Corrections or additions?

This article by Evelyn Goldin was prepared for the February 21,

2001 edition of U.S. 1 Newspaper. All rights reserved.

American List Counsel Moves to E-Marketing

Times were auspicious back in the fall of 1999 when,

flush with $15 million in venture capital funding, a young and feisty

dot com, Impower, spun off from American List Counsel to conquer the

world of Internet marketing. It was barely a few months later when

the Internet walls came tumbling down, leaving a wake of deflated

dot coms and technology stocks laid low.

Instead of staging a hasty retreat, Impower spent the year bulking

up and racing towards its E-marketing mission. The company’s staff

grew from 20 to 120, and together with its traditional direct

marketing

counterpart, ALC, the two signed leases for a combined 110,000 square

feet at the recently completed Bernard Kilgore Center at the Dow Jones

campus on Route 1 North. Impower, so far, has been keeping the faith.

Internet marketing is poised for a spending explosion, says Donn

Rappaport,

president and CEO of both ALC and its Internet spinoff. He predicts

the boom will be fueled by a new wave of traditional marketers, many

with little Internet or direct marketing experience. These stalwarts

of the old economy, sellers of say, candy, detergents, or healthcare,

have been waiting on the sidelines for the dust to settle. Rappaport

thinks he can convince the Fortune 500 companies to dramatically

increase

their E-marketing budgets, and also that he can answer their concerns

about respecting consumer privacy. He is so certain of his future

success that he has just bought North Brunswick-based Datamark

Technologies,

which offers the very latest customer loyalty programs for

brick-and-mortar

firms.

"Many brick and mortar companies are waiting in the wings,"

says Rappaport, "and once they’ve got the feeling that this

Internet

thing has been cracked, they’re going to throw money at it because

they know that’s where the future is going."

High-profile online research firms like Forrester

Research

of Cambridge, Massachusetts, and New York-based Jupiter Communications

tend to agree about prospects for a rosy E-commerce future. Predicting

that "online advertising’s current swoon won’t last,"

Forrester

said last month that it expects traditional marketers to embrace

online

advertising, driving digital marketing spending to $63 billion

annually

by 2005, from $11 billion last year. Forrester predicts traditional

marketers will account for 84 percent of digital advertising by 2005.

Impower, with several key products it says offer a unique advantage

to overcoming the challenges of E-marketing, sees itself in a strong

position to take advantage of the predicted spending resurgence.

"One of the things we go on is that no one has ever completely

turned Impower down," says Michael Keeler, Impower’s chief

marketing

officer, "because with products like TransAct, there is no money

down."

TransAct is Impower’s response to the traditional Internet

"impression-based"

advertising model, which charges advertisers per thousand viewers

on a given site. Newspaper advertising works in a similar way, with

high-circulation papers charging greater ad rates. But just as viewers

of a newspaper ad may not necessarily purchase the product, viewers

of Internet ads don’t always convert their mouseclicks into purchases.

The trouble with "cost per thousand" advertising, Keeler says,

is "the conversion rate — the percentage of consumers who

actually follow through on an offer — is so low. You may have

tens of thousands of people visiting, you may have a million people

visiting, but the conversion rates on banners are less than one-half

of one percent. It gets worse all the time as the clutter goes

up."

TransAct was developed in 1997 by Irv Brechner, now Impower’s

executive

vice president. Officially launched last August, it is an advertising

network that is performance-based. Advertisers pay only if viewers

act on offers that can include business products, magazine

subscriptions,

charities, book clubs, credit cards, and financial services, among

others.

TransAct users include Rodale Press, the New York Times, Pitney Bowes,

Save the Children, BMG Music Club, IT World, Audio Book Club, Register

Once, Cell Trader, Cool Savings, and MatchLogic. Impower says that

transactions through 30,000 affiliated sites in last year’s third

quarter — its first full-scale quarter — broke the 1 million

mark, making it one of the fastest-growing new marketing channels.

