Small e-mail M&As are big on strategy

Earlier this month, online services firm Protus acquired GOT Corporation, which counts among its divisions the Campaigner platform. A week before that, e-mail marketing services firm Blue Sky Factory acquired NTarget, a travel-focused e-mail marketing firm. No financial terms of either transaction were disclosed.

These acquisitions suggest that the e-mail business is ripe for acquisition opportunities, especially in the small to midsize business space. Both Protus and Blue Sky made their investments to expand the breadth of their offerings in the e-mail space to their customers.

According to Steve Adams, VP of mar­keting at Protus, e-mail is in demand, and consolidation at this level is a natural response to what the market bears.

“While e-mail marketing has been around for quite some time, there is still a lot of opportunity for small to midsize businesses to use e-mail and to do it successfully,” Adams says. “When we looked into getting into the space, we saw it was fragmented and it made more sense to acquire than to inject another brand into it.”

Things may have tapered off for acquisitions at the enterprise level after some large ones in recent years, such as Acxiom’s purchase of Digital Impact and Epsilon’s acquisition of Bigfoot Interac­tive back in 2005, as well as Experian’s acquisition of CheetahMail in 2004.

“The enterprise marketer is pretty well tapped with e-mail, but this is not the case with local merchants, who can collectively bring in a lot of money in a long tail kind of way for an e-mail service provider,” says Shar VanBoskirk, principal analyst at Forrester Research.

Protus has more than 250,000 subscrib­ers to its software tools, and Blue Sky’s Publicaster self-service e-mail platform serves clients including Texas Instruments and global PR agency Weber Shandwick.

“Offering a simple tool to small busi­nesses like your local plumber, your den­tist, or dry cleaner, who may already be using level on a personal level, presents a lot of opportunity,” says VanBoskirk.

Adams agrees that simple e-mail tools are most appealing to small businesses. “E-mail can be complicated with all of the rules for deliverability, so even smaller businesses are looking for an e-mail solu­tion that takes care of this for them,” he says.

A company offering services in this area, despite the growth potential, can benefit significantly by being acquired. Luc Vezina, VP of marketing and product management at Campaigner, feels that his company’s acquisition will give it more infrastructure and resources to reach out to this poten­tially long tailed customer base.

“There are 50 ESPs out there and it is going to be difficult for them all to survive on their own,” he notes.

But not all ESPs that serve this market are looking to be acquired. In December 2007, ExactTarget filed to go public in a move to raise money and expand its services from the small to midsize marketplace to larger marketing clients.

ExactTarget would not comment on what these actions mean, but VanBoskirk believes that this development means, “Its business strategy has been to stay indepen­dent, and it has done so by going public to raise money to serve bigger clients.”

It is unlikely that the tide of acquisitions and consolidations in the e-mail space will stem soon.

“There have always been a lot of e-mail companies, maybe more than are needed for customers, so there is always a pos­sibility of consolidation,” VanBoskirk concludes.

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