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Acxiom wins bidding for Digital Impact

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Data giant Acxiom Corp. last week announced it has agreed to acquire e-mail marketing company Digital Impact for $3.50 per share in a cash deal worth about $140 million.

Digital Impact had been fending off a hostile bid of $2 per share from data provider infoUSA. Digital Impact called the bid, which was made in early February, "financially inadequate."

The Acxiom deal for Digital Impact is part of a larger trend of major data providers acquiring e-mail companies to add online to their traditional offline support services model. Harte-Hanks, infoUSA, Experian and Acxiom-in a separate deal struck in January-have all bought e-mail technology companies within the past 12 months.

E-mail companies have been ripe for the picking given their commoditization. "The competition just killed the prices for these companies," said Safa Rashtchy, managing director and senior analyst at Piper Jaffray & Co. "There were four or five [major] competitors solely competing on price, and it became a commodity."

Rashtchy said the timing of the Acxiom acquisition was ideal. "Overall, we're seeing some improvement in the industry, and that is why the timing is right now rather than a year ago," he said.

Rashtchy said that up until about six months ago, the e-mail services industry was slumping because of the negative effect of spam and deliverability problems.

"We were continuing to see declines in the open rates and marketers not using e-mail," he said.

The situation has improved as e-mail service companies work closely with ISPs and spam filter providers to improve deliverability, and anti-spam measures are beginning to reduce the amount of spam.

Timing was right for deal

Acxiom agreed the timing was right for the Digital Impact deal.

"We wanted to find the leader in the marketplace, and that was Digital Impact," said Richard Howe, marketing leader at Acxiom Corp. "We realized we had some gaps in our product offerings as [they] related to e-marketing, campaign management and response analysis."

Acxiom and Digital Impact both focus on Fortune 500 and Fortune 1,000 blue chip clients. "We have several major clients who overlap," said Kevin Johnson, senior VP-products and marketing at Digital Impact. One common client is Hewlett-Packard Co.

Johnson said the two companies also have a heavy concentration of financial services clients. Acxiom has nine credit card issuers and nine major retail banks among its clients.

"The biggest upside [of the deal] is Acxiom taking what has predominantly been a business built offline and merging that with the Digital Impact product line," Howe said.

Top clients, limited growth

Digital Impact has a reputation as a service-oriented e-mail marketer with top clients. Rashtchy said that may have contributed to its business struggles. "That was a growth limitation for Digital Impact, because they were focused on high-service and high-end e-mail," whereas a company such as DoubleClick was having more success with the midtier market.

Johnson said Digital Impact is sold on Acxiom's data analysis expertise. "Going forward, the pressure is to be ever more relevant when you send out marketing information, and at the center of that is data," he said.

Howe said the first order of business would be to promote Digital Impact products and services across the Acxiom client base. He said customers will benefit because they can now handle online and offline marketing campaigns in one place. It will also help them "leverage e-mail marketing in their overall marketing strategy," he said.

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