Fast growth in a fast-changing marketing world

Columbia-based Merkle is adding jobs at a breakneck pace — 200 this year and hundreds more in the past few years, during a time when many employers have held the line or cut back.

Total workforce: 1,500. That's a heck of a change since chief executive David Williams bought the marketing company in 1988 and became employee No. 24.

Williams, 48, had no marketing background when he leaped from a stock brokerage into entrepreneurship in his mid-20s. He simply wanted to run his own company, and Merkle was available. It proved a good pick — though that wasn't so clear in the setback-laden first few months.

Williams, who lives in Annapolis, talked with The Baltimore Sun recently about the potential and perils of high-tech marketing, about how social media is changing the way companies interact with customers, and about how his company is expanding so quickly. Merkle doubled its revenue in the past five years to $300 million.

How have you managed such rapid growth?

We're in the right place at the right time in the industry. … We operate at the intersection of technology and science in marketing. We help Fortune 500 brands, people [from companies] like DirecTV and Geico and Disney … understand consumer behavior, and then we use statistical models to predict how a consumer will respond to a particular offer. So: Who's most likely to buy auto insurance in the next 60 days? Who's most likely to travel to a Disney park or resort in the next six months?

There's more demand on marketers to prove ROI — return on investment — and that's really the sweet spot of the work we do. … The challenges of the economic climate have in many ways accelerated our growth.

How is the company helping clients tap into social and digital media?

We are one of Google's largest customers in the sense that we help people manage their search capabilities — understanding how much people should pay for a certain term, like "auto search."

In the social world, we're helping clients better understand what a fan on Facebook is really worth. There's a lot of momentum with brands building Facebook presences and trying to build a fan base. We're not only helping them understand how to build a fan base but, more importantly, the value of that fan base and how to be relevant to that fan base over time.

How significant is this change, this ability for companies and customers to connect in many more ways?

This is probably the greatest shift in the marketing landscape since the invention of brands and network television in the late '40s and '50s. … It's a massive opportunity for marketers and, bluntly, it's a massive risk at the same time.

You risk betraying the trust of those consumers and customers in some way … like all the telemarketing calls we used to get a decade ago. And the second risk is, my competitors are more productive in that environment than I am and I lose competitive advantage. So those are the things that are on our clients' minds.

Why did you buy Merkle in 1988, and what did it look like at the time?

I was a young, naive kid that didn't know any better — that was why I bought it. Actually, I was a retail stockbroker; I was 24 years old when the opportunity first arrived. The guy who owned it was a client of mine [and wanted to sell].

It was primarily a data-processing company — we did what we call "list management" for unions and associations in Washington, people like the American Postal Workers Union and the American Chemical Society, where we helped them manage their mailing list, basically. So the business was always in the marketing community, but we immediately redefined our market as not unions and associations but Fortune 500 brands doing direct marketing. That's where that growth came over the last 23 years.

How did it go at first?

In the first six months, we lost our second-biggest business client — which was $600 million on $21/2 million [in total revenue]. [Former owner] Harvey [Blanton, who intended to teach Williams the ropes] had a heart attack. So he didn't die, but he was out of the picture for the most part. And my bank … got taken over by the RTC [Resolution Trust Corp.], so I lost my credit line.

I personally guaranteed all the debt, my house was on the line, I just had my first baby, so it was an interesting time. But … for me, it was just come to work, do the work and just keep pushing as hard as we can. We pushed through it, and we not only survived, we thrived.

You're a "customer relationship marketing" agency. How is that different from plain old marketing?

I would put marketing in two camps. There's really brand marketing, which is about universal messaging. … Then the other aspect of marketing is really about understanding customers, their individual preferences, desires and behaviors.

The kind of marketing we do here at Merkle is really about individual relationships. We get very involved in developing loyalty programs, for example. … It's all these emerging medias, mobile marketing, things where you can have a customized and personalized message to each consumer you want to speak to.

How did you get there from mailing-list management?

We kept looking at what customers were struggling with. … Our clients have made us what we are.

We have almost 200 graduate-level statisticians at Merkle that are looking at data around consumer behavior to generate insights and predict behavior of what those people will likely want to do next with a particular company. We started to build that organization back in 1996, and that was sort of unheard of in 1996.

Another interesting fact is we have 500 technologists. We have 500 people here doing nothing but managing … and building marketing technology applications … to allow people to have highly fragmented, sophisticated campaigns, one-to-one campaigns with consumers.

Merkle says most companies aren't using email marketing well. How do you mean that, and how do you help clients avoid ticking people off and ending up in the spam filter?

It needs to be customized and it needs to be personalized. … If we send out a million emails today, there should be a million versions of those emails, because they're personalized and customized to the behaviors, wants, desires and preferences of those customers.

It's really possible to have a million different versions?

It's part of the reason we have so many technologists. … Without the technology, you could never do it.

How much venture capital has the company brought in?

We never raised any money from 1989 to 2010, and in 2010, we took $75 million worth of money from an organization called TCV, Technology Crossover Ventures. … They're a private equity firm in Silicon Valley.

We had never taken any money; we had never needed any money. We didn't need that money either … but we have aspirations to build a $1 billion company.

How long do you think that will take?

I think it'll take my whole lifetime. … This is a long-term journey for us.

I've probably had, realistically, 100 offers to sell this company over the course of the last decade, and we're just not interested in that.

jhopkins@baltsun.com

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