How a Back-end E-tail Operation Looks to Grow Into a Digital Shop

NEW YORK (AdAge.com) -- It was a bit perplexing to many in the ad industry: Why would big agency veterans such as Nick Pahade and Dorian Sweet decamp from highly decorated shops to an e-commerce player that handles back-end digital-marketing functions and is headquartered in King of Prussia, Pa.? Last Tuesday, however, it became a bit more clear. GSI Commerce, an e-commerce platform and warehouse provider with clients such as Aeropostale, Bath & Body Works and Levi Strauss, rolled out and rebranded its marketing-services division, GSI Interactive, as True Action. The division, prior to the rebranding, had already handled search, banner and website design and development for retailers such as the National Football League, GNC, Kate Spade and Christopher & Banks. But as it emerges from its parent's shadow, the 300-person shop will look toward growing agency business from existing GSI clients as well as luring some of its own. For fiscal year 2008, GSI Interactive reported $84.5 million in net revenue for the company's interactive marketing services, which include True Action and e-mail marketing shop eDialog, but, year-to-date, that revenue was more than $110 million, said Mr. Pahade, the agency's president. According to Ad Age estimates, about $36.2 million of fiscal 2008 revenue came from agency-like services (estimates excluded eDialog), ranking it No. 41 on Ad Age DataCenter's list of top 50 U.S. digital agencies. GSI declined to provide True Action-only revenue figures. Different pedigree With its e-commerce heritage, True Action claims a distinctly different approach to advertising than some of its digital-agency counterparts. For one, the majority of its work until now has focused on driving sales online, not building brands. "But I see us expanding beyond that over time," Mr. Pahade said. "I don't see the world in the sense of brand work vs. direct-marketing work. Those worlds have collided; we can't live in those silos. At our core, we'll continue to look at insights to develop strategies but will branch beyond driving revenue." GSI Commerce was founded 10 years ago, and it built its business on designing and hosting websites, as well as providing warehouse, shipping and call centers to support online sales. While GSI Commerce has offered marketing to support its core business since its inception, that slice of revenue became sizable enough to roll out into an independent unit, GSI Interactive, three years ago. To supplement those services, GSI bought eDialog in early 2008 and acquired San Francisco-based website design and marketing firm Silverlign and affiliate-marketing firm Pepperjam this year. Its pedigree has put True Action in a position to access sales data they say is not often available to digital agencies, said Fiona Dias, exec VP-strategy and marketing for GSI Commerce. "True Action is a marketing agency in touch with how the site works," she said, adding that more than half of GSI Commerce's clients use True Action's services. "If your agency doesn't know how your base business runs, they can make dumb decisions, because they don't have the data to make decisions." She points to an example of campaigns that drive sales for products that are out of stock, like popular gaming consoles shortly after launch. "Why would you have paid search against no inventory?" It's also entertaining pay-per-conversion compensation structures that would link digital advertising to sales data. Expanding business The True Action announcement is GSI's latest move in expanding its business across the e-tail spectrum. Last week, it entered the popular online private sales space with the acquisition of Retail Convergence, a Boston company that operates RueLaLa.com. It and sites like Gilt.com run what are essentially online limited-time and by-invitation sample sales. "E-commerce is clearly what we do, but we also provide lots of services that enable e-commerce," Ms. Dias said. "We intend to be a large player in the marketing business. When people want to move their goods online, we want them to think of GSI. So we'll continue to add services."

How a Back-end E-tail Operation Looks to Grow Into a Digital Shop

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