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Thank You for your sponsorship. Lunch Presentation by Gridley & Company LLC February 14, 2008. Agenda Quick Gridley Commercial Wall Street Perspective Favorite Investment Themes. Quick Gridley Commercial.

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Thank you for your sponsorship

Thank You for your sponsorship


Thank you for your sponsorship

Lunch Presentation

by

Gridley & Company LLC

February 14, 2008


Thank you for your sponsorship

  • Agenda

  • Quick Gridley Commercial

  • Wall Street Perspective

  • Favorite Investment Themes


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Quick Gridley Commercial


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Gridley’s Investment Banking Effort is Focused on a Few Related Sectors of Information Services

Financial Technology and Outsourcing Services

Advertising & Marketing Services

INFORMATION

&

TECHNOLOGY

&

SERVICES

Database / Information Services

Internet Services


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Gridley’s Value Proposition

  • Highly strategic approach

  • Buyside work for industry leaders

  • Sellside and fundraising work for private companies

  • Host of Bellwether Events

  • 1,850+ quarterly newsletter distribution


10 years of revolutionizing the marketing services industry through transactions

10 + Years of Revolutionizing the Marketing Services Industry through Transactions


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Wall Street Perspective


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Reflections on 2007


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2007 Stock Market Performance

  • Marketing Services ↓5%

  • Internet Services ↓ 2%

  • Winners

    • Ad Networks in China

    • Internet Services

  • Losers

    • Data / Database Marketing

    • Teleservices


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    2007 M&A Themes

    • Market leaders go private

    • Internet Titans enter eMarketing with a “bang”

    • Growing interest in social media

    • WPP takes M&A road less travelled

    • Valassis completes ADVO deal – for better or worse


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    Gridley Newsletter Projections for 2007

    What We Said in Dec. 2006 - Marketing Services

    • Hopes for a more exciting year than 2006

    • Continuation of ad spending shift

    • “Consumer Pull” marketing is here to stay

    • Database marketing = core capability for next generation marketing

    • Harte-Hanks LBO?

    • Industry transforming deal in eMarketing?


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    Gridley Newsletter Projections for 2007

    What We Said in Dec. 2006 - Internet Services

    • The consumer is “king”

    • Slow increase in M&A consolidation throughout the year

    • Use of internet and digital devices to reach consumers in new ways

    • Growth in local online advertising

    • More “real action” by traditional media companies

    • Seemingly unstoppable Google – what’s next?

    • Emergence of a new e-marketing industry leader?


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    Outlook for 2008


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    Gridley January Conference Projections

    Marketing Services in 2008

    • Direct mail takes a hit

    • Client frustration with traditional providers becomes more evident

    • Clients show their insatiable appetite for data analytics

    • Ad spending without the internet, Olympics & elections looks bleak

    • Valassis, Harte-Hanks, or Vertis get acquired

    • Increase in M&A activity by ad holding companies?


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    Gridley January Conference Projections

    Internet Services in 2008

    • Globalization – Foreign buyers increase U.S. presence

    • ValueClick gets sold?

    • The 4 Titans continue to dominate

    • Strong sector M&A activity continues

    • Broadening buyer universe

    • Plethora of acquisition opportunities

    • Media companies become more aggressive buyers


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    2008 M&A Themes YTD

    • The internet Titan game continues

      • Microsoft / Yahoo!

      • AOL / Buy.at

  • Public buyers seek high quality growth opportunities

    • GSI Commerce / e-Dialog

    • WPP / Yankelovich

  • LBO / credit crunch hangover

    • Alliance Data Systems


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    Favorite Investment Themes


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    Marketing Services Industry Themes

    • Large market in significant transition

      • Client frustration

      • Consumers in control

      • Traditional leaders faltering

      • Technology importance increasing

      • Use of data is CEO level issue

      • Internet Titans have arrived

      • Without Olympics and Elections, traditional ad spending looks bleak


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    Marketing Services Industry Themes

    • Opportunity for New Industry Leaders

      • Data driven solutions

      • ROI focus

      • Vertical market expertise

      • Customer segmentation and lifecycle management

      • Well targeted, integrated, multi-channel marketing campaigns

      • Core delivery platform = technology and the internet


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    Integrated, Measurable, Information-based Marketing Services Offer Greatest Value Proposition

    1996

    1997

    -

    1998

    1998

    -

    1999

    2000

    -

    2001

    2002

    -

    2008

    Multi-channel Model

    Mass Marketing

    Direct Marketing

    Internet Marketing

    Integrated Model

    Database

    Marketing

    Mass Marketing

    Direct Marketing

    Database Marketing

    Internet Marketing

    Consumer Focused

    High

    Same as Integrated

    Consumer Opt-in is key

    Real-time Feedback and Analytics

    Multi-channel

    Same as Integrated with personalization

    Approach

    Mass

    -

    Orientation

    Segmentation

    Narrower Segmentation

    One

    -

    to

    -

    One

    Maximize Future Value

    Mass

    -

    Orientation

    Segmentation

    Narrower Segmentation

    One

    -

    to

    -

    One

    Maximize Future Value

    Knowledge of

    None

    Low

    Medium

    High

    High

    None

    Low

    Medium

    High

    Highest

    Customer

    Behavioral &

    Behavioral &

    Website

    Surveys

    Website

    Surveys

    Information Source

    None

    In

    -

    house Lists

    Legacy

    Transactional Data,

    None

    In

    -

    house Lists

    Legacy

    Transactional Data,

    Registrations and

    Registrations and

    Rental Lists

    Database

    Utilizing E

    -

    mail

    Rental Lists

    Database

    Utilizing E

    -

    mail

    Profile Information

    Profile Information

    Distribution Lists

    Distribution Lists

    Customer Expresses

    Tools

    None

    List Analysis

    Modeling

    Customer Expresses

    Cycle of Feedback

    None

    List Analysis

    Modeling

    Cycle of Feedback

    Interest

    Interest

    and Analysis

    and Analysis

    Internet Surveys

    Medium

    Internet Surveys

    Radio, T.V.

