Yesterday brought news that Acxiom had agreed to sell its marketing services business to Interpublic Group, a major ad holding company, for $2.3 billion. Acxiom will retain LiveRamp and do business under that name. Acxiom had restructured itself in March into the Market Services and LiveRamp groups and announced it was looking at strategic options, so the deal wasn’t especially surprising. But it’s still a milestone in the on-going evolution of the marketing industry.
For historical perspective (and assuming Wikipedia is correct), Acxiom got its start in 1969 compiling mailing lists from public sources such as telephone directories. The company grew to do all sorts of list processing, to manage custom marketing databases, to do identity resolution and to provide data enhancements for marketing lists. Although technology was always central to Acxiom’s business, it was ultimately a services organization whose chief resource was a large team of experts in databases and direct marketing. It was also a favorite target of privacy advocates in those quaint days before online data gave them something much scarier to worry about.
Acxiom bought LiveRamp in 2014 for $310 million, as a logical extension of its identity data business. Since then, LiveRamp has grown much more quickly than the rest of Acxiom, currently accounting for about one-quarter of total revenue. Interesting financial note: Acxiom stock closed today at 39.45, giving it a market cap of $2.66 billion. Extracting the $2.3 billion that Interpublic is paying for everything else, this leaves LiveRamp with an implicit value of $360 million – not much more than Acxiom paid, and even less if you add the $140 million LiveRamp paid in 2016 for identity matching firms Arbor and Circulate. That’s shockingly low and suggests either an error in my calculations (let me know if you spot one) or that the market has serious doubts about something.
But we’ll worry about LiveRamp another day. What’s interesting at the moment is Interpublic as Acxiom’s buyer. At first it seems to buck the trend of private equity firms buying martech companies: see Marketo, Integral Ad Science, Aprimo, and Pitney Bowes. But this report from Hampleton Partners gives a more comprehensive perspective: yes, private equity’s share of marketing deals doubled in 2017, but the main buyers are still big agencies and consultancies. Indeed, Interpublic competitors Denstu and JWT are among the top three acquirers in the past 30 months, along with Accenture. And bear in mind that Acxiom is really more of a services company than technology developer. It will be right at home with an agency parent.
So, what will Interpublic do with Acxiom? Some comments I saw said their main interest is Acxiom’s data business, which compiles and sells information about individuals (remember those phone books that started it all?) However, I disagree. It’s not that I fear privacy regulations will kill that business: I expect third party data sharing will continue. In fact, new rules should work in Acxiom’s favor. As a company that privacy watchdogs have barked at for decades, Acxiom is likely to thrive after less responsible providers are driven from the business and as data buyers seek sources they can trust. Indeed, Interpublic’s own discussion of the deal (click here to download) makes several references to data sales as an incremental revenue stream.
But it seems pretty clear that Interpublic’s main interest lies elsewhere. One of the nice things about ad agencies as buyers is they’re really clear in their explanations of their purchases. Interpublic’s deck lists their strategic rationale for buying Acxiom Marketing Services as acquiring “data solutions that enable omnichannel, closed-loop marketing capabilities and power exceptional marketing experiences.” A bit further on, they define the strategic fit as gaining “world class data governance and management capabilities [which] allow us to fully support clients’ first-party data”. They also say “data assets have intrinsic value that will grow over time”, but I read this to mean they’re most interested in managing each client’s own (first party) data.
This makes total sense. When Acxiom was founded in 1969, customer data was only used by a handful of direct mail marketers who were considered something between irrelevant and sleazy by the “real” marketers at big agencies and advertisers. Today, customer data management is considered the key to success in a future where every buyer expects a personalized experience. Ad buying itself, once an art form based on obscure (and often imaginary) distinctions among audience demographics, has become a mechanical process run by programmatic bidding algorithms. Indeed, the fraud-infested, brand-unsafe online ad market is now the shadiest corner of the industry.
The change is perfectly symbolized by the Association of National Advertisers (ANA) purchasing the DMA (originally Direct Mail Marketing Association): data-driven marketing is now main stream, even though the data-driven marketers are still not in charge. (If the data marketers had really taken over, DMA would have bought ANA, not the other way around.)
This is the world where Acxiom’s expertise at managing customer data is needed for Interpublic to remain at the center of its clients’ marketing programs. If Interpublic doesn’t have that expertise, other agencies and digital consultancies like Accenture and IBM will provide it and displace Interpublic as a result. It’s not a new trend but it’s one that will continue. Don’t be surprised to see other data-driven marketing services firms find similar new homes.