TECH CHOICES

January 10, 2006

Donnelley Is A Low-Cost Contender Among
Database Marketing Service Providers
The Forrester Wave™ Vendor Summary, Q1 2006
by Eric Schmitt
with Chris Charron and Jennifer Joseph

EXECUT I V E S U M MA RY
The Donnelley Marketing Group offers data management and data processing services through its
Donnelley Marketing and Catalog Vision brands. The company gets high marks for low-cost data
processing services and B2B expertise. On the downside, a below-industry-average customer satisfaction
rating should give prospective buyers pause. Using our reference criteria weightings, Donnelley comes
up a Contender in the 2006 Forrester Wave™ evaluation of database marketing service providers.

DONNELLEY IS BEST SUITED TO CATALOGERS AND B2B MARKETERS

infoUSA is an acquisitive, publicly traded company that owns a portfolio of marketing data and services
companies that generated approximately $350 million in revenue last year. The company’s primary focus
is data sales and list services, but it expanded into the database marketing business when it acquired
Database America Companies in 1997 and Donnelley Marketing in 1999. More recently, infoUSA
acquired several email providers, including Yesmail and @Once.1 It is currently engaged in a shareholder
dispute related to its recent bid to go private.

Forrester evaluated Donnelley’s current offering and strategy for database marketing services against
approximately 125 criteria (see Figure 1). Across the 10 companies profiled in this evaluation, we
electronically surveyed an average of 10 customers and conducted an average of five additional client
conversations by phone. Donnelley is a good fit for firms that want:

· An alternative to traditional file processing. For companies that still drive their direct marketing
with dated merge/purge processing — as is the case with many midmarket catalogers — Donnelley’s
solution provides an excellent opportunity to upgrade. In addition to data processing and hygiene
services, the company offers business-user-friendly analytical tools that can provide valuable insight
into customer data.

“Their core competency is aggregating and selling data. To do this, they have built a core
competency in cleaning data. That’s my biggest problem: aggregating and cleaning data. It’s
what they’re good at.”

“If you want to be on the cutting edge, and need it tomorrow, you should not be at Donnelley.
If you want reliable, cost-effective analytics, list select, and processing services, they are your
people.”

Headquarters
Forrester Research, Inc., 400 Technology Square, Cambridge, MA 02139 USA
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Tech Choices | Donnelley Is A Low-Cost Contender Among Database Marketing Service 2

· B2B marketing experience. Donnelley has far more experience with business-to-business
marketing than most other providers in the industry. Its assets in this area include a large
compiled data source, a data hygiene solution, and other marketing services.

“Donnelley clearly knows the B2B space, including data quality issues, corporate linkages,
and hierarchy.”

· A low-cost solution. Almost without exception, the clients we spoke with told us that
Donnelley’s price was a critical factor in their decision to hire the company.

“Donnelley’s ability to clean data is why we went with them. They are just less expensive at
that than the competition.”

“Their price and solution is bare bones. Because they’re so cheap, we can take the money we
save and put it into areas like development.”

Donnelley Clients Flag Service Issues

Prospective Donnelley clients should consider two other issues:

· Service complaints. Interactions with Donnelley clients revealed a pattern of negative feedback
about service issues. Clients rated the company below industry average in terms of their overall
satisfaction, and a significant number reported service issues like project management, inability
to follow through, and a lack of resources. We believe that many of these issues stem from the
company’s account service model, which has been extremely lean. For instance, Donnelley has
the lowest database administrator (DBA) to managed database client ratio of any company we
evaluated. To its credit, Donnelley did inform us that it has been hiring account staff recently.

“There is a long turnaround for things to get done. The people we are working with are
overworked, and there are not enough of them.”

“I’m not happy with the way things have gone. There have been a lot of account management
issues, a lack of understanding of where our business is going.”

“We knew it wasn’t going to be an easy ride because we weren’t going with a high-end shop.”

· An absence of strategic marketing services. Donnelley’s self-service approach to database

solutions won’t appeal to clients looking for a more agency-like experience. Marketing strategy
services aren’t usually provided — a fact that some clients don’t mind but others may count
against it. Other services — email, list, and analytics, for example — are provided, but some
clients wish that their delivery was more deeply integrated.

