Connection Engine allows clients to compare the value of customers acquired through multiple digital channels -- including website visits, lead gen, email, and display ads. It does so by hashing customer IDs from a database with offline data points. Customers can then create segments and build digital acquisition strategies by modeling their most valuable customers.
All 10 of Connection Engine's employees will join Datalogix, bringing the company's headcount to more than 200. Meanwhile CEO Eric Kirby becomes chief product officer at Datalogix, and two of Connection Engine's investors, Sutter Hill Ventures and Costanoa Venture Capital, will take a stake in the acquiring company. Other deal terms including the purchase price weren't disclosed.
In a key difference between the companies, whereas Datalogix describes itself as "semi-automated" whereas Connection Engine uses a fully automated software as a service model.
"I'd say it would be extremely unlikely that we would do another deal in any future that you could foresee. We have a lot of exciting organic opportunities. I don't think we're going to see M&A be an important part of our future," he said.
Datalogix's annual revenues are between $30 million and $100 million. The company has been profitable in the past but does not expect to be this year on a P&L basis, owing to growth-focused investments.
In the below Q&A, the two Erics share more on their companies and the deal implications.
AdExchanger: What problems does Datalogix try to solve, and what does this deal add to that?
Eric Roza: We've been focused on connecting the dots between digital media and offline sales. We recognized fairly early on that it's crucially important if you want to understand if your advertising is working, to understand what the connection points are between that advertising and offline sales.
[Those insights] can inform your decisions about what audiences to pursue based on buying behaviors, and then also to inform your decisions around buying behaviors coming out of the campaign. It's answering what the offline sales lift is from a campaign and how to maximize the campaign based on what's happening around offline purchase behavior.
We're focused on the largest consumer verticals. We spend a lot of time on CPG, automotive, retail, digital publishing -- areas that are new to us are travel and telecom. It's a confluence of what gets referred to as big data, measurement/insights, and ad technology.
We have worked with Eric Kirby and Connection Engine for the last two years. We saw they had nailed this idea of an application/SaaS platform that enables bringing in very large amounts of offline match data. It could be email addresses, but what I mean is data that's outside the real time transaction of a campaign. When a client of Eric's uploads 10 million customer records into the tool, that is truly them loading it into software they're using versus sending it to a third party.
Measuring true sales lift from a digital campaign is incredibly important and will not diminish in importance.
Eric Kirby: An accelerating theme for most companies has been the opportunity that customer data presents and third party data presents, and the ability to gain customer insights and act on those insights in a meaningful way.
Our innovation, where we focus, is on the fact that most companies still take a very traditional approach to how you bring together, organize and access consumer information to drive those insights and marketing decisions from that. Our platform offers the ability to bring together and host a massive data layer – and allow any client at any time to match into that database on their own customer keys – to receive back realtime reporting and analysis based on those records. And importantly, we have a series of solutions that then allow clients to leverage those insights into digital acquisition solutions, as well as customer acquisition solutions.
The matchup with Datalogix is that it brings a software and a platform approach to how companies can tap into those solutions outside the traditional one-off projects with teams of analysts and consultants. We really build software to help that process.
Is there any redundancy here with in-house technology?
Roza: Very little. Connection Engine did some things very efficiently that we do in a semi-automated mode. One of the key features for the deal is that we're going to be able to leverage some of these more touch-free environments.
Are customers going to notice the difference or is this consummating something that was already effectively working for them?
Roza: They'll notice. There are a dozen or so clients that we each work with separately. We'll be talking about how to integrate the solutions. Connection Engine's been very successful in the flash sales space, which we've hardly touched. We think a lot of the Datalogix solutions will be very relevant to them, and we think a whole lot of what CE does is going to be extremely applicable across all our verticals.
You have a large number of partnerships on data. Do you keep partnering, or does this deal mean you're shifting to an M&A strategy?
Roza: An ongoing strategy is to partner very deeply with a lot of companies. We partner with almost everybody where we have a strong overlap. Even companies we compete with, we generally can find very fruitful areas for partnership.
That's been a big driver of our success – the ability to work with partners to structure win-win situations even when there are some areas of our business where we may be competitive. That will be increasing rather than decreasing in the future.
We've looked at deals before, but never looked at anything seriously. I'd say it would be extremely unlikely that we would do another deal in any future that you could foresee. We have a lot of exciting organic opportunities. I don't think we're going to see M&A be an important part of our future. It would be more on a one-off basis than a calculated strategy to grow by acquisition.
Roza: I'd emphasize the value of Eric [Kirby's] tool to efficiently profile and provide insights around audiences. The example is the ability to compare an audience that visited your website to an audience acquired via lead gen, to an email address, to someone who responded to a display ad. How does the value of those audiences compare? Applying this offline data aspect to give very good insights about different media tactics in a like-to-like format is something that's never been available.
Kirby: Also, the ability to have that always on or always available, and not a one-off periodic exercise, is one of the key innovations we're going to bring.