Dive Brief:
- Alliance Data Systems is considering selling its Epsilon marketing services business, according to a release.
- Epsilon generated $2.2 billion in revenue for the year ended Sept. 30, and Alliance is reviewing strategic alternatives for the business, but there is no guarantee a sale will happen. The decision for a possible sale is based on an internal review of operations, and Alliance said if Epsilon is sold, it would use the proceeds to reduce debt and return capital to shareholders via stock buybacks or dividends.
- Epsilon saw weaker than expected revenue this year from its agency services and site-based displays, The Wall Street Journal reported. Client bankruptcies also hurt the business. Epsilon made up about 30% of Alliance's total revenue last year.
Dive Insight:
Major ad holding companies will be keeping an eye on the possible Epsilon sale and could consider making a bid, as many are striving to bolster their own digital marketing offerings, where a lack of data expertise has hurt traditional agencies. The news follows Interpublic Group's acquisition of Acxiom Corporation's data marketing business Acxiom Marketing Solutions for $2.3 billion, a deal that was completed on Oct. 1. The high price tag may have opened Alliance Data's eyes to the value of Epsilon, according to the Journal report. Ad holding groups are likely to take note of IPG's performance since the acquisition, when the company's Universal McCann was named media agency of record for American Express, in part because of its data capabilities.
Companies like Acxiom and Epsilon were built from the ground up to collect and analyze consumer data but suffered from the perception that data crunching isn't as exciting as the creative work that goes into marketing campaigns. However, a number of factors are pointing to the growing importance of data. Marketers, responding to consumer expectations, are demanding better personalization, campaign measurement and ROI tracking from their agency partners, all of which require agencies to be more data focused. Many marketers have been frustrated with what they see as agencies being slow to adopt marketing technology. As a result, 74% of major multinational brands are reviewing their current agency arrangements, as 84% think agencies struggle with marketing technology, according to the World Federation of Advertisers and The Observatory International.
The expertise of companies like Acxiom and Epsilon with managing consumer data could also be attractive to agency holding groups as data privacy becomes more important. Data privacy will also be a major focus for marketers in the next year. Marketers are expected to become more proactive and champion customer data privacy and promote the care they take with customer data as part of their business model, according to Forrester CMO predictions. Consumers are becoming more leery about the data that they share with brands following high-profile cases of abuse of consumer personal information, like Facebook's Cambridge Analytica scandal.
