OPINION

AT&T Sees T-Mobile Merger Through Rose-Colored Glasses

I want to give you some of the feedback on my recent column, “Thumbs Up or Down for AT&T + T-Mobile?” It is very interesting indeed. This merger is getting lots of attention. Arguments on both sides make sense, but only one side will win. Which side are you on, and why? Have you thought it through?

When reading this, please realize I am not saying this deal shouldn’t happen. What I am saying is that AT&T is only looking at the reasons for and not the reasons against — and that is creating a lot more pushback.

AT&T customers seem to like the idea. They like that this will give them better quality and reliability and service. This has been an increasing problem in recent years.

Customers of other carriers, if they have an opinion, seem to dislike it, because they say fewer competitors mean higher prices and less vibrant competition.

Execs from AT&T thought I was crazy for questioning the deal in my column. They think this is a good deal — not only for AT&T, but for the entire industry. They see no other side. They are singularly focused. Of course, they want the deal to happen. More on this later.

AT&T workers are more of a mixed bag. Some think it is a good idea, but many are also very worried about their jobs with all the new workers coming in. They have seen this before with the other mergers they have participated in. Bottom line: The efficiencies resulting from a merger typically mean the company doesn’t need all those workers. Many lose their jobs. In today’s jobs environment, that has many concerned.

Weighing the Competition

Execs from Sprint Nextel are against the merger. Sprint CEO Dan Hesse has been a very vocal adversary since the beginning. AT&T did not immediately answer his criticisms, but after a recent speech by Hesse, AT&T responded in a post on its public policy blog: Jim Cicconi, senior executive VP for external and legislative affairs, said Dan Hesse’s comments about the merger were “way off base.” Are they?

“Given that Sprint is a major competitor to AT&T in the hyper competitive wireless market Mr. Hesse describes, no one should be surprised that they would oppose this merger, but it is self-serving for them to argue that the highly competitive wireless market they cited only months ago is not threatened by the very type of transaction they seemed prepared to defend previously.”

I like Cicconi for his valiant effort, but I really don’t think he realizes that he is making Sprint’s point. If Sprint and T-Mobile got together, it would have made the three-way marketplace more even. Three more-equal competitors. Instead, this current deal will make AT&T that much bigger and farther ahead of Sprint Nextel. So you can’t consider these two mergers equal. They are not.

Sprint is now recovering from a very rough period and many years of losses. While this recovery looks good, it should not be used to say that Sprint is as strong and healthy as AT&T or Verizon. Sprint should not be pointed to by AT&T as vibrant competition. It is not. Not yet. Just look at the market share numbers.

I don’t know if Sprint expects to stop the merger or just to moderate the potential damage it could cause, but it is vocal about it. Sprint workers seem to agree. This is turning out to be a very interesting battle that is just starting.

Execs from Verizon have not really weighed in one way or the other. They express obvious concern with the many issues but don’t want to block the deal either. My impression is they have a problem with this merger but want to keep the pathway clear in case they have another acquisition in mind.

There are plenty of others — like Tracfone, MetroPCS, Cellular South and U.S. Cellular — that AT&T Mobility CEO Ralph de la Vega points to as vibrant competitors. Sure, they are competitors, but they don’t sell enough to be real competitors. Not in this argument. Look at market share. In the new environment, AT&T and Verizon will have somewhere around 80 percent market share. All the other competitors have to split the rest.

I have also heard from equipment and network companies, and there are plenty. Very few, if any, like the idea. Most think this will have a negative impact on them and the industry in general.

For example, companies like Ericsson and Alcatel-Lucent don’t seem happy about this merger. They would prefer a marketplace full of smaller and mid-size competitors, because they sell more gear. This deal means fewer sites. That may mean losses and layoffs in an industry sector very hard hit by previous mergers.

Tower companies, like American Tower, have taken an immediate hit in the stock market. American Tower CEO James Taiclet said in a CNBC interview that when similar mergers took place in the past, the company experienced an initial slowdown before continuing to grow. It sounds like he would prefer many companies as opposed to a few, but said his firm will make it either way.

I got a lot of phone calls and email and have read numerous articles with quotes from various executives, associations, customers and investors either complaining about the deal or loving it. There were plenty of both.

I had so many questions when this merger was announced. Now, after hearing from so many different interests, I have even more questions.

However, that was the point of my original column. AT&T wants this deal, but it is making things harder on itself with its current playbook.

Time to Get Real

This deal is clearly good for AT&T. This deal is also clearly bad for many others. For AT&T to ignore both valid sides will only hurt it.

I have watched Ralph de la Vega for 15 years, and I think he is a good man, but I think AT&T is making a mistake here in its approach. This is one of the last big deals and should be harder to get approved. Ignoring the arguments of the other side creates angst.

If AT&T takes a fair approach, it will make friends and have less pushback. If it stays on the current path, pushback will be strong the entire way.

