far has simply been that so few traders know about it yet. That's beginning to change, however, and as the story proliferates the stock should march forward. In fact, we're already seeing it happen. IRYS has rallied from $0.50 to $0.72 over the past week and half; momentum is on its side. There's still a long way to go before it's fairly valued though.

Holding:No Position Disclosure: SmallCap Network has purchased 100,000 shares of iTrackr Systems, Inc. with a cost basis of twenty five cents per share from a non-affiliate shareholder. The shares are free trading and should be construed as a form of compensation and a conflict of interest. The aforementioned shares could be sold at any time without prior notification.