BazaarVoice recently announced that they have achieved profitability, and company executive Sam Decker expanded on this fact in his personal blog. This is a huge milestone for the company, it’s management, and investors. So what is Bazaarvoice all about?

At the heart of the value proposition behind BazaarVoice’s product is the fact that consumers are more likely to buy when they can interact with a community of existing buyers (ratings, reviews, feedback). To build that functionality, like Amazon.com, can cost millions. To buy it as a service is much less, and you can get it more quickly. BazaarVoice is quickly signing up the top internet retailers in the country, such as the screenshot from PETCO.com above. Even the customer advocate experts are steering their customers to Bazaarvoice.

Bazaarvoice announced Series A funding of $4M from Austin Ventures, First Round Capital, Eric Simone, and other investors back in January of 2006. When I met First Round partners Chris Fralic and Howard Morgan I told them I was from Austin, Texas and the first thing out of their mouth was praise for BazaarVoice. In the short time of roughly 16 months BazaarVoice has turned the corner and announced profitability.

And nobody noticed. I would imagine the champagne corks were popping at company headquarters, and the venture investors were proud. What is impressive to me is the small amount of money invested, and the speed to profitability. Shortly after the funding, company founder Brett Hurt told me it was the first and only money they would take. I have to say I was skeptical.

One huge advantage that I think BazaarVoice has over other Austin software and technology companies is their revenue model. Customers pay a monthly or annual fee to have the BazaarVoice functionality seamlessly plugged into their website for a fraction of the cost of building it themselves. There is also a new pay-for-performance pricing model that is apparently gaining more acceptance. Compare this to a software license model where I purchase the software once, plus pay 15% - 21% of that license cost annually for support and maintenance. If you’re an internet retailer you can’t stop paying your bill and lose all your customer ratings and reviews, can you? This functionality is sticky.

As BazaarVoice adds customers, revenues will continue to increase steadily. If they don’t add customers, revenue will simply level off. For enterprise software vendors they have to close new deals every quarter to survive. There aren’t many companies that can enjoy this kind of revenue model, which places BazaarVoice in a unique position.

The deal guy in me says it’s time to hit the eject button and punch out to a strategic buyer that can leverage this technology cost effectively to the mid-tier internet retailers and non-US companies. Who would be a likely buyer?

• Amazon. They pioneered this area, plus are offering more innovative services like S3 and Mechanical Turk (which could help moderate comments). $750M in cash is just burning a hole in their pocket.
• Salesforce.com. These guys get the monthly service fee model. Although BazaarVoice is not as off-the-shelf configurable. They only have $86M in the bank, but could float some stock with that $5B market cap.
• aQuantive. They get marketing, enjoy a $5B market cap and have $130M in the bank. But with Microsoft buying them for $6B they’re going to be busy integrating that deal.
• Google/DoubleClick. Wow, more buyouts in the internet advertising space. Even ValueClick’s stock is shooting up on the activity. Didn’t Google just dump Google Answers? They don’t like community but do like advertising. That’s a tough call.

*In the interest of full disclosure Brett Hurt, Sam Decker, and Eric Simone are personal friends.

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