With AOL failing to bag Tradedoubler last year, the deal means it has finally got its teeth into a performance medium that we estimate generated more than £3bn in sales for UK businesses in 2007.
We caught up briefly with Buy.at CEO Kevin Cornils on what the buyout will mean for the company, including cross-selling opportunities, greater reach and cash for expansion abroad.
You haven’t disclosed the size of the deal, but what figures can you give us on how the business is going?
I need to be careful about talking about the size of the business because we’ve been acquired by a publicly listed company, but we’re generating between £25m and £30m in revenue.
Can you give us profit numbers?
I can’t - although I can say we have been in profitability for 3+ years.
The reasons behind the deal are pretty clear from AOL’s perspective. What have you got to do now to fit into the Platform A group and AOL’s integrated service model?
We’re going to be part of the Advertising.com business within Platform A. Advertising.com, together with AOL’s advertising business and some of the other acquisitions they have made recently, will make up the bulk of Platform A. So I will report to Linda Clarizio, the president of Advertising.com.
So you’re right, it was a pretty obvious synergy from their standpoint. They have obviously been interested in affiliate marketing for a long time. They have a great presence on their web network and are using the same technology to drive their SEM activity. They have lead generation capability, which is really their only foray so far into affiliate marketing.
They haven’t had a fully-fledged affiliate offering so that is something we can give them.
We can give them tools that they can take to etailers and retailers where we have capability down to a product level to dynamically display content from retailers through our content engine and some of our other tools.
Obviously we also have our infrastructure that tracks all of that and reports it in a management interface that allows affiliates, agencies and us to manage the whole programme.
That was not something they had owned. It fits really well into the whole suite. They had not really been able to have a true affiliate offering.
What’s in it for you?
From our standpoint, there’s the ability to have more strategic relationships with the big spenders online. We can learn from what is working in display and SEM and take that to the affiliate channel.
Cross-selling as well – they obviously have a lot of relationships with performance marketers that we can leverage. Ad.com also has the largest reach of any ad network in the UK, so we can go to their publisher base, which they have been working with on a display basis.
This should allow us to have greater reach to take to our merchants, which is something that is going to be a unique offering among affiliate networks.
Presumably you will be speeding up any international plans?
We’ve been a very fast growing company – the business has grown very quickly from 25 staff to 70 now.
Support from a larger parent is going to help us to continue to grow our offices in London, Newcastle and the US; and into other European markets as well. That will be on an accelerated timeframe from what we would have been planning if we were on a stand-alone basis.
We launched in the US in November last year and our lead client is Ticketmaster. We have staff on the ground in the US and that is something that will be accelerated going forward. We will also be working with their team to figure out our European expansion strategy as well. It’s very much on the cards.
We need to look at the 2008 balance of investment between the UK, US and Europe.
Will you be looking at developing countries?
I think there is opportunity there and there is probably less competitive pressure in those markets.
What’s your view on future growth in affiliate marketing? Are some sectors tailing off?
This deal is a good example of how others in the online business see growth potential in affiliate marketing, so that is good.
I think you will find that historically, a lot of the growth has been driven by etailers and financial services companies, as well as mobile telecoms companies.
You will see sectors like automotive and FMCG working with us to develop the pay per performance channel – whether that is for generating test drives, brochure requests or product trials. We will expand that into other sectors that have spent less online or have spent more on display advertising.
Are you concerned about the wider economic outlook?
It’s difficult for me to say because I’m not an economist. But I think in the performance marketing sector, we are in a good position. If the economy continues to grow, obviously that will be a good thing and budgets will stay closer to where they were in 2007.
If it does look like we slip into a recession, I think we may actually be in a good position. Affiliate marketing was rated as the most cost-effective form of online advertising in the research we did with you (our Affiliate Marketing Agencies Report 2007, carried out in association with buy.at).
A lot of advertisers will be looking to move some of their money from some of the less performing types of media, and potentially some of their branding activity, into affiliate marketing.
We are somewhat counter-cyclical and I think we would benefit from an economic downturn.
Did you receive any other approaches?
It’s probably not my position to comment on the corporate activity leading up to it.
We have been owned by a VC for coming up to two years and I can imagine they have kept close relationships with lots of players in the market.