January 10, 2006 © 2006, Forrester Research, Inc. Reproduction Prohibited

Tech Choices | Donnelley Is A Low-Cost Contender Among Database Marketing Service 3

“Donnelley is like a software ASP with data. They are selling a canned application with fixed
inputs and outputs.”

“Other suppliers want to be your marketing shop — well, hell, that’s what I do.”

“The jewel in their portfolio is Yesmail. It is bolted onto my database right now — not where
it needs to be, but they are working on it.”

To see how Donnelley Marketing stacks up against nine other competitors, see the Forrester Wave™
evaluation of the database marketing service provider market.2

January 10, 2006 © 2006, Forrester Research, Inc. Reproduction Prohibited

Tech Choices | Donnelley Is A Low-Cost Contender Among Database Marketing Service
Figure 1 The Donnelley Marketing Group Evaluation Overview
CURRENT OFFERING
Technology capabilities
Operations and service delivery
Data and data sourcing services
Analytical services
Strategy services
January 10, 2006
4
• Forrester estimates a DBA-to-managed database client ratio of
approximately 1:9.
• Six DBAs on staff.
• The Donnelley Marketing Group clients we surveyed give it marks in line
with the industry average for technical flexibility and responsiveness.
• Develops and maintains its own proprietary campaign management
software.
• Provides several customer lookup services to support real-time marketing
requirements.
• The Donnelley clients we surveyed give it marks in line with the industry
average for the reliability of its operations and execution.
• The Donnelley clients we surveyed give it marks in line with the industry
average for proactively proposing new marketing strategies and tactics.
• When we asked what they find most disappointing about Donnelley, a
significant number of the clients we surveyed identified “their limited
resources” and “their inability to follow through as promised.”
• Donnelley notes that it has invested significantly in staff in 2005.
• Forrester estimates that data and list services represent approximately
60% of revenues and at least 65% of profits for the Donnelley Group
division.
• Forrester estimates that data sales and list services represent 60% to 85%
of revenues and 70% to 90% of profits for infoUSA overall.
• Donnelley Marketing is an original compiler of both consumer and
business marketing information.
• Third-party data sourcing and evaluation services are provided through a
different Donnelley Group company, Walter Karl (which also provides list
management, brokerage, and alternative media services).
• Recently acquired major list broker Millard Group.
• Statistician-to-managed database client ratio of approximately 1:4.
• Analytic team of 17 statisticians, research consultants, and systems
analysts.
• Eleven of these staff are statisticians; eight have advanced degrees.
• Approximately 60% of database clients use the company’s analytical
services.
• The average annual expenditure for analytical services is approximately
$30,000 per client.
• Strategist-to-managed database client ratio of 1:5.
• Five strategy consultants, expanding through newly formed strategic
marketing services group.
• Sister division SIM also supplies strategic consulting services.
• Forrester estimates that strategic services contribute at most 5% of
Donnelley Group revenues.
Source: Forrester Research, Inc.
© 2006, Forrester Research, Inc. Reproduction Prohibited
Tech Choices | Donnelley Is A Low-Cost Contender Among Database Marketing Service
Figure 1 The Donnelley Marketing Group Evaluation Overview (Cont.)
CURRENT OFFERING
Fulfillment and media services
Creative services
Industry capabilities
Other capabilities
Contracts and pricing
January 10, 2006
5
• Forrester estimates that less than 10% of Donnelley Marketing’s revenues
are fulfillment-related.
• Provides print production and postal optimization services for
postal-presort and ink-jet formatting.
• 20% of managed database customers use the company’s direct mail
capabilities.
• Significant email capabilities provided through Yesmail subsidiary.
• Targeted banner advertising/remnant banner ad inventory placement.
• Search engine marketing is available through another Donnelley Group
company, Walter Karl Interactive.
• Forrester estimates that less than 1% of Donnelley Marketing’s revenues
are creative-related.
• Offers email design services through another Donnelley Group company,
Yesmail.
• 32% of managed database clients are in the manufacturing industry.
• 25% of managed database clients are in the retail (catalog) industry.
• Maintains 12 B2B marketing databases.
• Reports that approximately 35% of managed marketing database
solutions are used for acquisition.
• Doesn’t provide loyalty solution infrastructure.
• Donnelley Marketing provides some market research capabilities via its
Analytical Services group.
• Donnelley’s managed database contracts have three-year terms, but it
does agree to one- or two-year terms in some cases.
• It generally does not engage in opportunities that require exclusivity.
• The typical client of Donnelley’s Market Zone Platinum solution spends
between $250,000 and $1.5 million per year.
• Forrester has observed that relative to other database marketing services
companies included in this research, Donnelley’s price is often
significantly lower in competitive situations.
Source: Forrester Research, Inc.
© 2006, Forrester Research, Inc. Reproduction Prohibited
Tech Choices | Donnelley Is A Low-Cost Contender Among Database Marketing Service 6

