Epsilon, Bigfoot Team Up in E-Mail CRM Wars

Loyalty marketing firm Alliance Data Systems Corp.’s Epsilon unit has acquired e-mail service provider Bigfoot for $120 million.

No lay-offs are expected at Bigfoot, which will be renamed Epsilon Interactive and remain headquartered in New York when the deal closes in the fall.

In a market where e-mail failed to evolve into the acquisition tool many expected and the U.S. Postal Service keeps raising its rates, marketers are increasingly looking for ways to raise the average order sizes and conversion rates of e-mail to existing customers, while lowering the percentage of people who opt-out.

As a result, database marketing services providers have been on a spree of buying e-mail service providers who, in turn, see their future in offering more enhanced database services.

For example, Acxiom Corp., Conway, AR, announced an agreement in March to acquire e-mail service provider Digital Impact. InfoUSA agreed to acquire e-mail technology company @Once in January, and Experian acquired e-mail company CheetahMail in March 2004.

“Epsilon was one of the last large multichannel database-marketing-services companies that did not have e-mail as part of its portfolio,” said Forrester Research analyst Eric Schmitt. “Now you’ve got a situation where all of the major database players — Acxiom, Experian, Harte-Hanks and InfoUSA/Donnelley — have all got e-mail subsidiaries. The test now is how well they can integrate them.”

Also, Alliance Data Systems of Dallas provides data repository services, but it does not have the consumer data resources of Experian, Acxiom or InfoUSA’s Yesmail unit. However, this means Epsilon is “data agnostic,” according to Mike Iaccarino, Epsilon’s president. “We will go and build a database and our desire is not to drive names using our own compiled list and charge them on a per-name basis.”

Al DiGuido, Bigfoot’s chief executive, said that so far, the marriages of database and e-mail marketing firms have been hampered by culture clash.

“You’ve seen dysfunctional families stay dysfunctional,” said DiGuido, who will be president of Epsilon Interactive. “We did not want to make the same mistake that the other folks have made and have the market see this as a siloed part of another organization,” hence, the name-change from Bigfoot Interactive to Epsilon Interactive, he said.

Bigfoot and Epsilon have a strong presence in financial services, travel and entertainment marketing, said DiGuido.

Alliance Data bought Epsilon last October for $300 million.