Co-Op Databases: We're at Critical Mass and GrowingIt seems that the list industry's loss has been cooperative databases' gain at a time the economy is bad, the holiday shopping season looks dismal and list universes are down. Executives at four co-op database firms said their co-ops are at critical mass and claimed things such as increased client lists, record numbers of households, new products and market expansion.
The U.S. Abacus Alliance, which launched in 1990 with five participants, is the oldest of the four. It now has 1,250 participants and 90 million households. DoubleClick reported earlier in the week that its Abacus cooperative database division brought in $26.8 million in revenue, up 50 percent from the previous quarter and up 11 percent from the same period a year ago.
"List universes are down around 20 percent," said Brian Rainey, president of the Abacus division of DoubleClick, New York. "People are coming to us because they know they'll find performance. We've got enough critical mass of data."
In addition, Abacus expanded its co-op market in 1998 by starting a Business-to-Business Alliance and a UK Alliance. Those units were the two largest growth areas for Abacus in the third quarter. Combined, they made up 12.5 percent of Abacus' sales. The BTB co-op has 55 million business contacts and 250 clients, while the UK co-op database represents 25 million households and 260 catalogs.
Experian's catalog co-op, Z-24, began in late 1991 with 10 participants. It now claims more than 100 million households and 759 participants. Experian also started publishing co-op CircBase in 1998, which has 63.4 million individuals and 151 participants. It also has expanded to the United Kingdom with co-op database Club Canvasse, which has 21 million individuals and 85 catalog clients.
"The cooperative databases continue to grow in size and in the sophistication of their modeling and segmentation techniques, so mailers have come to increasingly rely on the co-ops for a greater percentage of their prospect universe," said Curt Blattner, director of cooperative databases at Experian Marketing Services.
In addition to Abacus and Z-24, two newcomers have quickly built up their own co-op databases in the past few years and have added clients and households in recent months.
Catalog-only Prefer Network, which launched in January 2001, has reached 93 million households, has nearly 275 clients and had its first profitable quarter in Q3 of this year, said Doug Platt, CEO of Prefer Network, New York. In June, the database had 180 participants and 62 million households.
Prefer expects to add up to another 200 clients within six months, Platt said.
"We thought that critical mass was kind of at the 50 [million] to 60 million household point," he said. "We've got every direct marketing buyer in the country."
The I-Behavior cooperative database launched in late 2000 but really got going in summer 2001, said president/CEO Lynn Wunderman. By February, it reached 300 members. Since then, it has grown to 425 participants with 62 million households and 72 million individuals.
Wunderman explained I-Behavior's comparatively lower household count by saying that it only accepts 24 months of data as opposed to the other co-ops, which can take as much as five years' worth. However, she was confident that I-Behavior had the market covered.
"If you think of all the direct mail buyers in the U.S., we're there," she said. "There are only 60-some million households that respond by mail."
This week, the firm debuts I-Behavior List Rental Models. These models are designed to rank a client's house file for customer affinity to buy out-of-category merchandise. This type of modeling gives a list owner a better chance of getting out-of-category mailers to test a file, Wunderman said.
Though both of the newer co-ops are U.S. only, each said that expansion to foreign markets is possible.
"We've had people from a lot of countries -- including France, Germany and Japan -- knocking on our door," Wunderman said. "We would plan to expand internationally and into the business-to-business market, but our priority has really been to focus on the U.S. development."
Platt also said that he would consider expansion but that his immediate focus was on growth in the United States. And he thinks the U.S. market could stand even more cooperative databases.
"I think there's room in the market for more co-ops as long as they have a unique product," he said.