ANALYSIS

AT&T Catches a Wave

Change is good. Industry consolidation seems to come in waves, and the next wave seems to be starting. Together, AT&T and DirecTV will be a strong new competitor in the pay-television space. That’s great. Unless traditional cable-TV companies get their act together, this merger could be another nail in their coffin.

This is a busy time in the industry. If we pull the camera back and take a longer-term look, however, we see a much clearer picture. In the 1990s, cable television companies, telephone companies and wireless companies were smaller, and they competed in different sectors. There were many companies, and they all had different footprints. Competition among them was not robust at the time.

Then, in the mid-2000s, we saw a wave of consolidation begin when Comcast acquired AT&T Broadband and went from being one of the smallest cable television companies to becoming one of the largest — even bigger than Time Warner Cable.

We saw other mergers — like SBC, a small local phone company from San Antonio, Texas, acquiring AT&T, Bellsouth and Cingular. It grew from one of the smallest to the largest on the telephone side, almost overnight. There were several other mergers of small and large players that reshaped the industry.

The Heat Is On

This time around, the wave began with last year’s acquisition of Sprint by Softbank. Next, Softbank would like to merge Sprint with T-Mobile. Then came the Comcast, Time Warner Cable deal. Now AT&T is merging with DirecTV — and more are coming.

Which companies will merge is the question? Another question is will all of these mergers be approved? We don’t know yet. However, typically when there is this kind of wave, approvals are given, if for no other reason than to level the playing field.

The question is always whether a particular deal will be good for the marketplace, customers, investors, prices, innovation and so on. That’s what the regulators will be mulling over the next year.

Mergers do put pressure on the existing framework. While that is a challenge to traditional competitors, it is also a good thing. That pressure typically results in better quality, happier customers, lower prices and more competition.

The companies under the most pressure going forward seems to be the cable television companies like Comcast, Time Warner Cable and Cox.

The latest American Customer Satisfaction Index, released earlier this week, shows that in the customer service area, the cable television industry’s performance is pretty darn bad.

Companies like Comcast and Time Warner Cable are improving, but they still have a very long way to go in order to make customers happy.

That means this AT&T-DirecTV merger could put significant pressure on the traditional cable television industry. While the companies might not like it, customers will.

A National Platform

One of the main reasons for this merger is to keep investors happy. It will be another growth engine, which will keep stock prices high. That’s all investors care about — and this, in fact, is one of the main reasons any merger is undertaken. Growth keeps investors happy.

This will be a real growth opportunity for AT&T. DirecTV is a satellite television company, but it has no real broadband operation, so it can’t compete moving forward into a broadband-centric world.

AT&T has broadband and is a successful marketer of a variety of different service platforms. It already sells U-verse television, which is IPTV. In the markets where it competes with traditional cable television, it is very strong. In the Dallas area, for example, AT&T U-verse has captured roughly 50 percent of the market.

I hope that is what we can expect going forward with DirecTV in many more markets nationwide.

The problem is that U-verse is not available to all AT&T customers. DirecTV may be. DirecTV will open up a national marketplace to AT&T, which is a huge growth opportunity.

I expect to see DirecTV’s traditional service continue for those who want it. However, I also expect to see AT&T supercharge its service offerings with DirecTV as part of a bundle for those who want more.

Customers like to buy in bundles — deal with one company and pay one bill. DirecTV will help AT&T build its bundle and make it even more attractive to customers.

The race is not over, however. This merger will help AT&T compete on a national scale in some service areas. However AT&T — and in fact, all telephone companies like Verizon and CenturyLink, and all cable television companies like Comcast, Time Warner Cable and Cox — are still not national companies.

So I expect to see more mergers and more waves of change in coming years. The industry looks very different today than it did 10 years ago, and it will look just as different 10 years from now.

E-Commerce Times columnist Jeff Kagan is a technologyindustry analyst and consultant who enjoys sharing his colorful perspectives on the changing industry he's been watching for 25 years. Email him at [email protected].

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Intuit’s $12B Mailchimp Purchase Breathes New Life Into Email Marketing

Intuit on Monday announced an agreement to acquire Mailchimp, a global customer engagement and marketing platform for small and mid-market businesses, for $12 billion in cash and stock advances. The purchase could be the linchpin that thrusts the mostly financial software company into solving more fertile mid-market business challenges for its customers.

The planned acquisition is part of Intuit’s mission to become an AI-driven expert platform. With the acquisition of Mailchimp, Intuit will accelerate two of its previously-shared strategic big bets: to become the center of small business growth and to disrupt the small business mid-market, said the company in its announcement.

Intuit’s acquisition of Mailchimp sends a great message to all entrepreneurs around the globe that venture capital is not always necessary, observed Michael Kawula, co-founder of CBA, a marketing agency for YouTube monetization. Mailchimp is a bootstrapped success story that has not raised any outside venture capital.

“This is a very clever growth strategy for Intuit, who wants to get in front of SMBs, which is difficult and expensive. Similar to HubSpot’s recent purchase of The Hustle newsletter, a much smaller acquisition, this also is brilliant,” he told the E-Commerce Times.

The acquisition marks a significant impact in industry, according to Osiris Parikh, sales marketing manager at Lilius. He also sees the deal as another reminder that email marketing is not dead — and data is power.

“Intuit has made a strong move to broaden its portfolio and become a leader in catering to the needs of SMBs. It is also a great story of success during Covid-19,” he told the E-Commerce Times.

