Deal for Neustar Is a Twist in Battle to ID Consumers Across Devices

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Neustar is in a race with a handful of marketing data and technology services firms to be the go-to choice for consumer identity and connectivity dominance, and private investment firm Golden Gate Capital is betting a long-term strategy will help the company get there. Announced Wednesday, Golden Gate acquired Neustar, a firm with a long-standing telco data business that only entered the marketing space a few years ago, in a deal valued at $2.9 billion.

The pact halts Neustar's plan, announced in June, to split in two, extricating its sexier but less-lucrative marketing services business -- the one attracting public investors -- from its staid older sibling, the number portability business, which handles things like caller ID and phone number management.

"We are discontinuing the work around the split and staying as one company," said Neustar President-CEO Lisa Hook.

Now that Golden Gate has bought out shareholders at a 20% premium to Tuesday's stock price, Neustar no longer will go forward with that break up, allowing it to continue to fund its venture into marketing services with revenue from its numbers business. Arguably, the acquisition frees Neustar to explore growth strategies away from the prying eyes of analysts and public investors.

"The acquisition by Golden Gate creates the flexibility for management to continue to execute their growth strategy outside of the public market and allows them to take a longer view," said Bruce Biegel, senior managing director of Winterberry Group, a close observer of the marketing data services sector.

As Neustar strives to compete with Acxiom, Oracle, Epsilon, Merkle and Infogroup, it remains unclear exactly what its planned path to victory is. But no matter the route it takes, the firm must build scale in order to compete, and some observers expect that to take form in future acquisitions.

In a call with Ad Age today, Ms. Hook said the company will make additional hires in its marketing services and credit risk and fraud groups. She did not directly respond to inquiries about potential acquisitions as a result of the Golden Gate investment, but did say Neustar has the "components of the marketing stack we need to we have."

When it was still far-better known as a supplier of telco services to government and financial institutions, Neustar bought analytics firm Aggregate Knowledge in 2013 to bolster its campaign measurement capabilities and enhance audience segmentation and campaign planning services. About a year ago, the firm purchased marketing analytics firm MarketShare Partners.

Mr. Biegel suggested that Neustar could stand to beef up its marketing data integration capabilities in order to go head-to-head with Acxiom, for example.

The real competition could be manifest in the race to acquire to fill gaps through a finite number of marketing data and tech providers.

"The question is whether they emphasize their growth plans to build towards an Axiom model of marketing services and data technologies or place more emphasis on services. In any event, it will increase the competition for available companies in the data and data driven marketing services space," he said.

In its third quarter 2016 earnings report in late October, Neustar lowered its full year outlook, reducing its revenue expectations for its information services and MarketShare businesses. The firm blamed "lagging sales execution." Heightened pressure as Neustar fights for attention from brand marketers and ad agency clients could have fueled that sales softness.

Like the competition, Neustar aims to be a primary provider of systems that help marketers connect their own first-party CRM data to second- and third-party information to a single universal ID. The idea is to use that one encrypted identifier to follow customers across all digital channels and beyond into the physical brick-and-mortar world via mobile, web-connected "internet of things" devices and transactional touchpoints.

"A number of folks who are competing with us do have that goal," said Ms. Hook, who argued that the identification data flowing through Neustar's older telco services business gives it an upper hand when it comes to linking various consumer identities to core data like names, addresses and phone numbers.

It's not as simple as pressing a button though. Oracle, Acxiom and Neustar all battle in the realm of offline-to-online data matching and connections, better known in data circles as on-boarding, but none has the master key. The little-discussed secret in that sector is that these firms often serve the same clients in their goals to connect data representing as many of their desired customers as possible. Indeed, if one can match just 60% of a customer list, the others should have pieces of the remaining 40%, and companies with deep enough pockets are employing multiple partners in their mission to reach 100%.