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A Database Windfall for Reader's Digest

March 2002

A Database Windfall for Reader's Digest

by Erin Joyce
March 22, 2002

Among the asset gems that publishing company Reader's Digest Association, Inc. (Quote) picked up with its $760 million acquisition of Reiman Publications is a proprietary database of more than 32 million customers.

As RDA integrates its offline media assets with an increasingly brisk e-commerce business online, it now has an even bigger database to mine for cross-selling opportunities.

The result could be a more diverse mix of revenues for the $2.5 billion publishing company, just the thing media companies are looking to do amid a difficult market for ad dollars.

Thomas O. Ryder, chairman and CEO of Reader's Digest, called the deal a perfect fit with the company's growth strategy.

"It will help us distribute our products to new customers, through new marketing channels, while providing an alternate platform for new-product development. The acquisition also will advance our effort to further reduce our dependence on sweepstakes promotions."

The acquisition, announced Thursday, nets RDA all of the assets of Reiman Publications, which publishes cooking, gardening, country lifestyle and nostalgia magazines as well as books in the United States and Canada.

In addition to the $300 million in revenue that the Reiman acquisition adds to RDA's $2.5 billion in annual sales, RDA's own database of about 50 million customers is taking in 19 million new customers from Reiman.

The two companies publish 20 magazines between them and collectively have U.S. databases with more than 80 million customers for magazines, books and other products.

But the lack of overlap in the customer list means RDA has 19 million customers who have not thought about purchasing RDA's magazines, books or CDs, or taken part in sweepstakes offers.

In addition, the company is already building a database of younger customers who have used the Web site to purchase subscriptions, books, CDs, videos or financial services.

The Reader's Digest Web presence actually accounts for a trickle of RDA's overall revenues right now, said Bill Adler, company spokesman. But it's changing fast.

"Like many in publishing, we see (the Web) as an extension of our products. But increasingly, it's becoming important. We see e-commerce becoming a profit center for us. It's on that kind of trajectory, to one day be a stand alone business," he said.

In addition to content and commerce, the Reader's Digest site offers e-mail newsletters, yet another customer list it could use to pitch financial services and other in-house products.

The Wisconsin-based Reiman also uses its Web presence to sell subscriptions and some books. But it is primarily adept at cross-selling its offline media assets.

It took its Taste of Home title and developed a franchise with spin-offs such as Quick Cooking and Light & Tasty, as well as cookbooks and other ancillary products.

Now, the Taste of Home traveling cooking schools visit more than 250 cities each year and the company recently cut a deal to license software for cooking.

Ken Marlin, president of Marlin & Associates, a New York mergers and acquisition firm, points to European media giant Pearson PLC as another example of a company deploying a database strategy in order to reduce its dependence on cyclical advertising revenues.Financial Times Group includes the FTInteractive division, which supplies interactive pricing data to the financial services industry.

"Not only are the data base businesses less cyclical, they are also faster growing, more profitable businesses," he said.

FT.com is selling access to its interactive database. RDA is using its database of customers to cross-sell internally; the result is the same: diversified revenues.

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