AT&T customers have been complaining for a while about lousy service. This merger will help the company deliver better service. So there are reasons this makes sense.

On the other hand, we have seen many mergers in the past decade, and the results have been mixed. This time, we have to be smart and try to look into the future and design the best merger for everyone — customers, workers, investors, as well as the companies.

We need to think about the changing and growing industry. We have to realize the wireless industry changes every five years. Remember, five years ago, the words “iPhone” and “Android” did not even exist. Five years ago, RIM, with its BlackBerry, and Palm ruled the smaller smartphone space. Five years ago, we had a couple hundred apps, and today we have a few hundred thousand.

So, what will the wireless marketplace look like tomorrow? That is what we have to think about. That is what we have to address.

When all is said and done, I think this deal will be done — but AT&T should make several important concessions. I think it knows this but doesn’t want to move in that direction yet.

I like AT&T. Starting as SBC from San Antonio Texas, it is suddenly a very large company that is trying very hard to grow and please everyone. I also think it is having a dickens of a time doing so. It makes its share of mistakes, but it also makes many good moves and is a very innovative and creative company.

Let’s hope this merger benefits not just AT&T, but the industry overall. There is a long way to go before it gets there, and it would be very helpful if AT&T would take a more realistic stance on both the pros and cons, instead of looking at this deal like it is just positive for everyone, which it clearly is not. Jeff Kagan's Pick of the Week

For my Pick of the Week topic, I want you to think back and remember the good old advertising commercials AT&T ran in the 1980s and 1990s. The kind that made you feel good. During the last decade, we have not seen them. The good news is they are back.

Suddenly, AT&T is running a newer version of those same old wholesome feel-good messages that worked so well in the past, and this time they are called “Anthem.” I guess the company is hoping they will warm the hearts of the marketplace — and they just might.

Among other things, AT&T is talking about healthcare and putting your personal information in the cloud, so that when you are traveling, the doctors can see your medical history.

That is brilliant. AT&T understands the direction the industry is heading. It will play a role in this new industry going forward.

It is talking up a great story. Now it just has to make it a reality. This new world, with wireless health, mHealth and eHealth, is really starting to arrive. Let’s hope it has a faster growth curve than the videophone did from the 1964 World’s Fair. Has it hit the market yet?

Jeff Kagan is an E-Commerce Times columnist and industry analyst following wireless, telecom and healthcare technology. He is also an author, speaker and consultant. Email him at [email protected]. Read the first chapters of his new bookLife After Stroke now available at Amazon.com and Barnes & Noble.

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CRM Buyer Channels

Walmart Announces Merchandise Hub for Netflix

Walmart and Netflix are teaming up to sell merchandise pegged to the streaming media provider’s content.

“Through this new partnership, Walmart will not only offer products that bring the imagination of Netflix creators into reality, but Walmart customers and Netflix superfans will also find a new, exciting entertainment destination,” Walmart Executive Vice President Jeff Evans wrote in a news release Monday.

“The Netflix Hub brings together some of its most popular shows in its first digital storefront with a national retailer,” he added.

Merchandise will be tied to such shows as “Stranger Things,” “Nailed It!,” “CoComelon” and “Ada Twist, Scientist.”

Among the items offered when the Hub opens this fall are the Ada Twist Cuddle Plush ($10.97), “Squid Game” t-shirts, the “Stranger Things” Bluetooth cassette player ($64.88) and the Witcher Netflix Transformed Geralt Dark Horse Collectible Statue ($59.88).

Evans also noted the Hub will also offer a feature called Netflix Fan Select. It offers fans of Netflix shows an opportunity to vote for merchandise they’d like to see from the service’s stable of favorites.

Competing With Amazon

The new partnership will have benefits for both Walmart and Netflix.

Walmart wants to compete with Amazon, and part of that competition includes streaming services, maintained Ross Rubin, the principal analyst with Reticle Research, a consumer technology advisory firm in New York City.

“A partnership with Netflix could be used for further collaboration. Walmart might start offering select content from Netflix, for example,” he told the E-Commerce Times.

“There’s a lot of ways it could work without Walmart offering the full-blown Netflix service,” he added.

Zain Akbari, the equity analyst for Walmart at Morningstar, an investment research company in Chicago, noted that the partnership allows the retailer to capitalize on media-linked commerce without making the kind of investment Amazon made to do it.

Although Walmart sold its Vudu streaming service in 2020, its interest in interactive and shoppable media remains, he explained.

“From its standpoint a deal like this allows Walmart to focus on what it does best while leaving the content side of the equation to an established leading player,” Akbari told the E-Commerce Times. “Ultimately, it’s another avenue by which Walmart can expand its building e-commerce footprint.”

Good Business Move

“Allying itself with one of the two streaming market leaders — Netflix and YouTube both capture about six percent of total TV time — makes good business sense for Walmart,” added Charles King, the principal analyst at Pund-IT, a technology advisory firm in Hayward, Calif.

