Danish marketer Come&Stay is taking a bigger bite of the advertising market by offering clients an elite list of willing recipients
The Danish city of Odense, on a waterlogged island about 80 miles west of Copenhagen, is not exactly a global media capital. Yet in a villa in a quiet residential neighborhood, a new breed of Internet-based marketer is challenging the traditional advertising business model.
Come&Stay (ALCSY.PA), with sales last year of $30 million and a market cap of $78 million on NYSE Euronext, does so-called permission-based e-mail advertising for blue-chip customers including BMW (BMWG.DE), Ikea, GE Capital (GE), and Apple (AAPL).
In effect, it's the opposite of a spammer, since it sends pitches only to people who have actively indicated a willingness to receive advertising. The company boasts a list of some 270 million such e-mail recipients, as well as a database of demographic information about them. The names have been collected over many years, mostly from Come&Stay's roster of corporate clients, who use the marketing firm to manage big campaigns aimed at customers who've signed up for e-promotions.
Close to the Heart
For advertisers, who also include Dell Computer (DELL), Hyundai, and Chrysler's (DCX) Dodge unit, Come&Stay offers a cheap and low-risk way to reach a target group. Clients pay only for responses, which can be defined in different ways—anything from a simple click to more concrete actions such as signing up for a test drive, completing a loan application, or making an actual purchase. "We can track everything," says Odense-based Torben F. Rasmussen, Chief Executive Officer for Europe and Asia, whose goal is to boost sales tenfold within five years. Given that sales have been doubling every year, that could happen.
The business model is simple—and powerful. That's one reason Come&Stay, which is active in the U.S. and has a quarter of its 160 employees in Ft. Lauderdale, Fla., is a lurking threat to traditional broadcast and print media. By using e-mail to hit consumers directly, Come&Stay bypasses traditional outlets (although its clients include CNN) (TWX).
Now, the company is moving into mobile advertising, with a list of 27 million cell-phone numbers from people who have indicated willingness to get pitches via text or multimedia messaging, sometimes in exchange for free or reduced-price mobile service. "Your mobile phone is closer to your heart than e-mail," Rasmussen says. That's a market set to take off. (see BusinessWeek.com, 11/03/06, "Blyk's Radical Mobile Plan")
The company is the product of Paris-based Come&Stay's acquisition last year of rival Danish firm Retail Internet, based in an Odense building that once served as executive offices for a cigar box factory. The combined company's global chairman and CEO is Carole Walter, who is based in Paris.
While Come&Stay is a major player in northern Europe, globally it's still a dwarf compared with Mountain View (Calif.)-based DoubleClick, the digital advertising company acquired by Google (GOOG) in April for $3.1 billion. Unlike DoubleClick, Come&Stay, with operations already in 14 countries, is focused solely on e-mail advertising.
That focus may be the key to Come&Stay's growth. "There's a big market and a growing market and there's space for smaller players," says Rebecca Jennings, a senior analyst for Forrester Research (FORR), which estimates the e-mail marketing sector could be worth $2.8 billion in Europe alone by the end of the decade, up from $2.1 billion this year.
Rasmussen already has proven himself a survivor. He took over Retail Internet in 2002, just as the company, founded in 1999, was trying to recover after the Internet bubble burst. Rasmussen beefed up the sales force, which consisted of one person when he arrived, and created sales-related bonus programs for the entire workforce.
Come&Stay also incorporates some of the management ideas of Lars Kolind, whose "spaghetti organization" became famous in the 1990s. Kolind, a well-known figure in Denmark who teaches occasionally at the Wharton business school in Philadelphia, was one of the original financial backers of Retail Internet, and Rasmussen considers him a mentor.
Kolind introduced the spaghetti organization at Danish hearing aid manufacturer Oticon in the early 1990s, attracting worldwide media attention. Immortalized by management guru Tom Peters in his 1992 book Liberation Management, the spaghetti organization eliminated traditional management and let employees choose their projects and teams.
While Come&Stay doesn't go quite that far, employees are given broad freedom to launch small-scale projects or make changes in ad campaigns without management approval. One example: An employee rearranged the content of a daily e-mail containing a weather forecast and advertising. By moving the forecast to the middle of the page and the ads to the top, the employee boosted revenue from the mailing by 30%, Rasmussen says. "If an employee has an idea, he'll just do it. We'll know tomorrow if it works." So far, it seems to work just fine.