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 are not.
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 SWREG acquisition?
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 example.
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 at SWREG?
What do you think? Honestly. Look at
our track record. We are the only provider that, to
the best of my knowledge, has lowered rates.
5. What changes both short and long
term can developers using SWREG expect to see?
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 this area.
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 a lot.
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 globally?
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 the year.
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 http://www.feedforall.com
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.
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