For Subscribers

Get the complete article now!

TWST: What are the events and activities that have really set the stage for what we might expect out of the marketing services companies over the next 12 months?

Ms. Christian: In terms of themes, it is getting increasingly difficult for marketers to reach consumers and, at the same time, it’s becoming increasingly important for marketers to reach consumers. As such, demand is strong for the offerings provided by marketing services companies. The backdrop for the increased importance is that there are a plethora of new products and services that have surfaced over the last few years as a result of innovation as companies strive to grow their businesses and create technological advancements to enable new things for consumers to learn about, use, and buy. The education and sales process oftentimes takes place through the marketing process. It’s getting difficult to actually reach the consumers because you’ve got busier people, fragmentation of mass media, and new forms of media outlets — the Internet, advertising in the movie theater, advertising on park benches, and buses — all happening at the same time. So the process of marketing is getting even more complicated. That’s where the companies we follow come into play. They help clients navigate the maze of alternative outlets, choose the right target consumers, create the right messages, and close the sale.

TWST: Over the next 12 to 24 months, what is your expectation for Acxiom (Nasdaq:ACXM)? What specific events or activities will signal success for that company over that time frame?

Ms. Christian: The next year is tough to call. There are two counterbalancing events affecting fundamentals. The first is the opportunity for Acxiom to exploit a new technology, AbiliTec, that the company has been developing internally for over three years. The data integration technology quickly and accurately integrates customer information from disparate sources. There’s a growing need for this capability as more companies implement customer relationship management programs and try to build one-to-one relationships with customers. Step one is to organize the various repositories of customer information. The Acxiom technology significantly expands the company’s client base and should increase its margins. The challenge is that Acxiom is faced with a slowing economy and slowing technology spending. Technology budgets are not growing, and looking at the news lately, they might be shrinking. So our key metric of Acxiom’s success over the next 12 months will be how successful they are at selling AbiliTec into their existing customer base and identifying new customers.

TWST: What does that translate into as far as top-line and bottom-line growth rates?

Ms. Christian: For this current fiscal year, which ends in March 2001, the Health Resource Publishing division will generate about $40 million in revenue but will lose $0.06 per share. The business model requires investment to build out the network ahead of the revenue. Next year, we think that revenue will increase to $75 million, with 80% growth. On the bottom line we think the unit will go from $0.06 on the bottom line to $0.02-$0.03 positive contribution per share. So what kind of growth is that? You can’t really calculate it, but it’s a significant flip. From there the business will be quite a scalable business as the network will largely be in place and growth is the function of selling through the existing infrastructure and increasing utilization.