The $157 million deal unites a key online retailer and a marketing specialist, putting e-commerce and email marketing under one roof.
Posted Jan 25, 2008
Two major players in Web-based marketing are joining forces. E-commerce company GSI Commerce announced Thursday that it will acquire the email marketing firm e-Dialog for $157 million, bringing together two companies that specialize in different areas of online sales. Lexington, Mass.-based e-Dialog creates and manages email marketing campaigns for clients including NBC, Hewlett-Packard, and Nintendo, while King of Prussia, Pa.-based GSI runs online shopping sites for the likes of Toys 'R' Us, HBO, and the four major U.S. professional sports leagues.
Under the deal, privately held e-Dialog, which was founded in 1996 and has been backed by venture capital, will maintain all of its employees, brand name, and offices in Boston, New York, Seattle, and London. It will operate as a wholly owned subsidiary of GSI, which is traded on the Nasdaq. Officials from the two companies say that close alignment of e-commerce sites and email marketing will complement both services and increase revenue, while allowing for expansion into new markets.
"This deal means a whole lot for email," says Forrester Research analyst Julie Katz. "It really emphasizes the importance of the email space." She notes that while the deal places a significant value on e-Dialog -- six times its revenue -- that price is justified given e-Dialog's recent "incredible growth" of 50 percent year over year and the significant ROI of email marketing in general. "They're going to be a huge asset to GSI," she says.
Katz notes that e-Dialog's email marketing efforts will benefit from information generated by GSI's e-commerce sites, such as what products customers are browsing, putting into their shopping carts, and purchasing -- and using that information to generate targeted, relevant email pitches. "Of course, they still have a lot of work to with figuring out how to integrate those data sources," she says.
John Rizzi, e-Dialog's chief executive officer, says that the time was right in the company's life cycle to start exploring such a deal, and that the similarities between e-Dialog and GSI make for a natural fit. The main selling point was "the really clear, complementary nature of what we do," he says. "Email marketing is a driver to good e-commerce. We don't have an e-commerce platform and GSI doesn't do a lot on the email side, so to bring the two together is really a seamless integration." The two companies even share several clients already, he adds, citing the NFL and Dick's Sporting Goods as examples.
In a Thursday conference call with reporters and analysts, Michael Conn, GSI's chief financial officer, said that the e-Dialog acquisition would play a pivotal role GSI's growth. He cited statistics from JupiterResearch showing that email marketing will grow 11 percent in the next five years from $1.2 billion in 2007 to $2.1 billion in 2012. "This deal significantly expands the scope of our marketing-services capability...and fortifies our ability to compete for a segment of this growing business," he says. E-Dialog's international presence, particularly in Europe, was also attractive, Conn added, noting the acquired company's capability for running email campaigns in 22 languages across 19 countries. Finally, Conn said that the company decided to acquire e-Dialog, rather than simply forming a partnership, because officials had seen the "deep benefits of integration" in other acquisitions.
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