Figure 1 The Donnelley Marketing Group Evaluation Overview (Cont.)

STRATEGY
Corporate strategy • Donnelley is owned by an acquisitive publicly traded parent, infoUSA,
which has a portfolio of independently managed marketing and sales
data and services companies.
• infoUSA offers business and consumer data, database marketing services,
email marketing services, analytical services, data processing, and list
management.
• The Donnelley Group collection of companies represents 58% of infoUSA
2004 revenues and includes consumer data assets, database, email and
analytical marketing services, and list services.
• Growth plans include: 1) continued expansion of client service teams; 2)
midmarket marketing database solutions; and 3) industry-specific
solutions.
• Forrester believes that Donnelley’s strategy of self-service-oriented
database solutions addresses a viable market niche, particularly in the B2B
and catalog industries.
• The company’s primary orientation is around data and list services.
• Forrester has concerns about the level of resources that Donnelley has
assigned to service database solutions, which seem to be affecting service
and delivery (the company notes that it has been expanding its account
team staff recently).
• As of late 2005, infoUSA is involved in a dispute with several shareholders,
stemming from a failed attempt by management to take the company
private.

Focus • Forrester estimates that 20% of the Donnelley Group’s $200 million in
2004 revenues comes from managed database clients.
• These estimated revenues represent less than 1% of the 2004 revenues of
parent company, infoUSA.
• Donnelley has managed client databases for many years but has become
increasingly focused on this line of business over the past 24 months.
• The company is also heavily focused on the sale of noncredit data.

Delivery strategy • We find that Donnelley’s delivery strategy is:

- Designed to bring up clients quickly, at low cost.
- Typically sales-driven.
- Focused on client self-service, with limited strategic and/or business
guidance.
- Reasonably well-integrated across its database, email, data, and
analytical services.
- Sometimes disappointing to clients in the areas of technical support and
project management.
- Inconsistent in terms of customer satisfaction.
• Many Donnelley client services employees have been there for a decade
or more, providing continuity that some customers praise.

Customer satisfaction • The Donnelley clients we surveyed give it marks below the industry
average for overall customer satisfaction.

Source: Forrester Research, Inc.

January 10, 2006 © 2006, Forrester Research, Inc. Reproduction Prohibited

Tech Choices | Donnelley Is A Low-Cost Contender Among Database Marketing Service 7

Figure 1 The Donnelley Marketing Group Evaluation Overview (Cont.)

STRATEGY
Technology strategy • The Donnelley clients we surveyed give it marks in line with the industry
average for technical flexibility and responsiveness.
• The technology environment is focused on a single application stack, built
on CBAT technology licensed from Alterian.
• All customer databases are hosted in the company’s data center facilities.
• Creates persistent keys for consumer and business data within the clients’
environment.
• Maintains a persistent key for an individual across client implementations,
based on a referential database.
• Offers two products for linking customer information across sources and
channels.

Industry strategy • Somewhat industry-oriented.

• Industry-specific P&Ls, delivery organizations, and technology for the
not-for-profit and catalog sectors.
• Industry-specific solutions and services for these two industries.
• Less-formal industry focus on B2B and consumer goods industries.
• Notes that it is currently reviewing its industry strategy.
• Generally does not engage in opportunities that require exclusivity.

Differentiators • Low-cost, self-service/ASP approach to database solutions.

