The infoUSA-Direct Media Deal: The Experts are Buzzing, What’s Your Take?

The news of infoUSA’s acquisition of Direct Media sent the combined reaction of total expectation and shock waves throughout the catalog/multichannel list industry. My own opinion is that this deal was to be expected considering the path that infoUSA has been going in recent years. Direct Media joins the infoUSA stable that contains Millard Group (including its most recent pick-up, Mokrynskidirect), Edith Roman, Rubin Response, Walter Karl, JAMI Marketing Services and American Church Lists.

Then again, it’s a little surprising considering that Direct Media was sold to Acxiom nearly 12 years ago, only for Direct Media’s management team to buy the company back four years later. But a lot has changed in eight years, and in retrospect, the deals have little in common.

That said, I tend to base some of my opinions largely on what clusters of people in the industry have to say. So I felt that for this column, readers would be better served to hear what their colleagues, competitors and experts felt. Here are some opinions. And this being an open forum for discussion, I encourage you to add your own comments in the post-a-comment box at the end of this article.

First, it’s best that we start with Direct Media CEO Larry May. In announcing the deal and putting his positive spin on it, Larry cited four key benefits to being absorbed by infoUSA:

1. The ability to expand Direct Media’s services in database products and data enhancement, data processing, and e-commerce;

2. The opportunity to keep Direct Media’s management and top staff intact indefinitely;

3. The chance to invest in new products and services; and

4. To improve its internal systems to enhance daily services to customers.

In announcing the deal, infoUSA chairman/CEO Vin Gupta had this to say: “Direct Media’s expertise and impeccable reputation combined with the new technologies from infoUSA will better serve our combined customers and grow our business.”

Here’s what the observers had to say:

Stephen R. Lett, president of Lett Direct:
This is a smart move on the part of infoUSA. It has acquired three of the most respected list brokerage/management firms in the business — Millard Group, Mokrynskidirect and now Direct Media. With approximately 60 percent of all prospect names being selected from one of the co-op databases, the brokers are working hard to retain the same dollars. This move helps ensure that these companies, now part of infoUSA, will retain what business is out there.

Catalogers are loyal to their individual list brokers, and not as much to the firms themselves. Therefore, I don’t see a lot of change as a result of this. What’s more, infoUSA does seem to operate these business fairly autonomously. Direct Media’s presence in the B-to-B markets will also be of value to infoUSA. I don’t see this having much impact on the list industry as a whole.

Jack Rosenfeld, chairman of the Potpourri Group:
I understand it because we see it in the catalog space also. It’s logical. As a user and consumer of list services, I worry about consolidation hurting pricing. We’re certainly seeing it in the consolidation of the printing industry, as there are basically three printers left. So consolidation only concerns me if it affects pricing.

Charlie Silver, vice president of marketing at Bloomingdale’s By Mail:
The list business has gotten more difficult to make money in for a number of reasons. Postage and paper increases have driven the cost of producing a catalog much higher. So it’s harder to prospect for new customers economically. Co-op databases have also been a tough competitor to list companies.

The shift online where you can prospect for new customers more efficiently has made it tougher for list companies. If a list company doesn’t have a robust online component, it’ll shrink and ultimately get bought out or close.

I’m sure in the near future Direct Media, like Millard [including Mokrynskidirect], will be cutting out jobs to try and become more profitable. In terms of what it means for the catalog industry, ultimately a catalog will be used as a marketing vehicle for our customers with very little prospecting done — what store catalogs are now.

Jim Garlow, director of advertising and marketing operations for CDW:
The key with any acquisition is being able to retain key people, capitalize on synergies and complete a successful integration. This can be a win-win for both companies as infoUSA may be able offer new services or capabilities to Direct Media customers.

Larry Gaynor, president, The Nailco Group:
The industry only needs two major players that can provide essential services and solutions to catalogers and perhaps a third player with niche offerings. With the increase in postal, paper and printing costs, the need for leadership players is vital to our success.

Susan McIntyre, president, McIntyre Direct:
When infoUSA purchased Mokrynskidirect in June 2006, the talk was that Mokrynski now could become stronger by offering many more services, which would be better for Mokrynski and better for its clients. Today, the respected Mokrynski brand is gone, and the few remaining staffers have been consolidated into infoUSA’s Millard brand. These changes don’t necessarily make happy customers.

But with the rise of the co-op databases (cheaper, better response, simpler and faster to acquire), and with the Web, consolidation in the traditional catalog list industry was inevitable. Consolidation will continue, as will what I see as the current “reinvention” of the traditional catalog list industry until it catches up with today’s wildly changed marketplace.

George Hague, senior marketing strategist for J. Schmid & Associates:
Acquisitions happen. It’s part of the free market economy. We’re seeing strong M&A activity throughout the catalog market. So it only makes sense that we would see similar activity in the industries that service catalogers.

From the catalogers’ perspective, you’ll see more list and data services under one roof. Smart catalogers will likely be able to take advantage of more integrated services, especially for house data mining, prospecting and processing. Once the dust settles, find out what integration is happening. You may have to probe a little. For the companies that use their services, there will likely be some good opportunities.

Phil Minix, president of MCM Electronics:
Direct Media is our list broker and manager. I’m conflicted about how I feel about it. On the one hand, it should give Direct Media access to additional data and products that should help us. On the other hand, I’m concerned that infoUSA is getting too big. So it’s one of those “time will tell” things. I am a bit afraid that too much consolidation in this area will lead to less creativity, higher pricing, etc.

Mark Amtower, founding partner, Amtower & Co.:
I guess Vin Gupta paid less for Direct Media than he will on the Super Bowl. How many major independent list management and brokerage firms are there now?

Conclusion:
With big deals like this one, as well as the other recent big list deal — American List Counsel’s acquisition of the list management division of MKTG Services — I don’t sense much in the way of reckless absorption. Say what you will about Vin Gupta and infoUSA, but there’s no denying a broad-reaching game plan is in effect here.

In the case of the ALC-MKTG deal, ALC wanted MKTG for its complementary lists and experienced management team. Although one could make a good case that infoUSA is looking to become as big as it can be by buying up all the list firms, I sense that each one fits into place where it belongs in the big company. And with ALC, here too was a puzzle piece that seems, at least on the surface, to fit.