InfoUSA chairman/CEO Vin Gupta cited the cost and red tape involved in operating a public company as motivating factors in his bid to take the Omaha, NE-based firm he founded private. He commented on that as well as other infoUSA initiatives in an interview with DM News earlier this week.
On June 13, Gupta announced his proposal to pay $11.75 in cash for each outstanding share of infoUSA's common stock he does not own. Vin Gupta & Co. LLC is controlled by Gupta, who owns 38 percent of the stock. The transaction would be made possible through debt financing, and the offer values the company at $630 million.
“Many times you have to invest for the long-term growth,” he said. “When you are public, it's very hard because in a public market, they want more revenue every quarter, they want higher profits every quarter and when you say you have to invest, well, they don't like that.”
While shareholders are demanding more revenue, keeping up with regulations is costly.
“Sarbanes-Oxley cost us $1.2 million last year, and to be frank with you, that was a waste of money because we got no value from that,” Gupta said. “A public company's cost is roughly $8 million to $10 million a year, and I think this company and this company's employees would be better served if we were private and not have to worry about all the regulations and stock price and analysts. And I think the offer we made is very fair. Most shareholders will make money at that offer.”
When the plan was first announced, Gupta said the deal could close within 90 days, but regarding an updated estimate, he said, “it now just has to go through the process.”
As a private firm Gupta would continue several initiatives he has started at infoUSA, including a change in its database pricing that he said represents a strategy shift for the company.
“We have just changed our philosophy,” he said. “We are not giving deep discounts to list brokers anymore or list resellers. We were giving 80 [percent], 90 percent discounts, and we decided that was not in our best interest. Basically, we give a 30 percent discount now, which is higher than the regular broker industry. We don't differentiate between the one-time use or unlimited use for mailing.
“We believe that if they get our list, let them use it as many times as they want. We don't have selection charges in our database. We have made a lot of changes in the way we do business, which is a lot different from the traditional list industry. I tell you, 20 years ago a customer used to buy 10,000 names. Now, they only buy 500 names because with the selections, they can drill down and get the right prospects.”
Gupta likened the new pricing structure to a high-profile consumer brand.
“On the pricing part, I believe we are like Nike,” he said. “We have a very high-quality database. Customers have no problem paying our retail price. They absolutely love the database.”
The days of compiled databases being viewed as inferior are over, he said.
“It's not like the old days when we used to say it was a compiled list,” he said. “That's not true anymore. And I don't think we have to discount it very heavily. We're not saying that we're better than response lists. There's room for every one of them. There's room for response lists. There's room for circulation lists. There's room for our types of lists. We can help each other. We can add value to each other.”
Innovation in the database arena is still key for infoUSA.
“In our case, the database is our main business,” Gupta said. “We are not into the credit business, where a database is like gravy or a sideshow. In our case, database is our primary business so we have to be the best at that. And it's in our best interest to come up with innovative products. So like Sales Genie, the product we have, an average customer is using four or five names. They don't want 500 names. They want to be able to have access to all the databases and get the right three or four names they need that week. It's like you have access to tons of candy and then you say, 'I just want this candy today.' “
Sales Genie is a Web-based subscription service allowing businesses to access unlimited sales leads from 12 databases online for a flat monthly fee. The subscription also gives users access to contact management applications such as a label printing feature and lead mapping.
To promote Sales Genie, infoUSA took out a full-page ad in the business section of the June 17 issue of The New York Times. The company also has promoted products through infomercials and even sold them through office supply retailers.
“We believe in advertising and branding,” Gupta said. “We are basically becoming a small business brand.”
In terms of Sales Genie, he said newspapers were a natural way to reach the product's target end users.
“We've been running ads now in business publications and what I call popular daily publications, and the reason is the appeal of Sales Genie spreads to sales managers, salespeople, small business owners and entrepreneurs,” he said. “The potential market is roughly 25 million to 30 million users. And to reach that, you have to go to all different media. So you will see more of us on television, radio, direct response TV, top daily newspapers, business publications, online, search engines. You'll see us everywhere. Believe me, it works, especially having a subscription product. It really works.”
Kristen Bremner covers list news, insert media, privacy and fundraising 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