Epsilon Hints at Changes To Its Conversant Business

'Deliberate' Transformation Prioritizes Rich First-Party Data

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Andy Frawley, Epsilon CEO
Andy Frawley, Epsilon CEO

Epsilon is going through changes as it continues working towards integrating Conversant, the company formerly known as Valueclick, which it purchased it for $2.3 billion in September. That acquisition was in part about Conversant's ability to make cross-channel targeting -- specifically in mobile -- more viable for the data-services company. Today, Epsilon is dead set on updating what Conversant has to offer to help clients make better use of their first-party data.

That means de-emphasizing the less-valuable aspects of Conversant's business that have become commoditized. In an earnings call yesterday, Ed Heffernan, president-CEO of Epsilon parent company Alliance Data Systems, discussed plan to move Conversant into the modern digital-data era.

"It's a very deliberate transformation," he said. "We're going to be focused on those businesses where that real rich first-party data will be driving the offerings and the more commodity-like businesses we will be de-emphasizing."

Mr. Heffernan did not go into detail on which specific services have become commoditized. Epsilon was also reluctant to elaborate. In fact, Epsilon CEO Andy Frawley told Ad Age, "It's less that we're de-emphasizing, than we're taking the traditional Valueclick site-based targeting and making it data- and audience-based targeting." He continued, "We're not sun-setting anything."

He suggested that Conversant's lead-generation business could be among the services getting less attention, stating that "nothing has happened [to the lead generation business] since we bought Conversant."

Conversant's Commission Junction affiliate marketing business, however, will remain, said Mr. Frawley. "We love the affiliate marketing business," he said. "It's a reasonably large slice of client budgets."

Going forward, he added, Conversant could evolve its affiliate marketing services to be more data-centric.

During yesterday's earnings call with investors, Mr. Heffernan stressed the focus will be on tailoring Conversant's platform for targeted display in desktop, mobile and tablets. "The ability to deliver this precision ad business across devices, [is] driven by the insights gleaned from offline and online first-party data. That is the model that is Alliance's model. That's the model that's going to be Conversant's model more and more going forward."

The company's goal is not unlike that of its rivals. Earlier this week, Ad Age reported that its smaller competitor Merkle plans to set aside $1 billion to acquire more companies with emerging digital technologies to facilitate the firm's focus on performance-driven marketing that employs first-party client data.

Merkle is shooting to hit close to $500 million in revenue this year. Epsilon reported a 45% revenue boost to $505 million in the first quarter of this year, attributing that increase to the Conversant acquisition.

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