Digital River Takes Over
No one is shocked any longer to hear
that Digital River has added to their impressive
collection of acquisitions. This time, only the
size of the acquisition was surprising. On April
19, 2004 Digital River announced that they added
ShareIt / Element5 to their collection of registration
services for a paltry sum of 120 million dollars.
Realizing that I had taken an interest and written
about their past acquisitions Brant Pallazza,
Vice President of Shareware at Digital River contacted
me and welcomed the opportunity to answer any
questions that I had. I seized the opportunity,
believing that any insight into the acquisitions
would help developers make an informed choice
about their online ordering service.
1.) There is a deep seeded fear amongst developers,
though no one will come right out and say it,
that DR will consume all of the registration services
and then increase rates. At that point
developers will be so vested in DR there won't
be any other options. Is there any guarantee that
this won't happen? Is there anything that you
can say to reassure developers who have this fear?
This question has two parts: First, regarding
rate increases...we have made many acquisitions
in the past and have never raised our ecommerce
rates. Instead, we have added features, functionality
and stability. In some cases, we have even lowered
rates. Our #1 goal is to help our clients grow
their revenues through better marketing, sales
and distribution opportunities - they win and
we win. We can have a much larger impact on both
our businesses through this strategy than through
simply raising rates.
Second, there are ALWAYS options. We know that
our clients have choices. The acquisition of e5
will not lessen that fact that there continue
to exist a number of other extremely competitive
services out there. We intend to continue to deliver
solutions of strength and value that fit our clients
2.) Why does DR keep acquiring registration
services, when they have not yet fully integrated
or leveraged the services of the properties they
With every acquisition, our intention has been
to integrate the back end services that make sense
(accounting, customer service, hardware, etc.)
while retaining the features, functionality and
"personality" of the original platform. Believe
me, it would have been much easier for Digital
River to acquire a platform, integrate the technology
into Digital River's core ecommerce platform,
and migrate the clients to this new platform.
But we know that this is not what the clients
want. They want to retain their existing interface
and process while benefiting from the elements
that Digital River has to offer (i.e. the network).
3.) At some point DR has to realize they are
re-purchasing many of their existing customers,
I'm not sure how this translates into growth,
can you elaborate on any of the thought process?
Following an acquisition, we often times find
ourselves reacquainted with previous clients.
But we understand that the client was simply looking
for an ecommerce solution that best fits their
Hopefully, despite the acquisition, the client
is satisfied with their current solution and will
continue the relationship despite the acquisition.
In fact, they often realize the immediate benefits
of being a part of a larger network.
4.) Are there any other directions that DR
intends to grow? While the acquisition of ShareIt
surprised me, I thought it likely that DR would
purchase another download site. In fact with the
shake-up at Tucows I thought that might have been
on your radar. Can you tell me if the business
focus is on registration services or if you intend
to grow into other segments? I honestly think
developers will be more understanding if they
understand both short and long term goals and
The objective of the acquisition of registration
services has been to grow the size of the Digital
River's aggregate client product catalog. With
a large catalog of titles at our disposal, we
will continue our focus on the development of
effective channels of distribution for our clients.
The more titles we can bring to table, the stronger
position we have in getting distribution for our
clients in both traditional (online retailers
and download sites) and non-traditional (content
sites and portals) online channels, which in turn
helps us further drive client growth on a global
Creation of our trialware network is just the
beginning of several exciting opportunities currently
being developed at Digital River. It has been
no secret that Digital River has always been very
successful and very interested in merchandising,
permission-based email marketing, and Web analytics.
I see these as continued opportunities for all
our clients that will be aggressively pursued
5.) Digital River has always taken a hands
off approach to their acquisitions letting clients
adjust, with as few changes as possible. However,
there have been recent key leadership changes
at RegSoft and RegNow that no one is talking about.
While these acquisitions happened quite some time
ago, it appears that they are becoming much more
integrated into the DR "machine", is that what
will happen with all the properties over time?
It is interesting that you describe Digital
River's approach to the acquisition of registration
services as "hands-off". That is exactly how we
wish the transition to be perceived. But the fact
is, many back end processes undergo immediate
integration. These changes provide greater security,
enhanced redundancy or more depending upon the
The fact is that we acquire only very well run
organizations with superior solutions and excellent
management teams. Obviously element 5 fits this
mold. RegNow and RegSoft, two acquisitions referenced
by you also fit this mold extremely well. It was
several years after having been acquired and being
managed by Digital River that the day to day business
owner of RegSoft decided to move on. The original
development team, however, continues to enhance
the platform even today.
As for RegNow, the day to day business managers
and support staff continue support the platform
today. Although some key roles have been expanded
to touch all Digital River's shareware properties.
With every acquisition, our objective is to retain
the personnel and the "personality" that makes
it a great registration service. We then try to
maximize the opportunities associated with being
part of a larger network.
my impressions *****************************
I still believe that this will be
a defining year for registration services. I was
caught off guard by the acquisition, as I was
under the impression DR would further integrate
their existing properties into a common system,
leveraging the benefit of having such a large
network before further expansion. Being that Element5
is in Europe and targets European developers,
it brings with it, a number of cultural nuances
that the other acquisitions did not. This move
is slightly out of step with DR's previous purchases
and will likely be more difficult to integrate.
I commend Digital River's intention
to provide their clients opportunities to further
market their software via permission-based email,
but I wonder if Digital River is missing the mark.
Many savvy web surfers are opting out, of opting
in, and simply selecting RSS feeds that contain
content of interest.
As for the future, eSellerate has
made it very clear that they will not sell to
Digital River for any price. They are positioned
well and will likely be "the" other
industry player. For all the developer rumblings
regarding the DR acquisitions, few grumble with
their feet and most will likely stay with their
existing processor unless they incur some sort
of financial loss as a result of the new conglomerate.
Of course I don't have a crystal ball, and Plimus,
the new kid on the block might surprise us all.
The challenge stands --- eSellerate,
SWREG and Plimus improve your services to a level
that will compete with Digital River's network.
Offer a personal and individual approach, do not
treat us, the client's, as a number. Digital River,
attempt to reach your potential, strive to combine
technology and leverage the power of your network
while not losing sight of the small business feel
that developers desire.
About the Author:
Sharon Housley manages marketing for NotePage,
a company specializing in alphanumeric paging,
SMS and wireless messaging software solutions.
Other sites by Sharon can be found at http://www.softwaremarketingresource.com
, and http://www.small-business-software.net
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