Home Data What Is Alliance Data Systems? A Backstage Data Puppet Master

What Is Alliance Data Systems? A Backstage Data Puppet Master


AllianceDataData juggernaut Alliance Data Systems (ADS) might keep a relatively low profile, but the multibillion-dollar company has its fingers in quite a few data pies. What it needs now is to connect the dots.

And as ADS’ recently announced $2.3 billion acquisition of ad tech company Conversant (née ValueClick/Dotomi) for subsidiary Epsilon denotes, that’s exactly what it appears to be doing.

“You have these companies, and there are only a few now, that have an incredible amount of consumer data, but what they need to do is put all the pieces in place to be able to package and sell their broader marketing capabilities to that top tier of clients,” Nucleus Research VP Rebecca Wettemann told AdExchanger. “That means having the customer data piece, but it also means having the email marketing piece and the agency services skills that will ultimately complement and pull it all together.”

ADS, which was founded in 1996 in Plano, Texas, has its roots in loyalty services, specifically private label credit cards. In fact, the company, which went public in 2001, came to be as the result of a merger between The Limited’s private label credit card bank and the transaction processing arm of JCPenney. ADS bought Canada-based loyalty programs provider LoyaltyOne a couple of years later in 1998, followed by email, loyalty and marketing services firm Epsilon in 2004.

Through its retail services arm, ADS partners with more than 100 big brands like J. Crew, HSN, Lane Bryant and, most recently, BJs, to provide retailers with credit and marketing services, including co-branded and private label credit cards.

(The result is a loyalty and retail data gold mine, although it’s probably safe to say that most of the 33 million active cardholders in the ADS network have no idea that the data being derived from the card in their pocket is being captured by an ADS-controlled database. As ADS CEO Ed Heffernan commented to The Dallas Morning News last year: “We’re probably the largest company that nobody’s heard of. Our job is to be invisible.”)

But that data is only as good as the insights advertisers can derive from it, and there’s a lot of industry interest in getting that ball rolling in terms of loyalty program technology. Beyond the big multinational clients, “we’re getting into newer verticals where we didn’t see that much interest in prior year [and we’re] beginning to see everyone getting more and more excited about, ‘Hey, I need something that will give me insights into who my customer is,’” Heffernan said during the Q2 2014 ADS earnings call. “And that requires some type of loyalty application.”

According to comments from global investment bank Jefferies, now that Conversant is part of the Alliance family via Epsilon, it can provide “enhanced anonymous online and offline databases to enrich Epsilon’s targeted marketing program which will be highly differentiated in the market.”

As to whether ADS will apply Conversant to its private label credit card business or to LoyaltyOne, which includes the widely adopted Air Miles Rewards program in Canada, Dan Salmon, an equity research analyst at BMO Capital Markets, said he could see it happening.

“This is a regular thing that ADS does,” he said. “Epsilon will frequently support database management, messaging and those sorts of things for those businesses. To me, the one that’s more likely to see some cross-selling is the private label business, but if the guys in Canada with Air Miles feel they need more tools for display and mobile and video, I’m sure they’ll be able to call up Epsilon to get some help as well. This is not uncommon for ADS. They frequently have their separate businesses work together on stuff.”

That would seem to be in line with Heffernan’s statement, made during the conference call announcing the Conversant acquisition last week, that that the move is “about filling up the toolbox to the brim with a very, very compelling set of products and services that will put us at the table of any CMO that’s out there in the global 5,000.”


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Though ADS competes with the likes of American Express, Discover and Visa in terms of its private label business, its core reason for being is customer data, which serves as the fuel for, as Wettemann put it, “a serious marketing arms race across the board from the tech side to the creative side.”

“We’re seeing a growth of big credit card companies and consumer data companies becoming all the more important as these one-to-many customer businesses transition to the web,” Wettemann said. “IBM, Oracle and Salesforce, for example, have all been particularly active and what they’re doing is building an end-to-end marketing machine. For Alliance and for the others, they’re looking to bring more streamlines and integrated services to bear for clients managing loyalty programs so they have, so to speak, fewer throats to choke.”

Additional reporting by Ryan Joe.

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