• B2B marketing data, data processing, and services capabilities.
• Compiled consumer data assets.
• Catalog industry experience and track record.
• Consumer goods manufacturing industry experience and track record.
• List brokerage capabilities.

Channel strategy • No agency/channel partners for its database marketing services.

Outsourcing strategy • Doesn’t report any outsourcing arrangements.

Source: Forrester Research, Inc.

January 10, 2006 © 2006, Forrester Research, Inc. Reproduction Prohibited

Tech Choices | Donnelley Is A Low-Cost Contender Among Database Marketing Service 8

Figure 1 The Donnelley Marketing Group Evaluation Overview (Cont.)

MARKET PRESENCE
Clients • Maintains large (>$400,000 per year) database relationships with
approximately 37 clients.
• Reports that it manages approximately 54 databases across 52 client
companies overall.

Revenues • infoUSA reported revenues of $344 million in 2004 revenues,

approximately $200 million of which was contributed by the Donnelley
Group.
• Forrester estimates that 20% of the Donnelley Group’s $200 million in
2004 revenues came from managed database clients.

Employees • infoUSA had a full-time employee count of approximately 2,300 at the end
of 2004.
• Donnelley Marketing had a full-time employee count of approximately
615 (across all locations) at the end of 2004.

Industry presence • 32% of managed database clients are in the manufacturing industry.
• 25% of managed database clients are in the retail (catalog) industry.
• Maintains 12 B2B marketing databases.

Source: Forrester Research, Inc.

Go online to download additional in-depth data and scores for this vendor and other vendors
included in this Forrester Wave evaluation.

SUPPLEMENTAL MATERIAL
Online Resource
The underlying spreadsheet for Figure 1 is available online. The spreadsheet includes more detailed
data and scores for this vendor.
The detailed data and scores for this vendor are also available online through an Excel-based vendor
comparison tool that provides detailed product evaluations and customizable rankings.
The Forrester Wave Methodology
We conduct primary research to develop a list of vendors that meet our criteria to be evaluated
in this market. From that initial pool of vendors, we then narrow our final list. We choose these
vendors based on: 1) product fit; 2) customer success; and 3) Forrester client demand. We eliminate
vendors that have limited customer references and products that don’t fit the scope of our evaluation.
After examining past research, user need assessments, and vendor and expert interviews, we develop
the initial evaluation criteria. To evaluate the vendors and their products against our set of criteria,

January 10, 2006 © 2006, Forrester Research, Inc. Reproduction Prohibited

Tech Choices | Donnelley Is A Low-Cost Contender Among Database Marketing Service 9

we gather details of product qualifications through a combination of lab evaluations, questionnaires,

demos, and/or discussions with client references. We send evaluations to the vendors for their
review, and we adjust the evaluations to provide the most accurate view of vendor offerings and
strategies.
We set default weightings to reflect our analysis of the needs of large user companies — and/or other
scenarios as outlined in the Forrester Wave document — and then score the vendors based on a
clearly defined scale. These default weightings are intended only as a starting point, and readers are
encouraged to adapt the weightings to fit their individual needs through the Excel-based tool. The
final scores generate the graphical depiction of the market based on current offering, strategy, and
market presence. Forrester intends to update vendor evaluations regularly as product capabilities
and vendor strategies evolve.

ENDNOTES
1
In 2003, we forecast that database marketing services vendors would acquire their email counterparts. Since
then, Acxiom, Experian, Harte-Hanks, and infoUSA have done just that. See the April 4, 2005, Trends “We
Called It: Email Vendors Get Swallowed Up.”
2
Firms hire database marketing service providers to manage, cleanse, and integrate customer data. In many
cases, they also pay for marketing operations, analytical services, and strategy support. To assess the state
of the market and see how the leading outsourcers stack up against one another, Forrester evaluated the
strengths and weaknesses of top database marketing service providers across 125 criteria. The result:
Epsilon is in the sweet spot of market demand. The Allant Group and Merkle aren’t far behind, thanks
in large part to their analytically led service models. Included in this report is an interactive vendor
comparison tool that provides detailed product evaluations and customizable rankings. See the January 10,
2006, Tech Choices “The Forrester Wave™: Database Marketing Service Providers, Q1 2006.”

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