The State Of Datalogix: CEO Roza On Point-Of-Sale Data, Attribution And The Data Services Layer

State of DatalogixEric Roza is CEO of Datalogix, a company which focuses on integrating database marketing and digital media.

As part of its “State of…” series of articles with industry executives, sat down with Roza to discuss his company, his views on the space, and the state of Datalogix today.

Click below or scroll down for more: There appears to be some consolidation momentum in the ad tech ecosystem. How is it impacting DataLogix?

ER: In terms of impact on Datalogix, to date, I would say “nothing material.” The only thing that’s important for us, and for others in the ecosystem, is that you have to maintain flexibility in your thinking, as well as be comfortable living in an era of ambiguity. For us, it’s about thinking and keeping the end customers in mind. Clearly, the clients and the agencies are funding the ecosystem here.

If you think about what’s going to be in the clients’ best interest, you’ll ultimately succeed, but there may be hops that no one expects along the way. Things will probably move more slowly than anybody expects, too. Those seem to be a couple of the things you can absolutely be certain of.

Thinking about your NextAction days, which weren’t so long ago (PDF, 2009), can you talk a bit about some of the biggest changes since that time at Datalogix?

First, we’re about twice the size that we were the last time you and I spoke two years ago. What’s been nice is that we’ve seen our direct‑mail analytics business continue to do well, and grow in the most recent months. The days of the triple‑digit growth, if they were ever there in that business, are long gone. But we’re continuing to see some growth in the direct‑mail analytics business which is focused on the specialty retail channel.

The biggest change overall has been current run rates. Well over half of our revenue now, is derived from the digital space. And in particular, we’ve developed an interesting CPG business. The auto vertical has grown nicely for us, too.

The business that Chris Scoggins runs for us is providing both syndicated and custom audience solutions to the whole digital ecosystem and is roughly doubling this year (2011). Overall, we think we’ll be about two‑thirds digital [in terms of revenue] next year.

We’ve also spent a lot of time with some of the biggest data brands out there. Obviously, when you and I spoke last time, we had just announced the Nielsen PRIZM partnership, for example. We work with most of the largest offline data brands now and partner with them in helping them think about how to create new markets for their assets online. That’s a big part of what we do.

And the other piece I would highlight is focused on measuring what matters, which is leveraging POS (Point-of-sale) data to measure online interactions, whether it be with a web page or an ad campaign, and if it drives an offline sales transaction. We think we’re much further along than anybody else.

If you had asked me what one of the biggest industry trends [overall] in 2012 is, it’s going to be this notion: “We have so much great data but lack a dependable correlation between clicks and sales – sales that consummate offline.” You don’t need a proxy anymore and we’re doing our best to make it accessible and affordable to measure all online campaigns to true POS data. We’re not talking about small panels that have limited applicability. We’re talking about retailers who have their own data via loyalty cards or whether it’s a data source that we have or are partnered with. For any industry that has a significant percentage of its sales offline ‑ and by the way, 85 percent of consumer purchasing is still done offline ‑ that’s a very resonant message.

So, if you’re doing an attribution type of analytics around the data, you need access to that point‑of‑sale data that the marketer receives. Regarding the retailer versus the [CPG, for example] marketer, I’m curious if you will be able to provide an analytics solution for the marketer that can tell them how much to spend on data like yours? How close are we to that sort of solution?

We’re close. We’re seeing this with several clients who have, over the last couple of years, moved from the initial test to the six‑figure test, and are now moving into the “Give me as much audience as you can because you’ve proven this works.” We’re effectively there in terms of being able to measure that. That doesn’t mean we’re there in terms of the ROI we’re seeing.

There’s obviously two questions. If you can measure it – and the downside of measuring it is it actually has to work, which, by the way, is obviously the upside for everybody because ultimately no one’s interested in being in a game that doesn’t generate higher ROI than other alternatives.

The smartest marketers right now are “kicking the tires” hard and learning, not just with us but with everybody else. 2012 is the year that learning goes mainstream; then, you will have early adopters, who are going to roll‑out with audience targeting where it’s beyond initial experiments.

You’d have to say, “Shame on you” if you’re a marketer not learning now.

How is the data‑exchange model today? And how does leverage it?

Data exchanges seem to have evolved to three complimentary businesses at some level. One is an open exchange, which was the initial conception where everything’s kind of bid at auction.

