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Coming off NearbyNow‘s $5 million B round, I had the chance to talk to CEO Scott Dunlap today.

Part of this announcement is an expressed goal to be in 103 U.S. cities by November (Dunlap stated this goal to me in a less official way in a previous post). It’s currently in 20 cities and roughly 30 malls, a function of the mall partnerships it has been able to form over the past six months, including one with the Westfield Group.

Through this growth, it continues to develop various parallel distribution strategies. Its main product is a private-label local shopping research and inventory search engine that powers mall partners’ Web sites. Here individual retailers can list products, promotions, coupons and inventory, which is paid for on a cost-per-action basis when users reserve items or redeem trackable promotion codes or coupons. This comes with a full performance reporting dashboard.

Ultra-Local Mobile Search
But the most interesting direction for the company could be its mobile product. It has developed an SMS-based tool that lets shoppers search for deals while they are in the mall. This not only has the benefits of proximity and captive audience, but there is also an overlap between the demographics of the average young mall-goer and those for which text messaging is a popular and frequently used medium.

Surprisingly, this has also caught on among another large demographic of mall shoppers, according to Dunlap: the soccer mom.

“Moms are learning how to text message,” he said. “Either ’American Idol’ has taught them, or in some cases, It’s the only way their kids will talk to them over cellphones, so they’ve learned how to do it out of necessity.” Much of this product’s use so far has involved people texting in to see if there is a better deal on an item somewhere else in the mall before they buy it.

Promotion codes are used for tracking in most cases, which is a challenge for chain retailers, according to Dunlap, because store level clerks have to be trained to accept promotion codes. This is one of the major challenges in mobile coupons overall, but Dunlap claims it isn’t as great in the microcosm that is a shopping mall.

On-Site Search
The company also places kiosks within malls that let shoppers look up deals or print out coupons, for which the redemption issue isn’t as great. Interestingly, there are also display ads served on these terminals for actual products or stores that can be steps away. This proximity factor leads to unusually high CPM rates, according to Dunlap.

“With a banner ad for a pair of jeans that is 100 yards from the store, I’ve seen CPMs north of $125,” he said. “People understand the value of proximity.”

Interestingly, Dunlap claims in his informal polling of mall retailers that use the service, 100 percent of the budget reallocation comes from newspapers. He contends it’s the same (but much more efficient) use of local marketing dollars to drive foot traffic. The reporting capabilities and dramatic difference in pricing between its online performance-based model and newspaper circular rates have a lot to do with this.

He claims, in fact, that some chain retailers have told him they can cut one store’s local newspaper circular per quarter to pay for the equivalent of 100 (individual store) NearbyNow search-based marketing campaigns. This is purely anecdotal and should be treated as such, but if true is a powerful statement.

What’s Next?

The next steps for the company include building in social and personalization features to its online and mobile products that let users search for and save items they want, and also share them with friends.

“Someone can form a back to school list and send to their parents,” said Dunlap. “This summer we’ll be experimenting with that.” (a TKG report on this “save and share” trend is forthcoming).

This could also involve alerts, where a shoppers are notified via text when an item becomes available or a sale happens with a particular item or store. With this type of alert, users explicitly state what they want and implicitly state that they are ready to “pull the trigger” if the item is available.

As pointed out in the TKG advisory RSS and Email Alerts: Shopping 2.0, this can imply a very strong and clear intent to buy which, combined with the proximity factor, helps Dunlap continue to prove the company’s value proposition to mall retailers.

Given these directions, 100+ malls by November seems likely.

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