On-demand public relations management software provider
) recently announced the acquisition of an email marketing company,
iContact for a total consideration of $179.0 million. The total
payment was made through a combination of $91.0 million in cash and
$9.0 million worth of Vocus common stock and $79.0 million in
redeemable convertible preferred stock.
The acquired company, iContact, was founded by Ryan Allis and
Aaron Houghton in 2003. iContact's software has gained significant
popularity among different organizations across the globe and
approximately 70,000 organizations use this email marketing
The future of eMail marketing is great and it has grown to be a
billion dollar plus industry, with several companies deploying
iContact's email marketing software to boost their marketing
strategy. Email is a quintessential communication tool and it is
easier and more price effective for marketers to reach their target
audience. Through this acquisition, Vocus is trying to tap the
potential in this market.
The idea behind acquiring iContact was to focus more on the
Small & Medium Business (
) sector. Vocus estimates that spending by SMBs on digital
marketing is expected to grow from $5 billion in 2010 to $17
billion in 2015, representing a 25% CAGR.
By 2015, SMBs are expected to allocate 70% of their marketing
budget to digital marketing. In addition, e-mail marketing, search
marketing and social media marketing will comprise the top three
areas of spending for small and midsize businesses by 2013.
By leveraging iContact's capabilities and growing its sales
team, Vocus is targeting cloud opportunities at SMBs.
The inorganic growth strategy was also previously adopted by
Vocusthrough the PR Web International acquisition in 2006. The
acquisition enables the company to distribute press releases over
the Internet that are indexed by major search engines and
distributed directly to various news sites, journalists and
Vocus reported impressive fourth quarter results, beating the
Zacks Consensus Estimate on the bottom line. Vocus operates in a
nascent market and should therefore continue to see good growth. On
the other hand, we are concerned about the current conservatism
with respect to technology spending and the reduction in the
Europen business that could partially offset this positive.
Additionally, concerns related to margin contraction linger,
based on higher investments in sales and marketing, as well as
Currently, Vocus has a Zacks #4 Rank, which translates into a
short-term Sell rating.
VOCUS INC (
): Free Stock Analysis Report
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