When Publicis acquired Epsilon for $4.4 billion on Sunday, it put a big emphasis on the value the company brings to the group around first-party data.
But while Epsilon has deep experience working with its clients’ first-party data and managing their CRM databases and loyalty programs, it doesn’t actually own first-party data – depending on your definition of the term.
Epsilon has access to personally identifiable information, but it doesn’t actually generate that data on its own. It aggregates third-party data to enrich clients’ CRM files and loyalty programs. And it can match offline data to a digital ID and tie together different profiles under the same household.
Epsilon has a unique data set through Conversant, the ad tech stack it acquired for $2.3 billion in 2014, based on the media activity that runs through the platform, said Bryan Kennedy, CEO at Epsilon. It also has access to transactional data through its data co-op Abacus, which manages data from thousands of retailers.
"Because we have a massive digital delivery platform, we’re able to infer behavior about consumer and tie it back to all of those offline data assets which creates a very rich set of proprietary data that we own," he said.
If Epsilon is aggregating data between its clients to build a unique asset, that could give it access to even more proprietary data assets, said Jay Stocki, chief operating officer at Signal, and formerly an exec at Epsilon rival Experian Marketing Services.
“Without digging deep into those agreements, they may have given permission for aggregation,” he said. “This is where we’re seeing an even greater resurgence around brands considering what rights they’ve given up to their agencies.”
Still, any proprietary data Conversant has is limited to its client set, which is a sizable but incomplete network, he added.
“I’d love to see a match test on what they actually have versus what can be acquired thorough other parties in the industry,” Stocki said.
Beyond Conversant, Epsilon’s third-party segments are available virtually everywhere in the market, said Maja Milicevic, principal and founder at Sparrow Digital Holdings. Even if Publicis wanted to make Epsilon’s data exclusive to its clients, it would cut into the $2 billion in revenue Epsilon brings in annually by selling its data segments across the industry.
“Epsilon segments are easily accessible to anyone looking to buy,” she said. “This transaction looks like paying premium for something that's essentially available everywhere and is by no means scarce.”
At the end of the day, first-party data always belongs to marketers, who are unlikely to want their agency to take ownership of that asset, said Greg Paull, principal at R3.
“Marketers are not about to give up their first-party data to allow others to build advertising campaigns to their loyal customers,” he said.
Why buy when you can rent?
Epsilon’s real value is its talent and expertise onboarding and structuring first-party data, as brands increasingly need agencies to leverage data as a strategic advantage.
Managing CRM and loyalty programs could potentially add a new revenue stream for Publicis, and it could give clients the confidence that it understands their data when developing audience segments and activating media. That expertise can also open up new services around multitouch attribution, measurement and analytics that Publicis may not have been able to offer previously.
Beyond first-party data management, owning Epsilon gives Publicis the opportunity to influence its road map. Publicis wants to expand Epsilon’s business, 97% of which is in the United States, to international markets where the holding company operates.
Doing that quickly, however, will be difficult, as different data providers and regulations around customer data usage exist in different markets around the world. That’s why businesses like Epsilon, Acxiom and Experian have avoided international expansion for some time.
“It is tough to scale this across geographies,” Stocki said.
The ubiquity of third-party segments in the market leaves Publicis competitors – namely Omnicom – skeptical of the acquisition’s huge price tag. But with Merkle owned by Dentsu and Acxiom owned by IPG, Epsilon is one of the last data management businesses on the market, so scarcity likely elevated the sale price.
“They had to do this,” Stocki said. “They were the last big holding company that didn’t have a strong data play.”