Return Path Inc. announced this week that a small group of investors, led by Internet ad firm DoubleClick Inc., has paid $7.7 million for an undisclosed minority stake in the company.
As part of the deal, DoubleClick reserved the right to invest an additional $10 million in the e-mail management and change-of-address firm.
The investment is Return Path's first major funding since its December 1999 launch. And while the investment team includes two venture capital firms — Flatiron Partners and Chase Capital Partners — the key player was DoubleClick, according to Matt Blumberg, CEO of Return Path, New York.
“DoubleClick is very aggressively taking a leadership position in the e-mail industry with the acquisition of NetCreations and launch of all these [e-mail] products that they have been cooking up for the last year or two,” Blumberg said. “The largest player in the space has committed to working with us.”
As a result of the investment, DoubleClick will be able to resell Return Path's soon-to-debut e-mail change-of-address service, ECOA, its e-mail bounce processing service, SmartBounce, and other products as they are developed. Also, Jonathan Shapiro, DoubleClick senior vice president of data services, and Phil Summe, a Flatiron Partners principal, will join Return Path's board of directors.
In a prepared statement, DoubleClick CEO Kevin Ryan said the partnership would enable his firm to help its “e-mail clients reduce wasted marketing dollars by putting an end to e-mail churn.” The investment brings another component to DoubleClick's rapidly expanding stable of e-mail products and services. In early October, DoubleClick announced plans to acquire NetCreations and only a week ago, it unveiled a suite of e-mail products ranging from an e-mail ad-serving platform to e-mail campaign management and targeted e-mails based on Abacus Online data.
DoubleClick's cash and connections will no doubt help Return Path to more quickly discover whether its goal — to develop direct marketing-style tools for online marketers — is a viable one.
“All of the services on our radar screen are tools that direct marketers are accustomed to having in the offline world which haven't yet been adapted, migrated and built out for the e-mail environment,” said Blumberg, who was a MovieFone executive prior to its sale to America Online. ECOA, which is expected to debut later this year, is its first original product. SmartBounce, an active Return Path service that processes and tracks e-mail bounces for its clients, was acquired in February.
In turning over a piece of ownership to DoubleClick, however marginally that might be, Return Path is opening itself up for questions about its commitment to maintaining the privacy of the names it collects. Blumberg insisted that consumers would have control over the distribution of their e-mail names and said it would roll out a utility-type Web site for exactly that purpose. He also drew a sharp distinction between a minority investment and an actual acquisition.
“Under all circumstances DoubleClick would own a very clear minority interest,” he explained. “There's no point at which they would control the company or control the board.”
Return Path is not the only company seeking to develop an e-mail version of the U.S. Postal Service's national change-of-address service. One competitor, ActiveNames, launched earlier this year with a two-pronged model that seeks to provide businesses with NCOA-like services for e-mail and consumers with software that gives them an automatic way to notify their family, friends and other important contacts every time they change their home or business e-mail addresses.
Blumberg said ECOA differs and relies on Return Path's ability to develop an Abacus Online-type model where the participating companies would “contribute data and then pull data out.” Consumers would be notified and given the choice of allowing or refusing their new e-mail addresses to be distributed.
A third e-mail change-of-address service, Changed E-mail, Atlanta, debuted in September. This service is currently available in two formats: free, basic e-mail forwarding and a premium service that offers privacy and spam protection.
