Publicis Groupe this week agreed to purchase Commission Junction’s parent company Epsilon. The $4.4 billion deal emphasizes once again the importance of affiliate marketing in the age of big data. Major consumer-facing advertisers are desperate for ways to compete against Amazon and the key to that is first-party data. Affiliate networks are fantastic vehicles for gathering first party data, dealing as they do in tens of thousands of transactions a day, and that makes them increasingly attractive acquisition targets.

There are three big takeaways from this deal:

1. Affiliate Marketing 2.0 Is About Data, Not Just Customer Conversion

So often in this industry we are looking for the next sale or the next lead. What is now just as much of a necessity is to build a marketing technology stack that will capture and process every piece of data possible. For bigger companies that will mean a DMP, but smaller companies need to get in the game too, whether they are merchants or publishers. For networks, investment in their own platform may have been their biggest IT investment to date. Moving forward however, expect to see much greater investment by networks in data management, personalization and loyalty initiatives. 

2. Amazon’s Threat Is An Opportunity For Performance Marketing

We have already seen significant investment into CPA networks from VCs and Private Equity, and now the big beasts of the cost-per-sale world are fully integrating into the world of multi-national agency holding companies like Publicis. Publicis needs to help their customers survive and compete against Amazon, and sees CJ as part of the solution. Rakuten Affiliate Network is, of course, already part of Rakuten, Inc., perhaps Amazon’s greatest direct competitor worldwide. These two giants are leading the way for the indsutry. The increasing dominance of Amazon is going to lead to ever more opportunities for affiliate marketing networks to help advertisers compete.

3. Personalization And Data Services Are A Goldmine

The reason for Publicis wanting Epsilon was summed up by Publicis CEO Arthur Sadoun when he noted that when buying a car, customers might have 900 online interactions:

“You just take this number and you understand why there is no way for our client to continue to grow profitably if they don’t deliver personalized experience at scale. If they’re not able to touch those people within those 900 points in the right way with the right message at the right time and with the right offer.”

Many analysts have doubts over the acquisition because Epsilon hasn’t been performing that well. Indeed, there have been persistent rumors for the last year that CJ was “buying business” in order to position itself for sale, and that this had to be hitting their margins (I can’t vouch for the truth of this rumor either way, of course). But any doubts over Epsilon’s weak financials ignores the oportunities presented by combining Epsilon’s data management expertise with the agency services that Publicis offers. Agency fees have been under a lot of pressure in recent years and data personalization gives them the opportunity to claw back some of those reduced revenues. 

The big question will be if Publicis can integrate Epsilon effectively, and whether compliance issues will hinder their goals as GDPR in Europe, and privacy concerns here in the USA, have an increasing impact. Again, having access to reams of first party data will be a critical competitive advantage in this area.