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Listening to the coupon clickers has learned a lot in its ten years: How to survive a dot-com bubble. How to thrive in a recession. And lately, how to turn itself into a surprisingly good economic indicator.

By Paul Sloan, senior writer
June 17, 2008: 9:33 AM EDT

steven_boal.03.jpg CEO Steven Boal is a data-junkie.

(Fortune Magazine) -- There's a reason Steven Boal is fielding calls from hedge fund managers asking what he sees going on in the U.S. economy. As CEO of Coupons Inc., a small web company that is by far the largest provider of downloadable coupons, Boal has an unusual window into just how U.S. consumers are feeling. His data show that his customers - coupon clickers, if you will - are more active than ever, and that means trouble.

First, a bit of history. Boal, a 43-year-old New Yorker who fled to Silicon Valley to embrace his entrepreneurial side, founded Coupons Inc. a decade ago. At the time, a slew of startups, empowered by the easy money of the day, promised to move the coupon business to the web. Unlike his rivals, Boal's firm survived - and now, in fact, is thriving.

The online coupon business is still small, roughly 2% of the $6.6 billion coupon industry overall, but the shift from paper to the web is picking up speed, and privately held Coupons Inc., with annual revenues estimated at $55 million, is growing at a rate of 35% each quarter. The company gets a cut of every coupon that's printed, and Boal says his 100-person firm is profitable and aiming to go public in 2009. The most compelling pitch to advertisers is that coupons stuffed in the newspaper claim a redemption rate of below 1%. The redemption rate for Boal's coupons, by contrast, is around 17%.

The company's main site is, but it also distributes coupons to a network of more than 2,500 destinations, such as and Yahoo Coupons. To use those coupons, you have to download special printing software. It's a minor hassle, but it's free, and roughly 33 million people have done it. Once you have the proper application installed, you print your coupons, bar code and all; when the store scans them, the information is zapped back to Boal's firm. Every day his system serves up about 1,600 different offerings, mostly for packaged goods - cereals, juices, paper towels, etc. Boal is in the process of rolling out a network called Brandcaster, which employs Google-like technology to interpret what you're reading and produce relevant coupons. If, for example, you're a bleary-eyed parent looking at an article on about the sleep habits of newborns, you might be presented with coupons for diapers or baby food.

Micro-targeting like that requires a lot of data, and Boal is a data junkie to the core. He once ran one of J.P. Morgan's derivatives desks, and he still talks that way even when - especially when - he's talking about coupons. For instance, he uses the word "range" a lot, as in: "The natural ups and downs of the curve show the range" and "we have never spiked through this trading range with any sustainability." He and his team have been merrily crunching the numbers since January 2005, when their volume of coupon clicking became large enough to be statistically valid.

What they discovered was that a certain kind of coupon turns out to be a good leading indicator of American consumer sentiment. Specifically, Boal pays attention to what he calls mid-quality coupons, which are coupons of well-known brands with, say, 20% to 30% off. Then he tracks the percentage of coupons that people print after viewing them the first time. That in turn is measured against the redemption rate. It's all boiled down to averages and measured against historical norms, and the result is the chart that you see on this page. The trend line spiked last September, crossing a mark that, based on the index's past behavior, Boal considers meaningful - an early sign that consumers are watching their pennies more closely. The higher the indicator, the greater the economic pain out there.

For now Boal is using his data only internally, as a way to track the market. So what are the data saying now? "We're moving above anything we've seen before," he says. The line just keeps going up and shows no sign of stopping. Good news for Boal, bad news for everyone else.  To top of page