It took him two years, but John Giuliani is the man who finally made Conversant ready for a sale.
And even though his stake in the Westlake Village-based advertising technology firm’s $2.3 billion cash-and-stock merger with Alliance Data Systems announced Sept. 11 will be worth about $96 million, Giuliani has no plans to cash out. “I’m electing 100 percent stock,” Giuliani said on a conference call with investors. “I’m bullish as always.”
For years, the future was uncertain for the firm formerly known as ValueClick. Conversant was often the subject of buyout rumors because it kicked off a generous amount of cash flow that could service a debt-based acquisition or become immediately accretive to a suitor in an equity deal.
But Conversant, which projects $670 million in 2015 revenue, was always too unwieldy to find a buyer. Founded in the late 1990s, Conversant was an early leader in Internet display advertising, which now accounts for about 70 percent of its revenue. And through its purchase of Santa Barbara-based Commission Junction, Conversant came to own the biggest commission-based network of publishers and advertisers in the world.
Conversant often had to buy its way into new fields in digital advertising through acquisitions. Its business units often operated profitably but largely independent of one another. The result was a collection of assets each individually too small to spin off and a master brand without a clear sense of direction.
That began to change with Conversant’s 2011 acquisition of Dotomi, a company that used so-called first-party data to better target ads. First-party data is information that a consumer has shared directly with a retailer through a purchase or other contact. Retailers can share that information with companies like Dotomi to help improve their ad targeting across various channels.
Conversant then acquired companies in mobile advertising and video advertising. Giuliani, who led Dotomi and was named Conversant CEO in 2012, quietly worked to integrate Dotomi’s technology across Conversant’s units. Earlier this year, Conversant went through a rebranding process to make its units work better together. But underneath the hood, Conversant also launched a so-called “common ID” initiative.
The idea was to use a single identifier that would find consumers across devices such as tablets and phones and across channels such as video and mobile.
“The industry could now look at the Conversant footprint, and when they did that with a common ID, in terms of reach we came in second only to Google,” Giuliani said to investors on a conference call.
The overall result was that Conversant became a compelling one-stop shop to launch Alliance Data headfirst into digital marketing at scale.
Texas-based Alliance Data is old-school with a stronghold in offline loyalty and direct-marketing programs and about $3.6 billion in revenue. The company has an email business and has launched several digital marketing efforts, but CEO Ed Heffernan said those efforts weren’t enough.
“To be quite frank, we are sub-scale,” Heffernan told investors on a conference call. “Especially when it comes to the huge market of data-driven targeted display [ads] and the newly emerging markets of video and mobile, we could certainly use a little more scale. You put this together and say, ‘OK, well, [Conversant] is a company that provides all of that.’ ”
Under the deal, Conversant is valued at $35 a share and will be paid out with a mix of 52 percent Alliance stock and 48 percent cash. The biggest winners will be Giuliani, who owned 4.1 percent of Conversant’s stock at the company’s last annual proxy filing, and Vulcan Value Partners, which owned 10.7 percent.
Alliance Data has worked directly with retailers for more than a decade. The company grew out of roots in JCPenny’s credit card business in the late 1990s. Heffernan said the focus on first-party transactional data at Conversant — which Giuliani and Dotomi brought to the table — sealed the deal for Alliance.
“Conversant is now the premier digital platform for clients who provide very detailed transaction-based first-party data,” Heffernan said on the conference call. “The clients feel comfortable giving that very precious data to us, and we then use that for sophisticated and very precise targeted display [ads]. … That’s what we bought into — that this transformation is real. … These guys get it. There’s no question about it.”