The second one is strategic client engagements where there are certain preferential access to data or custom data that isn’t available to others – or preferential access to data that is more broadly available and at different pricing agreements.

Then, the third model is using the exchange infrastructure, but effectively, to be a DMP (data management platform) as well.

And so that seems to me to be the current state of the art. All three of these have real value in the market today. What I can’t opine on is how big the market is for those things. But I can tell you that for Datalogix, it certainly is valuable to work closely with the exchanges. Drinking my own Kool‑Aid, I’ll say, “Learning is the most important thing,” and we’ve found it advantageous to engage with that channel and help support its growth. Both the media and the data exchanges have proven to be core infrastructure that everybody is using at least in part.

For interactive marketing, is there an emerging services layer?

First, we are very clear about the business we’re in and the business we’re not in. We’re not in an agency business. I speak for Datalogix, which is to say that we are interested in partnering with agencies rather than competing with them. We don’t sell consulting services.

Let’s broaden the question to ask, “Do we provide a lot of value‑add when we work with a client in a strategic fashion?” With an end client who doesn’t have an agency because they’re a specialty retailer or doesn’t have an agency focused on the stuff that we do, we absolutely provide a lot of strategic guidance and best practices around how to best utilize and learn from the kind of data that we provide for both targeting and measurement. I don’t view that as an SKU that gets charged for.

Unlike an agency, we don’t have the notion of billable hours and a professional‑services team that is a profit center. It’s all kind of consultative, in the spirit of being a better kind of technology and data partner to people. But taking your question broadly, if the question is: “Is this stuff plug‑and‑play?” it can be, but generally, it doesn’t work. The devil’s in the details here. And you can see that there are so many things that can go wrong as all this plumbing gets connected to each other, especially if you start from the CRM database and deliver that all the way to an online impression – and then potentially back to a PLM system. There’s a lot of room, both to get mechanics wrong and to interpret wrongly, and not capture the learnings you want to capture.

Can you talk a bit about the channels that your data is informing and anything that has particular amounts of momentum? Where is the sweet spot for Datalogix?

Right now, the vast majority of our focus is on display and direct mail. Those are the two big pieces. Local and video advertising are in the early stages [of their development], and we’re just getting started with them. We are in the R&D phase in the addressable TV world, but I would say that’ll be happening more in 2012.

Email is not a focus area for us. I’m a big fan of a clear consumer value‑add with low intrusiveness. I don’t think anybody gets excited about display ads, but people aren’t annoyed by display ads unless it’s the intrusive screen‑takeovers and so on. If you’re doing your job right and you’re getting the right discount or offer in front of the right person, it can actually be a positive.

What about profitability today? Do you need more funding? Have you taken funding in the past?

Yes, we have taken some funding and recapitalized the business. A little over two years ago, we brought in General Catalyst, a Cambridge‑based private‑equity group, as our lead investor. And some of that was secondary and some of the money went into the business. Currently, we’re not thinking about additional funding. Our business is profitable even though we’re not running it to maximize profitability. We’re just focused on executing versus fundraising for now.

I’d love to hear what you think about 2012. Some see the global economy sliding. Any thoughts from your end?

You’re going to love my data point. I was at a function on Saturday night with a guy who owns about 40 dry‑cleaning shops and a family business. He’s been in the business for eight years, but over the last 20 years that he’s been running it, he said he’s realized that it’s a leading indicator of the economy. And he said he’s having a good season. That’s making me optimistic. I didn’t dig deep enough to know if I buy them as a leading indicator of the economy, but that would be pretty neat. You could see all the hedge funds would start calling him if that actually held up. I guess I don’t know.

I am probably somewhere in the middle. It will either be moderately good or bad – versus a massive recovery or a massive train wreck – and that’s what we’re positioning for. So, we continue to hire. We’re cautious about the economic outlook in the short-term. Even when things aren’t great economically, one can find a silver lining. So I would argue, for Datalogix, the silver lining is, when things aren’t working as well for you (the marketer), you may be more inclined to experiment because you need to try things – especially if the current things aren’t working.

And the other thing is that the more people demand a hard ROI, the better off we are as an industry. It’s amazing how much TV has thrived in the past year, especially broadcast TV, against everyone’s expectations.

In the digital world, it’s the industry’s job to prove a better value proposition‑‑not just gimmicks, but a better, harder ROI. And that market is capable of thriving, even in economic uncertainty.

By John Ebbert

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