"We make money because we split the revenue and the sites make

money because they’re finally on somebody’s radar, and everybody

profits

by it," Keeler says. "Marketers love it because they know

from the offline world how much it costs to get a person to sign up

for a magazine or credit card. They basically say, `if you can do

it for half of that, we’ll take as many customers as you can

generate.’"

Working to ensure TransAct’s success, Impower helps marketers

determine

which sites should carry their offers, and conversely, helping sites

know which offers their viewers respond to. "It comes back to

what our pedigree is," Keeler says. "We’re direct marketing

people who know what kind of offers work for what kind of

customers."

Impower’s founding company, American List Counsel, is in fact the

largest direct marketing list broker/manager in the nation. American

List Counsel was founded in 1978 in the basement of the Scotch Plains

home of husband and wife Donn Rappaport and Liza Price Rappaport.

Donn was at that point working in Manhattan at Young & Rubicam, the

advertising agency. Later the two moved the firm to 88 Orchard Road

off Route 206 in Montgomery Township. In 1994, as part of a divorce

settlement, Donn Rappaport bought out his wife’s share. At that point

it was a $42 million company with 85 employees. It now has 200

employees

in four regional offices and more than $130 in gross sales.

Originally called ALC Interactive, Impower was started in 1997 and

spun off two years later with $15 million in funding from

Toronto-based

venture capital firm Counsel Corporation, which acquired a 33 percent

stake in Impower, which has about 110 employees. Though the two

companies

are separate, Impower and ALC share such functions as operations and

billing. And ALC shareholders are also Impower shareholders —

but not majority shareholders.

After 21 years ALC is leaving behind the 18th century Orchard Road

farmhouse that saw the company’s rise into a direct marketing

powerhouse

with compound growth of 35 percent a year for the past five years

and inclusion on the Fortune 500 list.

The farm’s four outbuildings, plus space in a Hillsborough industrial

park, amounted to 35,000 square feet, a tight fit for the 163

employees

here. The farm is under contract, says ALC’s broker Wayne Kasbar of

Woodbridge-based Newmark JGT, but he released no details.

The two companies have moved to 110,000 feet in the $25 million

400,000

square foot addition to the Dow Jones campus that was completed in

1998. This granite-faced building, designed with lots of glass by

Philadelphia-based Kling Lindquist, was intended for a Dow Jones

division,

Telerate, which was sold as construction was in progress. Dow Jones

has Factiva, housed here now, but 63,000 feet remain to be leased.

The Orchard Road farm was such an integral part of the company culture

that ALC and Impower have brought some of the farm feeling with them.

The Manhattan-based architect, the Phillips Group, has created four

"farm stations," circular areas with bucolic-looking murals

of silos and farmhouses.

Donn Rappaport, age 50, serves as chairman and chief

executive officer of both ALC and Impower. After graduation from Penn

State, he worked as an advertising copywriter in Manhattan. (For this

article his comments were relayed through a spokesman.) He and his

second wife, Susan Rice Rappaport, live in Princeton, and each has

three children, ranging in age from 9 to 22.

Susan Rappaport is chief operating officer and a partner at American

List Counsel. The daughter of a United Airlines pilot and a fashion

designer, she majored in finance at the University of Santa Clara,

Class of 1981. She was a brand manager at Clorox, director of catalog

marketing for Eddie Bauer, and a vice president at Direct Media Inc.

on the West Coast before joining ALC.

Keeler, a 1985 graduate of Cornell University, has worked for several

advertising agencies in New York City and has been at Impower for

one year. He and his wife, a watercolor artist, live in Pennington

with their two school-aged sons.

Keeler says that Impower and ALC work together to provide one-stop

shopping for clients’ on- and offline marketing needs: "We call

it convergence. Other people call it synergy."

"Impower has the same value proposition as ALC, but its toolbox

really focuses on Internet tools, where ALC deals more in terrestrial

traditional direct marketing," says Susan Rappaport. "We

really

think there’s a convergence going on with the Internet now becoming

an additional channel for direct marketers. We see it as a real

integration

with their traditional marketing, and it’s really where our expertise

feeds in perfectly. We are really one of the major resellers of

Impower

products."

