Blog

Earlier this week, I expressed concern about the SRDS sale to WPP as it relates to the list industry. I thought it would give WPP an unfair advantage. However, Direct Magazine published a story yesterday "WPP Acquisition of SRDS Leaves List Executives Underwhelmed" that expresses the industry sentiment that there is nothing to be concerned about.

This story's conclusion is based on three assumptions:

1. SRDS and their mailing list services division are such an inconsequential "blip" (his word) in the huge WPP organization that they will not pay attention to nor capitalize on this rich source of data.
2. Advertising agencies don't want to get involved with mailing list selections. They'd rather outsource this task to list brokers.
3. Even if they did focus on it, advertising agencies don't know enough about lists and the list business to take away business from list brokers.

According to Geoff Batrouney at Estee List Marketing,

"I don’t think there’s anything unfair or threatening about it. If I was worried about WPP acquiring SRDS that would presuppose that agencies knew something about the list business, but they don’t."

Maybe I was wrong in thinking the SRDS sale gives WPP an unfair advantage. Do you think that lack of attention and expertise eliminates this risk?

On Tuesday, Nielsen announced its intention to sell SRDS to WPP Group as part of a big asset swap agreement. Like many in the direct marketing industry, I am concerned about how this deal changes the competitive landscape.

This affects the direct marketing industry because SRDS provides a research system that is used for making mailing list purchasing decisions and formulating media plans. List managers use SRDS to promote their lists. List brokers and mailers use SRDS to make list selections.

WPP Group is a huge advertising agency holding company with an estimated 100,000 employees and £6.18 billion revenue in 2007. A big part of WPP's revenue is commissions from media purchases done by their stable of advertising agencies. It's a good strategy for WPP to buy SRDS because it will give them better insight into media purchases that happen outside of WPP. They can use SRDS' database to better calculate their market share and to develop laser-focused strategies to acquire the share they don't already own.

If I were a list broker, I'd be really nervous about this.

After all, list brokers compete with WPP agencies for their commissions (i.e. their livelihood). If WPP owns their list research system, it would provide WPP with powerful insights that enable them to steal the business away from list brokers and move those commissions to WPP agencies.

Imagine if your competitor could see all your research and proposals before you publish them. They would eat your lunch!

That's why we at NextMark fundamentally believe that anyone who owns such a system needs to be industry neutral. Our business model is predicated on independence and neutrality. In order for the industry to work efficiently, the industry's technology infrastructure must provide a level playing field. No competitor should own the "marketplace" or any part of it.

Don't you agree?