Deal Basics

Intuit provides a global technology platform that makes TurboTax, QuickBooks, Mint, and Credit Karma. Intuit and Mailchimp will offer an innovative, end-to-end customer growth platform that allows customers to get their business online. It will also enable them to manage marketing, customer relationships, payment processes, and access insights and analytics, along with optimizing their cash flow and staying compliant with experts at their fingertips, according to Intuit.

Key to this process is Intuit’s ability to enable businesses to combine their customer data from Mailchimp and QuickBooks’ purchase data to get the actionable insights they need to grow and run their businesses with confidence.

“We’re focused on powering prosperity around the world for consumers and small businesses. Together, Mailchimp and QuickBooks will help solve small and mid-market businesses’ biggest barriers to growth, getting and retaining customers,” said Sasan Goodarzi, CEO of Intuit.

Mailchimp brings to Intuit technology at scale along with global customer reach.

Founded in Atlanta, in 2001, Mailchimp began by offering email marketing solutions. The company evolved into offering customer engagement and marketing automation processes fueled by an AI-driven technology stack. Mailchimp’s data and technology spans 70 billion contacts and more than 250 rich partner integrations. Its AI-powered automation at scale fuels 2.2 million daily predictions.

“Over the past two decades, we have vastly expanded and evolved Mailchimp’s platform to help millions of small businesses around the world start and grow,” said Ben Chestnut, CEO and co-founder of Mailchimp.

Why Mailchimp’s Worth It

While the email marketing sector is pretty crowded, Mailchimp stands out in terms of size and scope. The company reportedly has 13 million total global users, 2.4 million active monthly users, and 800,000 paid customers, noted Charles King, principal analyst at Pund-IT.

“Plus, half of its customers are outside of the U.S. Additionally, while people tend to focus on the mass/might of large enterprises, small businesses are really the heart and soul of most economies,” he told the E-Commerce Times.

The acquisition likely represents a lucrative opportunity for Intuit to integrate Mailchimp data with QuickBooks and provide greater analytical capabilities to customers. The synthesis of financial and marketing data in this case provides valuable and actionable insights about an organization’s clients, added Lilus’ Parikh.

“It’s also a great diversification of offerings to centralize SMB operations through one platform and benefit from Mailchimp’s established user base,” he said.

Another supporting factor for Intuit’s interest in Mailchimp is the renewed stature of email, according to Elice Max, co-owner of EMUCoupon and someone who has been involved in online marketing for eight years.

“Email marketing has made a comeback in recent years. With increased digitization caused by the pandemic, all digital mediums including email have gained a renewed importance,” she told the E-Commerce Times.

Email Marketing’s Resurgence

Technology giants are looking to build more integrated and holistic solutions. Microsoft recently bought Clipchamp, a video production tool. Both companies are looking to build platforms for the new tech-savvy SMBs, Max Suggested.

“More than anything, it means a renewed confidence in the field. Experts have been talking about the death of email marketing for a while now. But a $12 billion acquisition by a big player like Intuit means email promotion is alive and kicking,” she said.

Another factor is Intuit keeping its eye on the ball. It is important to remember the significance of Mailchimp as the pioneer in marketing automation and email marketing in particular.

“Intuit is looking to make a statement that it wants to become more than a financial software company,” Max observed.

QuickBooks Synergies

One of the motivations that lies behind Intuit’s purchase of Mailchimp is its desire to lead a revolution in the CRM capabilities of SMBs, according to Will Ward, CEO of Translation Equipment HQ . Think about the effect the pandemic has had on the popularity of remote work and the amount of remote SMBs being established.

“You would expect there to be a lot of growth potential here in the next few years. With Mailchimp and QuickBooks, Intuit is providing an end-to-end customer growth platform, and with around $20 billion invested already its belief in SMBs is evident,” Ward told the E-Commerce Times.

Like any other system that handles transactions such as orders and payments, you need to work closer to the actual customer channels. With the Intuit e-commerce product, launched about a year ago, this seems like a natural step by adding marketing automation and reaching out with its e-commerce offering to the MailChimp customer base, suggested Johan Liljeros, general manager and senior commerce advisor, North America for Avensia.

“The acquisition has added synergies between the platforms while still being able to operate as independent platforms. Looking at Intuit’s offerings, it appears they are moving towards expanding [into] digital transactional experience,” he told the E-Commerce Times.

Final Thoughts

Email marketers should be ready for disruption along with other business services providers. Intuit has been both savvy and aggressive in the way it built its business, effectively becoming the 800-pound gorilla of small business accounting and tax solutions, according to Pund-IT’s King.

“With that kind of ally behind Mailchimp, life is going to become a whole lot more ‘interesting’ for other email marketers,” he predicted.

The Intuit-Mailchimp deal should offer Intuit customers significant benefits, such as new solutions and services for bolstering their businesses. At the same time, the deal highlights the fact that old technologies can continue to be vital and dynamic.

“For years, many have claimed that email is dead or dying and quickly being replaced by whatever the tech du jour happens to be. Mailchimp — and now Intuit — beg to differ,” King quipped.

Jack M. Germain has been an ECT News Network reporter since 2003. His main areas of focus are enterprise IT, Linux and open-source technologies. He is an esteemed reviewer of Linux distros and other open-source software. In addition, Jack extensively covers business technology and privacy issues, as well as developments in e-commerce and consumer electronics. Email Jack.

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