One key product that highlights Impower’s roots in traditional direct

marketing is called ImpowerBase. It aggregates data from more than

450 million E-mail address records and is designed "to help

marketers

and list owners unlock the true potential of permission E-mail

marketing

by bringing new data, a higher degree of accuracy and sophisticated

segmentation to the E-mail universe," company literature says.

Impower acts as middleman for a marketer who needs a list of, for

example, gardeners. "We query our database and come up with the

name of every list owner who claims to have a list on gardeners,"

says Keeler. "The lists may have rates of $300 per 1,000 (names),

$100 per 1,000, and we go to all of them and negotiate one against

the other," Keeler says, "to get optimal pricing for our

client."

Impower goes a step further with ImpowerBase. "Every time we add

a new list to the database, we decoy ourselves. We sign up to be a

recipient of that list," Keeler says.

Impower then "audits" the list, opting in, opting out, opting

in again "to see if they re-recognize us. You can kind of tell

how sophisticated they are," Keeler says. In a system called

eScore,

each list is then scored, with the best lists earning scores between

one and four, the worst from five to nine.

"One of the problems with renting lists on the marketplace is

the list quality is really very very poor. The first thing you can

do is get rid of the percentage that is complete junk, so we’re really

adding some semblance of discipline to the marketplace," Keeler

says.

The e-Score system, Impower says, is one of its biggest competitive

advantages. But ironically, Donn Rappaport in early January presented

eScore to the Direct Marketing Association, proposing it as a standard

the entire industry should adopt.

For what reason would Impower would encourage all its competitors

to use its prize product? To deal with the Internet privacy issue,

which looms large in the face of direct marketers. "Our product

is the best way for marketers to insure that every message they mail

has absolute adherence to customer privacy and respects the rights

of the customer," says Donn Rappaport. "Our concern for

customer

privacy and marketers’ concern for message effectiveness go hand in

hand. The data shows that the more you give consumers what they want,

the more effective the marketing is going to be."

Impower hopes that by adopting E-score, the industry can ward off

potentially chilling legislation that would not only hurt Impower’s

business but actually curtail E-commerce.

If legislation is one cloud that could cast a shadow on E-mail

marketing,

increased "postal" costs are another. Right now, E-mail

advertising

messages can be sent for very little cost, but the portals are

threatening

to charge for them. Wouldn’t that impede Impower’s success? Not

really,

says Keeler. "But it would put the onus on the marketing partners

to make their promotional messages more effective, so that each

message

will still pay for itself. When the postal rates go up, for instance,

you reevaluate the overall effectiveness of your marketing plan and

make adjustments."

With a raft of promising products and close ties to a large and

respected

off-line marketer, when does Impower expect to begin turning a profit?

"There’s nothing left to buy or spend on," Keeler says.

"All

our investments are made and completed. We expect to be profitable

by the end of the first quarter this year."

"This year will represent the end of "E" as E-commerce,

E-mail,

and E-marketing," says Donn Rappaport. "Moving forward, marketing

will be marketing, and all marketers will have to be adept at all

forms of marketing, wherever a message could touch their

customer."

Although Impower has been an independent entity for more than a year,

the company plans a "grand opening" in early March. One goal

of the grand opening, Keeler says, is to advertise the sophisticated,

high-tech nature of the Princeton area to the many who don’t yet

realize

it.

To some, especially those from out of state, "Princeton is the

land that time forgot," Keeler says. "Part of the opening

is to have people realize that substantive, technological, Internet

things are happening here."

— Evelyn Goldin

American List Counsel, 4300 Route 1, Building 5,

CN 5219, Princeton 08543-5219. 609-580-2800; fax, 609-580-2888.

Www.amlist.com.

Impower, 4300 Route 1, Building 5, CN 5219,

Princeton

08543-5219. 609-580-2500; fax, 609-580-2555. Home page:

www.impower.com.


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