The acquisition of sweepstakes content company ePrize this week by PE firm Catterton Partners highlights the path that brand advertising and marketing is taking with the rise of mobile and social media: the diminution of classic "interruptive" ads replaced by a more one-on-one approach. In part, it's a recognition that, at least for the moment, social media and mobile are more about customer relationship management than media buying and ad inventory. The big question that has yet to be answered conclusively is: can this kind of marketing be as scalable enough to work?
The fact that Greenwich, Conn.-based Catterton paid an estimated $100 million for Detroit-based ePrize -- the deal's price remains undisclosed -- is an indication that at least one major retail player is betting that this form of marketing may dominate mobile and social media. Certainly, both formats are expected to continue to drive double-digit annual growth in spending. On top of the increase in ad budgets, the longer term value of companies like ePrize is in the consumer data collected through mobile and social channels -- something that could be much more valuable than traditional direct mailing lists.
"There are two trends going on right now in digital, and one that all marketing needs to drive loyalty and consumer engagement," said Tolman Geffs, co-president of Jordan Edmiston Group, Inc., which was the banker on the ePrize/Catterton deal. "Big brands love mass reach advertising, but also covet the ability to engage with consumers in a two-way direction. By giving them an incentive, it closes the loop with the consumer and creates a stickier relationship."
The second trend Geffs pointed to is that social and mobile are increasingly seen as channels for a clearer understanding of ROI and ad effectiveness. In the meantime, trying to forge traditional advertising into mobile display remains in the experimental stages.
How does ePrize work? Geffs offered an example: The Gap, one of ePrize's clients, ran a sweepstakes that encouraged shoppers to upload photos of their kids for a "casting call sweepstakes," where the company would choose faces to be part of an ad campaign. "About 98.2 percent of parents think that they have the cutest kid -- so you have many parents sharing not only their photos, but their information. That's the beginning of what can ultimately become a long-terms series of short, but frequent interactions with the brand."
For Catterton's part, the company mainly invests in retail stores and restaurants like Restoration Hardware and the parent company of the Outback Steakhouse chain. The PE firm sees ePrize as a way to bring those non-digital oriented marketers online in a more substantive way, while building a new CRM business in its own right. For ePrize, the reward it hopes for is for the support to beat back the competition and extend its digital presence to more traditional retailers. And with that, expect to see a lot more activity around companies that promise to "close the loop" with digital promotions and the real-time data that comes with it.
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