Incentive network FreeMonee gets $34M to turn every day into a birthday

Gift network FreeMonee has raised $34 million in VCMonee for its consumer incentive program.

FreeMonee delivers cash gifts from participating merchants directly into the bank accounts of consumers. Merchants determine the nature of the campaign, deciding how many customers, how much to give, and when and where to deposit the gift.

Consumers then receive the free money, which of course encourages — but doesn’t obligate — them to go patronize that particular store or restaurant. The incentives function like a gift card, so it feels like getting birthday present, without the card and balloons.

This strategy is effective for merchants because the likelihood that the incentive will translate into profits is higher than other marketing techniques. Unlike rewards or rebates that consumers often ignore, FreeMonee gifts yield a high response rate without discounting the product with deals or coupons.

It seems people are more likely to respond to free money than traditional promotions. The company promises merchants a sales lift of 400 percent to 700 percent and a return on ad spend of 500 percent to 900 percent. FreeMonee turns into actual money.

The third party in this cozy little arrangement, the card issuers, stand to gain as well because consumers have to use their card to unlock their gift.

The technology involves more than just delivering money into bank accounts. The Gift Underwriting Engine figures out what gift will ensure the highest level of consumer interest. It analyzes a consumers’ transaction data to discern how much a gift recipient is likely to spend and where, increasing the likelihood that there will be a return on the investment.

With this model, FreeMonee claims to be “changing the economics of advertising”.

This second round of investment was led by financier Charles E. Ryan and returning investors Opus Capital Ventures, Redpoint Ventures, Utter Hill Ventures, and Pinnacle Ventures. It is more than triple the amount of the $11 million Series A from 2010, bringing the total capital raised to $45 million.

FreeMonee was founded in 2009 and is located in San Mateo, Calif.

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