By S. Housley
Brant Pallazza from Digital River
was kind enough to answer the following questions
related to Digital River's acquisition of SWREG.
The questions are bolded, while Brant's responses
1. Inquiring minds want to
know, what did Digital River pay for the acquisition
of SWREG? I know past negotiations have involved
earn-outs. What earn-out was involved in the
We paid $8.8 million cash for
the assets of the business plus assumed liabilities.
There is an earnout subject to the completion
of specified development milestones and achieving
specified revenue targets.
2. Historically SWREG's business
model has been significantly different than
Digital River's. How will SWREG's platform fit
into the Digital River portfolio?
Yes, Digital River's business
model has been geared a little different. Features
and functionality place a significant emphasis
on revenue growth. Hands-on account managers
plus tools like analytics, email, merchandising
and catalog management all come at a premium
price. SWREG, on the other hand, is all about
value. Getting a great service at a great price
may be the primary driver for some developers.
Keep in mind that Digital River also has significant
experience in this market. RegSoft, for example
is ideally suited for the cost conscious developer
who also wants a solid ecommerce service.
3. Many developers have stated
they feel that Digital River's acquisition's
reduce competition, giving them less choices
in the marketplace what reaction do you have
to that statement?
I understand this concern. But
if you really think about it, it is completely
unfounded. First of all, we have never shut
down a platform that we have acquired. In some
cases, we have acquired only the assets of a
platform. But the functionality and even the
original pricing still exists. Take PSL for
Furthermore, it is quite possible
that some of the services that we have acquired
might not even exist today had we not made the
acquisition. Everyone of the platforms now owned
by Digital River are more safe, secure and redundant.
And each retains it's own brand. It's own contract.
It's own pricing. To say that there are fewer
choices simply doesn't make sense. I would argue
that there are more.
4. Will you increase rates
What do you think? Honestly. Look
at our track record. We are the only provider
that, to the best of my knowledge, has lowered
5. What changes both short
and long term can developers using SWREG expect
Short term…safety, security, and
redundancy. No question. Steve will be the first
to admit that we have a lot of work to do in
Long term…to be honest, I need to work with
Steve on his Roadmap. He knows better than anyone
what his clients are looking for. Digital River
will help fast track some of these items.
6. Why didn't Digital River
release a press release regarding the recent
acquisition of SWREG?
The timing of the acquisition
closing was not ideal for making a separate
announcement due to the filing of the 10-k and
our raising our outlook for the first quarter
all in the same week. So, we included notice
of the acquisition in the 10-K as a subsequent
event where it is freely visibile to the public
and announced the transaction directly to the
SWReg client base.
7. What unique product or service
does SWREG bring to Digital River's offerings?
Value. Steve has done a great
job of creating a product that provides a level
of service at a price that vendors appreciate.
Not to mention, like element 5, SWREG understands
European developers, consumers, banking systems,
VAT, etc. very well. Digital River can learn
8. At this point in time most
of Digital River's past acquisitions still function
as single entities although I understand there
is backend integration with the Digital River
platform, each company retains its own distinct
brand. Do you expect that you will begin consolidating
these properties under a single corporate brand
at some point?
Nope. We certainly may "tie" the
brands together where it makes sense.
9. At some point do you intend
to make the RegNow affiliate program available
across all the platforms? Do you intend to consolidate
the power of the network and making some of
the unique registration service features available
This is extremely difficult. When
it was built, the RegNow affiliate program was
tightly integrated with the RegNow ecommerce
systems. Originally, there had never been any
intention of integrating or supporting other
ecommerce platforms. However, we are currently
looking at ways of supporting other DR platforms.
That said, one corporate 2005
objective at DR is to enhance the network. By
SIC, we will be launching a number of affiliate
and network enhancements. Some have already
been released. This will continue throughout
10. What future acquisitions
do you anticipate? (I had to ask) Would you
like to purchase us? :-)
Digital River's acquisition strategy
is focused on meeting the needs of both our
software publisher and network partner clients.
The opportunities that will continue to be of
interest to us will be ones that expand our
geographic reach, product catalogue, service
offering and technology solutions for our clients
on a worldwide basis.
As for purchasing you…there is
not enough money on the planet! ;-)
About the Author:
Sharon Housley manages marketing for FeedForAll
software for creating, editing, publishing RSS
feeds and podcasts. In addition Sharon manages
marketing for NotePage http://www.notepage.net
a wireless text messaging software company.