The company, which had revenue of $7.2 million in 2009-10, has just acquired Deals Group Media (better known as DGM) to complement its permission-based marketing company Empowered Communications, which runs a number of websites that offer loyalty-rewards programs for users who accept advertisements.
Today, chief executive Chris Meehan, who previously ran domain.com.au and travel.com.au, talks about the rise of performance-based digital marketing, why companies should be careful about getting caught up in marketing fads, and why Groupon copycats face a fight for survival.
Two years ago when we spoke to ComTel the company had just launched a cheap pre-paid phone service for consumers willing to accept ads. But now the business has completely changed direction.
If I go back to 2008, our business was two-fold. One was a mobile phone business where we sold pre-paid and post-paid plans and the second part of our business was Empowered Communications, which is an online business which focused its offers around selling targeted, measurable online advertising through email marketing and also SMS.
So former CEO David Sweet certainly started the strategy in 2007 of shifting the focus from a purely mobile business to an online business and part of his thinking at the time was around how do we bring mobile and online together and that’s where the SMS type mobile offer came. That actually reflected the Empowered Communication business model more than the mobile phone business. Empowered Communications has 500,000 thousand members, of which 140,000 provided their mobile phone numbers and they receive SMS adverts, but predominantly our business has been around sending emails, permission-based email marketing and that is our ongoing focus.
So the phone side of the business has now been sold?
Yes, we sold that at the beginning of September for $9.8 million and we’re looking at closing that sale in mid-October.
Is there much unstitching of the two businesses to be done?
It is a very clean break. We’ve actually sold the mobile base to two parties, one for a pre-paid sale and one for a post-paid sale. So we’ve kept the technologies separate, I guess the sales process is very separate and the marketing process is very separate.
Empowered is very much a media sales business. We deal with 50 of the largest media buyers in Australia. We also work with providing an online research panel to the likes of Nielsen and others. So it’s a very, very focused online business.
Did you feel that the phone side of the business was very crowded, whereas the online advertising space was something that you could grow a lot more?
Yes. The digital space is very broad and where we see our presence in that area is around the performance based marketing.
Empowered has been operating since 2001 in that area through its email database. Email is becoming more and more crowded, we’ve seen variations with Cudo and everything else coming out of the last 12 months as kind of bi-product of Groupon in the US, but our offering is quite different to that. Our offering is really to the media buyers, we deal with the large advertisers in Australia, whether it’s financial or telecommunications or technology amongst others. So we certainly saw more potential for growth in online. We just had recent IAB numbers saying that online advertising has hit the $2 billion mark for the first time and I think the PricewaterhouseCoopers media study forecast that by 2014, online or internet advertising and marketing is going to be larger than television. We want to be part of that journey.
Tell us a little bit about DGM.
DGM has been operating in the performance-based sector in Australia since 2003. It offers clients marketing programs across multiple channels, whether it be affiliate marketing, search engine marketing and online display. So it operates very much, particularly in the affiliate side, as an intermediary representing a multitude of websites, where Empowered owns its own website, owns it own inventory. However, they are working to the same result from an advertising perspective in terms of delivering a sale or a lead or a visit to their site etcetera or growing brand awareness but they complement each other.
So Empower might be one of the channels that DGM would offer?
Well for the immediate future we propose to run both instances side by side. Empowered is very much focused on the media buyers, the agencies where DGM has historically had more of a direct relationship with some clients. So what we see is that both will leverage each others’ relationships, both will reach each others’ offerings where appropriate but we do see that there is enough differences there in the respective businesses. And I must say that they’ve actually both got quite strong brands to the markets that they serve.
You mentioned just before some of the changes in the performance-based marketing industry with the likes of the million and one Groupon knock-offs. What other changes have you seen in the digital space?
Well I think that the whole category of digital has grown but certainly I guess that performance orientation has grown more significantly. I think what has happened is that marketers have sharpened their focus when they’ve been pressured from perhaps above to deliver more sales and more measurable results and the performance side, whether it’s search marketing or affiliate marketing or whether it’s many of the other options, it’s been collecting a greater proportion of the dollars.
Have you seen a difference in what results people want? Is it leads or is it sales, what are they after?
There’s a lot more lead generation that marketers are looking for, there’s a lot more final acquisitions. I don’t think that marketers are ignoring the other options in terms of brand awareness campaigns but I do think that online is a bit like the end of the funnel sometimes. The other campaigns drive people online to compare and search for particular products and that’s where they’re doing their research.
If I go back 10 or 15 years ago, everybody was focused to get the customer to make the phone call or to walk into a shop. Now they can still do those things but they also go onto the online shop or send an email to make an enquiry and that’s where sites that are comparison sites or search engines or whatever are driving more value. And likewise businesses like Empowered, where they’ve got a database and they’re more targeted in terms of being able to profile consumers are more measurable and give a better result.
With a business database business like Empowered, how do you ensure the panel of people on the Empowered websites don’t become jaded and look at advertising offers just to get rewards? How do you ensure that they stay active?
We recruit around 20,000 new members a month and we lose between 15,000 and 17,000 depending on the state of the market. We do need to refresh our membership. They’re like any consumers, they come in and out of the buying cycle depending on, for example, whether they’ve just got a credit card or they’ve looked at a card. But we do look for new members all the time to ensure that advertisers are hitting fresh eyeballs and are getting the results that they expect.
Is social media marketing something that you guys are keen to explore?
We’ve got social media sites in the sense of the What do you think? site allows people to place a poll on the site and you give their opinions, but to be frank we’re in the process in redesigning that site to make it a lot more relevant for its community. It’s got 120,000 members in Australia so it has its own niche and we want to grow that. We certainly want to build our own website to reflect the growth in social media. We haven’t really done a lot in terms of embracing it in terms of a sales perspective and I guess they are the sort of things that I’d like to talk to the guys at DGM about.
In theory it makes sense – there is a lot of information provided by users to a site like Facebook, where you can drill down into locations and interests and that sort of stuff. That should work for permission-based marketing.
Facebook is a phenomenon, it’s just incredible. But I think there’s still a lot of debate about what people mean by social marketing. I mean there are good examples where you can generate different awareness and response but from our perspective, we need to do more work in that area.