As email prices drop, companies like Epsilon look to add revenue streams by building agency services portfolios.
Alliance Data Systems, owner of email marketing firm Epsilon, will acquire Aspen Marketing Services. The purchase will broaden Epsilon's client base into the auto and telecom arenas, and, according to Epsilon, effectively completes expansion of the firm's agency services offerings.
"Epsilon has a long history in industries such as financial services, consumer packaged goods, retail, pharma and travel. The addition of clients in industries like automotive and telecom will allow Epsilon to add breadth and depth to existing offerings and focus on developing new and expanded capabilities," said Bryan Kennedy, president and CEO of Epsilon, in a statement sent to ClickZ News.
Aspen's clients include major auto makers like Chrysler, Ford, and Toyota as well as telecom firms such as Motorola and AT&T, in addition to food and beverage brands including McDonald's, Outback Steakhouse and Jameson, according to Aspen's website. The company provides an array of traditional and digital marketing services including email marketing, mobile campaigns, campaign creative, and loyalty programs.
Some see the addition of agency services as key to the survival of email vendors like Epsilon, as email becomes commoditized.
"Most of the companies out there right now, the ESPs, are all buying up marketing and advertising companies because email itself has become such a commoditized thing that the only way you can [earn more revenue] is to do strategy," suggested Bill McCloskey, founder of Only Influencers, an invite-only community for digital marketers, and founder of eDataSource, formerly Email Data Source.
For example, email services provider Responsys bought digital creative agency Smith-Harmon in late 2009.
McCloskey believes companies like Epsilon must differentiate themselves from other email vendors as the cost of sending emails drops. "They need another stream of revenue coming in...and they can start by doing design work, strategy work," he added.
According to Epsilon, the acquisition will enable it and Aspen to cross-sell into their respective established client verticals. Epsilon stated in a press release that it expects to bring in $1 billion in annual revenues in 2012.
When asked whether Epsilon plans more related acquisitions, Kennedy responded, "Over the years acquisitions have helped build out Epsilon's overall business, as well as our agency services, to best serve clients and remain an industry leader. Our current focus is the Aspen transaction, the integration of the Aspen team and the transformation of our agency business."
As a result of the acquisition, Aspen staff will become part of Epsilon. "It is expected that all of Aspen's management will transition and Aspen's 750 employees will add significant capabilities and expertise to Epsilon's agency business," Kennedy stated.
The Epsilon name became more familiar to consumers earlier this month when the firm announced a security breach had exposed email addresses of its clients' customers. Consumers of companies including Chase, Target, and Marriott, had their email addresses leaked.
The data breach could have an effect on Epsilon when it comes to retaining clients, McCloskey said, noting that he believes some advertisers and agencies are reviewing their relationships with the company. "It will certainly have a near term impact on them," he said.
Still, McCloskey believes that, despite the recent Epsilon breach, the email marketing services sector is strong. He pointed to last week's IPO of Responsys, which resulted in a jump of around 30 percent in the marketing company's stock price.
According to McCloskey, the fact that the IPO out-performed expectations despite the news about Epsilon's data breach, "speaks to the strength of email."
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Kate Kaye was Managing Editor at ClickZ News until October 2012. As a daily reporter and editor for the original news source, she covered beats including digital political campaigns and government regulation of the online ad industry. Kate is the author of Campaign '08: A Turning Point for Digital Media, the only book focused on the paid digital media efforts of the 2008 presidential campaigns. Kate created ClickZ's Politics & Advocacy section, and is the primary contributor to the one-of-a-kind section. She began reporting on the interactive ad industry in 1999 and has spoken at several events and in interviews for television, radio, print, and digital media outlets. You can follow Kate on Twitter at @LowbrowKate.
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