    Direct Mailing

    Direct Mailing

    Targeted Ads, E

    -

    mail,

    Radio, T.V.

    Direct Mailing

    Direct Mailing

    Targeted Ads, E

    -

    mail,

    Search, E

    -

    Mail

    E

    -

    Mail

    Telemarketing

    Telemarketing

    Search, Direct Mail

    Telemarketing

    Telemarketing

    Direct Mail

    Customer Requests

    Strategy

    Customer Requests

    Marketer Blankets

    Marketer Targets

    Marketer Targets

    Integrated, Opt

    -

    in,

    Marketer Blankets

    Marketer Targets

    Marketer Targets

    Integrated, Opt

    -

    in,

    Information From

    Information From

    Everyone

    by List Segments

    by Database

    Privacy Protected,

    Everyone

    by List Segments

    by Database

    Privacy Protected,

    Marketer

    Marketer

    Transaction Driven

    Transaction Driven

    High Response Rate

    High Response Rate

    Get Message to Consumer When & How They Want It

    Expensive

    Low Cost

    Expensive

    Low Cost

    Very Expensive

    Expensive

    High Measurability

    Very Expensive

    Expensive

    High Measurability

    Medium Measurability

    High Measurability

    Key Issues

    Medium Measurability

    High Measurability

    Unknown Response

    Low Measurability

    Increased ROI

    Unknown Response

    Low Measurability

    Increased ROI

    Above Average

    High Response Rate

    Above Average

    High Response Rate

    Rate

    Low Response Rates

    Unmatched Targeting

    Rate

    Low Response Rates

    Unmatched Targeting

    Response Rate

    Interactive

    Response Rate

    Interactive

    Capability

    Capability


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    Reaching the “Right” Consumer With the “Right” Message Using the “Right” Communication Vehicle is Imperative

    Internet, Email,

    Podcasts, and Blogs

    Mobile, RSS

    Inbound and Outbound Phone Calls

    Direct Mail

    Advertising – TV, Radio, Print

    Fax and

    Fax Back Service

    Voice Response Unit

    Face to Face Contact


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    Consumer Problems Vary by Industry – Sophisticated Solutions Needed

    Key Consumer Issue

    Industry

    Automotive

    Maintaining Customer Relationships through

    Fragmented Dealer "Middlemen" and Multi-year

    Buy Cycles

    Consumer Packaged Goods

    How to Create Brand Loyalty in an Increasingly

    Price/Promotion Sensitive Industry

    Financial Services

    Real-time Risk Management

    How to be the Multi-Service Provider to High

    Lifetime Value Customers

    Technology

    Lead Management

    Telecom

    Customer Churn


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    Increasing Importance of Data Analytics

    • Data is everywhere, key is how to interpret

    • Data analytics enables:

      • Customer segmentation

      • Targeted Communications

      • Measurement of Campaign effectiveness

    • Internet enables real-time capabilities


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    The Use of Data Drives Value

    • Core component for effective marketing solutions


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    Customer Lifecycle Management is Better Than Campaign Oriented Approach


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    Consumers Shift to New Media


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    Advertisers Follow, But Not Fast Enough

    • 2008E internet advertising = $23.8 billion

    • +22% growth vs. 2007

    • Mainstream spending, not pilot projects anymore

    Time Consumers Spend Online

    Online Advertising Spend


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    Opportunities for the Future - Summary

    • Clients are “Desperate for Disruption”

    • New data driven industry leaders needed

    • Consumers are firmly in control

    • Integrated multi-channel marketing is key to success

    • Technology is the innovation driver

    Go Forth With New, Innovative

    Solutions!


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    Happy Valentine’s Day

    From Gridley & Company LLC


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    Alliance Data Case Study: Achieving Market Leadership via Acquisitions

    • Alliance Data has become a marketing services powerhouse via an acquisition program

    • Cornerstone deals

    • Loyalty Group Mgmt Canada (1998) - $183 million

    • Epsilon Data Management (2004) - $300 million

    • Big Foot Interactive (2005) - $120 million

    • Abacus Direct (2006) - $435 million


    Alliance data case study achieving market leadership via acquisitions

    Alliance Data Case Study: Achieving Market Leadership via Acquisitions

    • Epsilon was viewed as a “tired, always for sale” property when ADS acquired the Company in 2004

    • Marketing Services is now the largest business segment for ADS (41% of revenue) and is considered a favorite buyer in the industry

    • ADS’s stock price has significantly outperformed vs. its peer group and it has increased its EBITDA margins from 14% to 28%


    Alliance data s stock has outperformed its peers 330 since its ipo on 6 07 01

    Alliance Data’s Stock Has Outperformed Its Peers: +330% Since its IPO on 6/07/01

    ADS Performance Versus Peer Groups

    • Marketing Services Comps include: Acxiom Corp., Equifax, Experian Group, Fair Isaac Corporation, Harte-Hanks, Inc., infoUSA, and Valassis Communications

    • Payment Processing Comps include: Cybersource Corp., Euronet Worldwide, Inc., Fair Isaac Corporation, Global Payments, Heartland Payment Systems Inc., and Total Systems


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