Need for leads fuels frenzy of direct deals

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This has been a busy year for direct marketing deal-making, and much of the activity can be traced to an intense focus on acquiring lead generation tools and technology, both online and off.

With an ever-expanding array of media choices, marketing has never been more complex, and marketers are increasingly demanding sophisticated solutions to find customers and deliver relevant messages. In turn, suppliers are reacting to that need.

In addition, marketers need measurement tools to gauge success and justify budgets in a climate of increased accountability. What has become even more appealing is the prospect of finding end-to-end marketing tools from a single provider.

Top 5 challenges

In August, Alterian, a marketing software company, surveyed marketing service providers at its annual Think Tank Summit regarding the top challenges they face. The top five responses were: analytics, data acquisition, database management, lead management and tracking ROI. It stands to reason that these companies would be motivated to make deals to acquire some of those capabilities.

Last month Harte-Hanks announced it had agreed to acquire AberdeenGroup, a Boston-based market research company that specializes in technology. Aberdeen's emphasis on research and benchmarking data will, among other things, enhance Harte-Hanks' lead generation services.

OgilvyOne pounces on Leopard

In June, direct agency OgilvyOne, part of WPP Group, acquired Leopard, a boutique b-to-b lead generation agency.

"Their coming together helps our 360-degree marketing efforts," said Ann Rubin, director of integrated marketing communications for the software group at IBM Corp., a client of both OgilvyOne and Leopard. "To have the message directly feeding the advertising and demand generation will increase our success and [influence] how we talk to customers. To have that coming from one organization makes it even stronger. To me, that's a huge advantage."

Integrated capabilities have become fundamental for marketing services companies.

"Marketing services providers need to expand the services they offer their customers, but they need to do it in a way that's integrated," said Laura Ramos, a VP at Forrester Research who covers b-to-b marketing.

Another industry expert agreed. "No longer is siloed direct mail expertise, or DRTV expertise or promotion expertise satisfactory," said Michael Petsky, partner at Petsky Prunier, an investment bank that specializes in direct marketing. "The majority of clients are seeking integrated solutions and one-stop resources."

Looking for clients

Lauren Rich Fine, managing director-corporate strategy and research at Merrill Lynch, sees another motivation behind the deal-making.

"When you make acquisitions, it may not be the service offering but you have a group of clients who are attractive," Fine said. "When Omnicom does any of their acquisitions, they are really looking for an overlap of clients."

The same holds true for OgilvyOne's Leopard acquisition, as both agencies share IBM as a client?Leopard for 22 years and Ogilvy for more than a decade.

"Leopard has always done a great job enabling our clients' sales forces through sales and marketing materials," said Gunther Schumacher, COO at Ogilvy New York. "Acquiring them brings that capability in-house."

Petsky Prunier tracks deals in the marketing services space. In the second quarter of this year, marketing services, marketing technology and multichannel marketing companies completed 116 transactions totaling $9.70 billion in aggregate deal value. While total dollar volume remained flat, the number of deals during the quarter grew 5% from the year-earlier period.

E-mail is another hot area for deal-making.

Petsky Prunier tallied eight e-mail-specific transactions in the second quarter, compared with one in the year-earlier period. The deal value in the second quarter for e-mail totaled $49.0 million, up from $29.0 million.

The activity signals continued consolidation in the e-mail space, with many of the deals driven by the desire for new technology.

In one example, data company infoUSA, which has had a voracious appetite for e-mail companies, last week announced another acquisition. It bought Digital Connexxions, a Toronto-based e-mail marketing company that it plans to integrate with its Yesmail e-mail subsidiary.

"They have great technology," said Ed Mallin, president of infoUSA's Donnelley Group. "It's a very good fit. It will give us the opportunity to focus on e-mail services for small-to-midsize companies. The acquisition is built around adding new technology, adding additional talent and expanding our market share."

Alterian acquires platform

In another example, Alterian, a database marketing services provider, announced in May it acquired e-mail and online technology company Dynamics Direct. Through that acquisition, Alterian was able to launch its Dynamic Messenger, an online marketing suite that includes not only e-mail marketing but Web forms, RSS and microsites that are fully integrated with marketing databases.

"With the Dynamics Direct acquisition, we've fully integrated online and e-mail marketing into a single platform," said David Eldridge, CEO of Alterian.

Last month, Alterian acquired Nvigorate, a marketing resource management software company. "With our most recent acquisition of Nvigorate, we're tying all those activities together with a powerful work flow product," Eldridge said. "It's all about bringing together what the direct marketer needs to do."

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