Merkle: “Addressability Is The Future of CRM”

DavidWilliamsMerkleMerkle’s been busy.

Since 2011, the privately held CRM and database marketing agency has been on an acquisition roll: Brilig (data exchange); 5th Finger (responsive design); Social Amp (social commerce); IMPAQT (search engine marketing); New Control (digital and direct marketing agency services); and, most recently in July, RKG (search).

It’s all part of what Merkle CEO David Williams called a plan to create “one fully integrated company.”

Merkle’s client roster currently includes big names across a variety of verticals: Geico and Travelers in insurance, Dell and Google in tech, The Office Depot and Urban Outfitters in the retail space and Chase and Visa in financial services.

But it’s not about being everything to everyone, Williams said – it’s about doing certain things well, like creating a nexus between data and digital. For an agency that went from managing about $20 million in media four years ago to a projected $650 million run rate today, the watchword is addressability, what Merkle CMO Craig Dempster described at the time of the RKG acquisition as “the ability to execute digital communications to the individual at a level of scale.”

“One question we ask ourselves is, ‘What is Merkle’s real right to win in the digital space?” Williams said. “We’re not going there because we think it’s cool or because we just want to be a bigger company. We’re moving so aggressively because we manage 150 mostly first-party marketing databases for Fortune 500-type companies.”

Williams spoke with AdExchanger about what’s been happening at Merkle.

ADEXCHANGER: What’s been going on since the RKG buy in July?

DAVID WILLIAMS: That acquisition was an opportunity for us to add scale to our digital media team, primarily in search. In the meantime, we’re learning their team and they’re learning ours. We’re learning their customers and they’re learning ours. George Gallate, the CEO of RKG, is still active in the business. We are starting to work on the integration part right now, but we’re trying to do it in a way that doesn’t disrupt the people on our teams or the clients. The RKG team will be integrated into our existing team starting in January 2015.

What was the motivation behind all the recent acquisitions?

Merkle has a very strong background in database marketing, technology and analytics acumen, primarily around direct mail and email. Over time, we noticed the big marketing database companies starting to think about becoming enterprise and people were beginning to come to them for a broader array of options, like display, search and website. That’s why we made a big investment in building the digital agency inside of Merkle. In the last two years we’ve invested more than $150 million in that business.

What else does Merkle need to round out its portfolio?

We’ve got scale on the media side, but where we’re looking to add more scale is on the channel or site side, in other words, user experience, site optimization, site technology – the whole suite of site assets. We bought a company on the mobile side, 5th Finger, a few years back, with a nice, strong team that focuses primarily on responsive design for mobile. I’d love to add another 200 people to that team if I could.

What’s the timeline for starting to focus more on site optimization?

The sooner, the better. We’re in active dialogue with a handful of opportunities that would extend those capabilities. We’re also looking beyond North America to Europe and APAC. A lot of our focus up until now has been in North America. We’ll be looking to expand our global footprint in 2015 and 2016.

What will your strategy be in China specifically? Different rules apply.

To a large degree we’ve been in China since 2010. We have about 350 people mostly doing analytics and supporting the big US-based multinational companies in-market over there. We’ve been learning that market for four years now. It’s likely that we’ll build out our digital capabilities out of Shanghai, although the decision hasn’t been made just yet. China is a unique and growing market and our clients need help and support to be in a position to take advantage.

You partnered with Rubicon back at the end of June to combine CRM and programmatic buying. How’s that going?

Well. The opportunity of these platforms, whether we’re talking about Rubicon, Google, Twitter, Facebook or Amazon, is that they all allow a more sophisticated and direct level of addressability at the individual or household level. Some of these things are in the early throes, but we have many large brands pushing harder and harder into addressable spend. We have CMOs challenging us for the first time that one of our metrics needs to be what percentage of media spend is addressable. The reason why our search and display business has grown so fast is because even as recently as two years ago you couldn’t target display or search at the individual level. Now that’s exactly what we’re doing.

From Merkle’s point of view, is addressability the future of CRM?

Absolutely. I’ve been in more CEO-level conversations in the last six months than I have in the last six years combined about this. The digital consumer is disrupting virtually every consumer company in America, and that’s forcing those companies to change – because something has also changed in the way consumers learn about brands. When a website knows who I am, it needs to do something with that information, and if it doesn’t, its competitors will.

Then look at what’s coming with the “Internet of things.“ A car can suddenly be seen as an addressable platform. A person’s house can be an addressable platform. There will be so many opportunities for brands to engage consumers in nontraditional ways.

Can you go into a breakdown of Merkle’s structure?

We have about 150 clients across seven verticals: insurance and wealth management, retail and consumer goods, travel, media and entertainment, banking and finance, life sciences, nonprofit and technology. We’re not like a traditional agency. We’re more like a management consulting firm. We also have four operating teams across management consulting, marketing technology, data and analytics and our digital agency services.

What’s Merkle doing on the cross-device tracking front?

We’re using a series of partners and we’re building out our own capabilities. We have our own attribution solution, which we built from the bottom up, [and] mainly has digital attribution capabilities, and we deploy other tools like Visual IQ or Adometry for our clients. We also created something we call “connected recognition,” which is our integrated solution for identity and cross-device. It’s not perfect yet, but compared to even 18 months ago, we’ve come a long way.

What do you think about what players like Facebook are doing to close the loop?

Facebook specifically is in a fantastic position, and my view is, the more power to them. Every move these guys make allows us to better understand how to align and link economic transactions, which is good for commerce and allows us to be more efficient and relevant to the customer. But the underlying problem with addressable audience platforms like Facebook is that it might solve the issue on Facebook, but what happens outside the walled garden of Facebook?

Where are you seeing the most growth?

We have about 50 clients in the digital agency world. That’s the fastest-growing piece of our company, and we’re penetrating more all the time. About 85% of our revenue is fully integrated. We provide some form of integrated solution for the vast majority of clients. We’re also providing analytics for most of our big clients and managing a portion of their ad tech stack.

Can Merkle compete with the nominal media agencies and, if yes, how so?

We’re building Merkle to help Fortune 1,000 companies play in the addressable world and you’ll see us continue to acquire the unique assets we need to succeed. We compete as what we would call a tech-enabled CRM agency in a market where the interaction between tech, analytics and digital media are all very important to clients. To do that, you’ve got to have a killer tech system integration and hosting capabilities, and most, quite candidly, don’t have that.

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