A group of investors last week announced the formation of USApubs.com and merged the new company with direct marketer Special Data Processing Corp., Clearwater, FL. SDP markets magazine subscriptions and other products and services, primarily through direct mail and telesales. The new company will focus on growing SDP's core subscription-marketing business, adding Internet-based marketing components and acquiring other companies in the circulation-building and affinity-marketing arena.
The partners in the new venture include William Hood, the founder and CEO of SDP; James D. Dunning Jr., the chairman and CEO of magazine publisher Emap Petersen Inc., New York; and investment firm Willis Stein & Partners, Chicago, which retains a controlling interest in the new company. The terms of the merger with SDP were not disclosed.
Hood said SDP, which has annual revenues of about $100 million and represents more than 1,000 magazine titles, will operate as a subsidiary of USApubs.com and will continue to focus on the acquisition of magazine subscribers for such publishers as Hachette Filipacchi, Reader's Digest, Conde Nast, Times Mirror and Ziff Davis. The company mails about 70 million pieces annually and handles about 1 million inbound calls per month.
USApubs.com will have its headquarters in Clearwater but will also establish offices in New York, according to Daniel Blumenthal, a partner in Willis Stein who will serve on the board of USApubs.com.
The new ownership structure will, in effect, give Hood a capital infusion that he can use to expand his business.
“There has been some thought of consolidating in the subscription-marketing arena in the last year,” said Hood, “and I wasn't really interested in an outright sale of the company, but I was interested in starting a new venture.”
Hood, who founded SDP about 15 years ago, said he will continue to serve as the CEO of SDP. He also will be president and chief operating officer of USApubs.com. Dunning will be chairman of USApubs.com, and Dave Anderson will remain president of SDP.
SDP markets subscriptions primarily through direct mail pieces that list toll-free numbers customers can call to order various magazines. In the past year, the company also has delved into affinity marketing, offering other products and services to magazine subscribers and offering affinity-club memberships on behalf of magazine publishers. Unlike its larger, sweepstakes-focused rivals, American Family Publishers, Tampa, FL, and Publishers Clearing House, Port Washington, NY, Special Data does not have any revenue-generating capabilities on the Internet, however.
“It is our intention to develop leads over the Internet and sell products and subscriptions over the Internet in much the same way that SDP has growth by selling products through direct mail,” said Blumenthal of Willis Stein.
The new company already has taken some steps in that direction. Hood said USApubs.com hopes to execute a marketing agreement with an Internet service provider within the next 30 to 40 days.
In addition to the alliance with an Internet service provider, USApubs.com also is negotiating to make its first acquisition. The prospective target is a company “that augments our strategy,” Hood said, although he declined to reveal further details about the target company.
Blumenthal said USApubs.com would pursue acquisitions among the “niche” players in the direct marketing and affinity marketing industry.
Both Blumenthal and Hood also said a public offering for the USApubs.com eventually could be a possibility.
“I think everyone is hoping to move in that direction, but we don't have any plans existing on the table,” Hood said.
In addition to Blumenthal, Avy H. Stein of Willis Stein & Partners also will serve on the board of directors of USApubs.com.
At least one of SDP's customers applauded the formation of the new company. “From my standpoint, it's a very positive move,” said Dave Leckey, vice president of circulation at publisher Hachette Filipacchi, which authorizes the marketing of all of its magazines through SDP. “They've made a very prominent player in subscription sales stronger… Bill is a very innovative marketer, and he's running an efficient company, but was only held back based on economics. This will allow him to do the things he wanted to do.”
