As our physical mailboxes gradually get a little less stuffed with direct marketing letters, two of the companies that have played a part in shifting that business to email, mobile and social media networks are coming together. XL Marketing, the NY-based direct and email marketing company co-founded by former CEO of Apple John Sculley, is buying Intela, a UK-based rival. The deal makes good use of the $70 million that XLM picked up in funding a little over a year ago, and will give it a crack at more international business, as well as a chance to sell through other data marketing services beyond email targeting to Intela’s current customer base.
David Steinberg, the other co-founder and CEO of the company, declines to disclose the cost of the acquisition but says that it will make XL Marketing one of the larger email service providers. It will add another $20 million – $25 million to XL’s revenues, which are now at “over $100 million and growing at 37% annually” at the moment. The combined company will have over 500 employess, he says.
As part of the deal, XL Marketing is merging Intela’s data and customer acquisition businesses with Virtuoso Advertising, XL Marketing’s existing UK subsidiary and renaming it XL Marketing Europe (XLME), based in London. Intela’s Colorado-based email business, meanwhile, will merge into XLM Corp.’s email services division.
The two companies have a strong overlap in their business in the area of direct marketing. The differences between them, however, are part of the rationale for the deal. For starters, there is Intela’s international footprint. It has offices in the UK (in London), Spain and the Netherlands, along with operations in Australia, Canada, Germany and France, compared to XL Marketing’s existing operations in the U.S. and UK. This gives XLM a window, which works with Fortune 500 companies like American Express and Barclay’s, an opportunity to serve them in more markets, too.
The other area where the deal makes sense for XLM is that it gives the company a wider base of customers to sell its other services, since Intela today only focuses on direct marketing and none of the other services XLM currently offers.
Those other services can very loosely be put into the general buck of “big data” and more specifically big data used for marketing purposes. Next to email marketing, XLM also has a strong business in other kinds of digital marketing services covering social media networks as well as search, display and mobile ads. Social media, he says, is its second-largest business line after email marketing at the moment (email is 40%-50%, he says). “We literally are bidding on millions of dollars of social media today on behalf of our clients,” says Steinberg.
It also works with different businesses to help them target and filter potential customers for sales and CRM purposes.
All of this, Steinberg says, is done using data it collects covering some 300 million anonymised users worldwide, with an average of 327 cells of data per person, to shape how and where it targets different marketing campaigns. Those datapoints, he says, are “demographic, psychographic and behavioral.” Sourcing data from companies like Epsilon and Acxiom, he says XLM is “fed approximately 1 million new records per day that we de-deupt, run though suppression files,” and so on, resulting in some 265,000-270,000 “fresh new names every day.”
The sales and CRM aspects of XL’s business put the company into direct competition with the likes of Salesforce, which acquired another direct marketing specialist, Exact Target, for $2.5 billion earlier this year. Steinberg says XLM has a different approach. “Rather than just a CRM play or just a marketing play, we are trying to approach this as a platform play,” he says. “It’s about customer acquisition in addition to CRM, not one or the other.”
Intela is XL’s seventh acquisition in the last four years, with others including Zeta Interactive and Virtuoso Marketing in the UK. (Zeta’s ZetaMail is getting merged with Intela’s U.S. operations, while Virtuoso is merging with Intela’s UK operations.)
He adds that XLM is now “knee deep in another deal right now” that it expects to close before the end of the year. No more details on that except to say that it’s a tech company that will bring it “an entirely new methodology for customer acquisition and CRM.”
Sculley, who is the vice chairman of the company, is one Steinberg’s best friends that has been “incredibly involved” with XLM since co-founding the company. “If you want to talk about a guy who understands tech and marketing and how they intersect, he is the one.”
As part of the deal, Jim Mansfield, founder and CEO of Intela, will become the chief strategy officer of XL Marketing Corp. managing the data and email operations in Boulder. Ben Harvey, founder and CEO of Virtuoso Advertising, will become President of XLME and Toby Harris, previously COO of Intela, will become COO of XLME. Both will report to Steven Gerber, COO of XL Marketing Corp.