DoubleClick Inc. plans to shed its e-mail marketing business for $90 million to Alliance Data Systems Corp. in yet another deal indicative of the irresistible lure of e-mail marketing firms to database marketers focused on data-driven communications.
The all-cash sale yields 400 DoubleClick Email Solutions clients like buy.com, Patagonia, AOL, Meredith, J. Crew, Orbitz, Unilever and Procter & Gamble. The deal comes within 15 months of Dallas-based Alliance's purchase of Epsilon and e-mail firm Bigfoot Interactive, known as Epsilon Interactive since September.
“I've been talking a lot about the move from customer relationship management to customer optimization management,” said Al DiGuido, CEO of Epsilon Interactive, New York. “The market is moving toward a point where the marketer is going for more transactional and informational behavior and then leveraging that information to build more relevant communications.”
The DoubleClick Email Solutions deal comes in a hectic two-year period of mergers and acquisitions involving major e-mail players. Among the firms taken off the market were CheetahMail by Experian, Yesmail by infoUSA, Digital Impact by Acxiom, Postfuture by Harte-Hanks and, most recently, Accucast by Premiere Global.
Most of the 220 employees of the $40-million-revenue DoubleClick Email Solutions unit will join Epsilon Interactive after the deal closes this quarter. Combined, the new Epsilon Interactive will have nearly 350 employees and 560 clients.
The sale will leave DoubleClick with its digital advertising services like DART for publishers and advertisers, Performics and Motif. It also will have access to former division Abacus.
DoubleClick in June sold its Enterprise Marketing Solutions unit, including SmartPath software and Ensemble product, to enterprise marketing firm Aprimo Inc.
Private equity group Hellman & Friedman, San Francisco, paid $1.1 billion last year for DoubleClick, once the giant of online marketing services. Once the acquisition closed, Hellman spun off Abacus from DoubleClick into a standalone business that it directly controls.
DoubleClick Email Solutions' merger with Epsilon Interactive will make the combined entity a leading player in e-mail marketing.
“They bring a strategic services organization,” DiGuido said of the DoubleClick side. “They bring relationships in terms of reporting and analytics and a global footprint with offices in eight countries. Their technology expertise and platform will be used to build the next evolutionary step in our combined e-mail platform.”
In a way, the deal reflects two philosophies at work: one-stop shopping for Epsilon and core competency for DoubleClick.
“It makes the most sense given the dynamics of the e-mail market,” said Eric Kirby, general manager of DoubleClick Email Solutions, New York. “If you look at the past two years, there have been more than a dozen acquisitions of e-mail service providers, with the key theme being bringing e-mail capabilities with traditional database marketing capabilities.
“The sale is consistent with a strategy that DoubleClick has been exercising for a year now, which is to focus full resources within the core business line. Email Solutions has been one of the core solutions, but the difference being that based on the overall direction of the e-mail and database services market, the most logical strategy was to combine our e-mail business with Epsilon Interactive.”
What of the fear that some DoubleClick Email Solutions clients may jump ship before Epsilon creates a common e-mail platform? This is a real possibility to Scott Olrich, chief marketing officer at Responsys, Redwood City, CA, a competitor to DoubleClick and Epsilon Interactive.
“It's a hot market ripe for corporate activity and consolidation, which are good things,” Olrich said. “However, running two different platforms will not last long. DoubleClick customers will most likely have to migrate off the company's e-mail solution, which will give those customers an opportunity to take a look at other leading service providers.”
But Michael Della Penna, chief marketing officer of Epsilon Interactive, stressed that Alliance's planned purchase of DoubleClick's e-mail unit was a true integration of database marketing services with e-mail with one vision and under one brand.
“The other e-mail acquisitions still operate as siloed e-mail organizations under large entities,” he said. “That's something that the analysts and others have recognized about how Epsilon's integrated approach is so different.”
Chris Baggott, cofounder and chief marketing officer of ExactTarget, an Indianapolis e-mail marketing services provider, said the pace of consolidation in the industry is focused on a small niche of customers sending huge volumes of e-mails.
“There are just a few hundred of these companies among a universe of about 20 million U.S. businesses,” Baggott said. “This is a high-stakes game because the trend in e-mail marketing is toward data-driven communications in which companies are beginning to focus on sending fewer, more targeted e-mails that deliver higher ROI versus traditional campaign metrics focused on volume alone.
“Because of a narrow focus on a market that is shrinking from a traditional metrics standpoint, the main players are forced to consolidate and attempt to drive more professional services revenue in the face of customers who are looking for software solutions that are more sophisticated and usable.
“The onslaught of competitors based on the software as a service model can offer both lower costs and a higher level of data integration,” he said.
Darin Brown, president of interactive agency Avenue A/Razorfish's West Coast unit, said his firm's clients want e-mail's integration with other online marketing offerings.
“We believe that we need to look at how the customer is behaving across all aspects of digital marketing — display media, search, Web site and e-mail — and analytics is the foundation underneath all of those,” Brown said. “So e-mail marketing as a standalone, or e-mail marketing along with database, is not enough, in our mind. We need to understand the customer behavior across all those touch points with analytics and create an integrated customer experience.”
Mickey Alam Khan covers Internet marketing campaigns and e-commerce, agency news as well as circulation for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters