ESP Market Consolidation and Why Bicycles and Cars are Different

David Daniels | October 24, 2005, 08:25 AM

So far, 2005 has been the year for ESPs (email service provider) consolidation through mergers and acquisition; something we anticipated in this August 2004 report.

The JL Halsey (Lyris) acquisition of EmailLabs last week was the latest transaction, and one that is somewhat unique as it is more of a roll-up/build as compared to the expansion play that we’ve seen from the data services vendors (Acxiom, Experian, etc.), which we refer to as a mixed-media ESP. The Lyris and EmailLabs marriage makes sense since Lyris tends to play a bit more down market and in the on-premise application space. EmailLabs on the other hand tends to cater more to the middle market and delivers their offering as an ESP (it is hosted). Moreover the companies use a similar backend technology, making any technical consolidation a bit easier to accomplish.

All of this consolidation gets me thinking about consolidation analogues and more importantly the way marketers make purchasing decisions on these vendors. Do not be confused by simple-minded predictions. There will always be a market for stand alone ESPs. One reason they have a future is because the buying power for these products and services is not centralized. Email marketers still demand specialization and more than often have no oversight to purchase offline data/marketing services, which will slow the growth of the mixed-media ESPs. An analogue to this myopic view of consolidation would be the viewpoint that a bicycle salesman is not a legitimate bicycle salesman unless he sells both bicycles and cars. Evaluating a market only on these criteria is simply foolish and would ignore many creditable e-mail marketing solutions.

In addition to evaluating 30 ESPs, my recent Email Buyer’s Guide details the growth patterns of these market sub sectors, which indicates that standalone ESPs are growing at a faster rate than their consolidated peers. This ESP buyer’s guide is the most comprehensive piece of research on this topic that we have ever produced.