Rearden Commerce goes for scale with American Express
After two years of dancing across the table, Rearden Commerce and American Express Business Travel partnered up to scale out employee business services beyond the big three, air, hotel and car rental. American Express Business Travel is white labeling Rearden Commerce's employee services platform and making a $22.
After two years of dancing across the table, Rearden Commerce and American Express Business Travel partnered up to scale out employee business services beyond the big three, air, hotel and car rental. American Express Business Travel is white labeling Rearden Commerce's employee services platform and making a $22.5 million minority investment in Rearden Commerce (which would be thus valued north of $200 million).
Rearden Commerce's Personal Assistant service taps into corporate workflow, identity management systems, scheduling and contacts help employees discover, purchase and manage travel, dining reservations, package shipments, conference and other commerce services from a network approved suppliers. American Express Business Travel is launching under its own brand a marketplace that uses Rearden Commerce's Personal Assistant and other services.
Rearden Commerce CEO Patrick Grady told me that the deal instantly provides his company with a faster path to reaching new customers, especially in the SMB market. "The true test is if we can get scale," he said. Getting in bed with American Express Business Travel is certainly an efficient way to scale.
American Express Business Travel handles $21 billion of travel spending, with more than 70 percent of the Fortune 500 on board. In 2005, the company did 6 million air, hotel and car travel transactions, according to Andy McGraw, senior vice president of American Express Business Travel. McGraw hopes to tap into the services outside of air, hotel and travel that Rearden Commerce actively manages, with 135,000 merchants across 10 categories (including air, hotel and car rental). Since the private label deal closed in July, American Express has gained 15 new clients, said McGraw. Rearden Commerce has acquired 36 customers since it was founded in 2000, Grady said.
"We are not carving up the existing pie--car, hotel and air," McGraw told me. "We are creating a new economic pie. This relationship changes the economics for the American Express travel group and drives substantial cash flow to Rearden." According the the deal, American Express Business Travel will not share revenues from the big three categories.
Rearden Commerce will continue to sell all category services and its platform through its direct sales force. The two companies are also looking to new revenue streams, such as advisory services and merchant advertising revenue.
The partnership also puts the two companies in a kingmaker position relative to the employee business service providers. "For enterprises, we can round out the portfolio and allow them to do some comparison shopping. For small businesses we could be kingmakers, looking at procurement pool and providing savings to client with the purchasing power of American Express within a single Web site," McGraw said.
Grady said Readen Commerce will open its platform APIs to developers in the future. He cited procurement, IT services and expense management applications as possible areas of third-party development. "With the scale we become pretty meaningful to merchants and developers," Grady said.