Location-based shopping app Shopkick became profitable in the fourth quarter of 2012, slightly over two years after it launched.

The Palo Alto-based firm launched a new app version in October 2012, which the company said led to a “large holiday spike in consumer usage and revenue” for the company and its retail partners and brands.

The app includes “lookbooks” of products based on the retailer’s weekly circular that allows consumer to save the promotions they are interested in via a virtual store folder. They then get rewards for walking into the physical store. Saved products, which serve as reminders of items consumers want to buy, are no longer visible once the sale is over or are no longer available.

Shoppers get Shopkick’s reward currency, called “kicks,” when they walk into a participating store, scan products or make purchases.

Since launching in 2010, Shopkick has driven more than 16 million verified walk-ins to stores, with 2 million per month in the fourth quarter just ended, 26 million product scans and millions of tranactions, the company said. While the app has driven more than $300 million in revenue for its retail and brand partners since its launch, $200 million was generated in 2012.

So far it has 15 national retail partners that include Target, Macy’s, Old Navy, American Eagle, and Simon Malls. Shopkick also has over 70 brand partners that include Revlon, Levi’s, Procter & Gamble and Unilever, as well as financial firms Visa and Master Card.

Cyriac Roeding, chief executive officer and co-founder of Shopkick, said the company didn’t plan or expect to reach its first profitable quarter so quickly. “With this milestone, Shopkick is ready for 2013, when mobile payments and mobile loyalty will start to converge.”

Shopkick’s investors include Kleiner Perkins Caufield & Byers, Greylock Partners and angel investor Reid Hoffman, a partner at Greylock as well as founder of LinkedIn.

According to Hoffman, “The key to mobile is making an experience that can’t exist without a mobile phone, based on performance-based business models, and that’s why Shopkick is performing so well.”

Shopkick’s performance-based model incentivizes shoppers via rewards for entering stores so retailers get foot traffic and for mobile scans at point of purchase so brands get product interactions.

Hoffman compares Shopkick’s monetization of mobile ads for retail as the equivalent of AdWords, the main advertising product and source of revenue for Google.

AdWords rely on the typical metric for online advertising, which is the cost of an advertising placement to reach 1,000 individuals or housholds.

According to Hoffman, “The impact [of Shopkick’s business model] can be as big as AdWords have been for the Web, specifically because this too was built specifically to serve the value chain of the audience: in this case, retailers and brands.”

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