“The new storefront should please the company’s existing clients and attract new customers, and also provide a point of competitive differentiation from Amazon,” he told the E-Commerce Times.

Having exclusivity on products from Netflix’s hit shows is another benefit of its new partnership.

“Squid Game is a perfect example,” noted Michael Inouye, a principal analyst atABI Research.

“You can imagine what the opportunity would look like if this partnership was already in place and Walmart was the only place for official Squid Game Halloween costumes,” he told the E-Commerce Times.

He added that there is a lot of value but also a lot of cost in original programming, but to date, no one has done as well as Netflix with it.

“This allows Walmart to generate some of the same benefits to their core operations of an in-house streaming service without having to make those investments in original content,” he said.

Bricks and Mortar Prize

Netflix, too, benefits from the new arrangement.

“Walmart’s massive size and geographic reach make it a great partner for Netflix to reach shoppers,” King observed. “The new store should help drive sales during the upcoming holiday shopping season.”

“Netflix has tried for a while to monetize its content other ways. Selling merchandise is one of them,” added Morningstar Netflix equity analyst Neil Macker.

“Netflix is not an e-commerce company,” he continued. “It’s a streaming company. It has a different business model than a pure e-commerce company. By working with Walmart, they can get help with building a site, fulfillment, shipping and things like that.”

Netflix is also looking to diversify beyond subscriptions for its streaming service.

“It’s already announced its movement into games,” Rubin noted. “This is a way to take a page from Disney’s playbook.”

“Disney is very skilled at driving merchandise from characters in its franchises,” he continued. “Walmart offers a strong retail presence from which Netflix could potentially build that and realize more revenue from its original content and franchises.”

Netflix may also be looking beyond online involvement with Walmart.

“If Netflix could get into Walmart’s brick and mortar stores, that would be the bigger prize for Netflix,” he said. “To have a section of the stores promoting its properties would be a big win for Netflix.”

Crucial Channel

Inouye believes that in time, Walmart will become a crucial distribution channel for Netflix.

“Since many of Netflix’s shows are launched all at once — although there are a growing number that launch on a timed schedule — it can be extra challenging for Netflix to keep excitement up around a TV series when the next launch may be more than a year away,” he explained.

“Having merchandise and content to keep fans invested and engaged in this popular IP is massive for Netflix,” he said.

Creating original content can be a hit or miss proposition, he noted. Selling merchandise can help offset the cost of the misses.

Like Disney, Netflix would like to leverage its IP well beyond the video content itself, he maintained.

“Netflix is still in its early days here,” he said, “but it is starting to expand into new territories and opportunities and the Walmart deal could become a key piece to that strategy.”

“This is particularly critical in those markets, like North America, where future subscription growth is limited,” Inouye added.

“In these more mature markets revenue growth has to come from price increases or these alternate channels,” he continued. “The latter allows them to keep engagement higher, bring additional revenue, while ideally slowing the rate of subscription price hikes, which helps maintain — and slowly grow — the installed base.”

“Other content companies have looked to marketing and selling merchandise to bring additional revenue by capitalizing on hot IP — Rovio for example has done this with its “Angry Birds” IP — but with Netflix, this could be on another scale,” he concluded.

John P. Mello Jr. has been an ECT News Network reporter since 2003. His areas of focus include cybersecurity, IT issues, privacy, e-commerce, social media, artificial intelligence, big data and consumer electronics. He has written and edited for numerous publications, including the Boston Business Journal, the Boston Phoenix, Megapixel.Net and Government Security News. Email John.

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Intuit’s $12B Mailchimp Purchase Breathes New Life Into Email Marketing

Intuit on Monday announced an agreement to acquire Mailchimp, a global customer engagement and marketing platform for small and mid-market businesses, for $12 billion in cash and stock advances. The purchase could be the linchpin that thrusts the mostly financial software company into solving more fertile mid-market business challenges for its customers.

The planned acquisition is part of Intuit’s mission to become an AI-driven expert platform. With the acquisition of Mailchimp, Intuit will accelerate two of its previously-shared strategic big bets: to become the center of small business growth and to disrupt the small business mid-market, said the company in its announcement.

Intuit’s acquisition of Mailchimp sends a great message to all entrepreneurs around the globe that venture capital is not always necessary, observed Michael Kawula, co-founder of CBA, a marketing agency for YouTube monetization. Mailchimp is a bootstrapped success story that has not raised any outside venture capital.

“This is a very clever growth strategy for Intuit, who wants to get in front of SMBs, which is difficult and expensive. Similar to HubSpot’s recent purchase of The Hustle newsletter, a much smaller acquisition, this also is brilliant,” he told the E-Commerce Times.

The acquisition marks a significant impact in industry, according to Osiris Parikh, sales marketing manager at Lilius. He also sees the deal as another reminder that email marketing is not dead — and data is power.

“Intuit has made a strong move to broaden its portfolio and become a leader in catering to the needs of SMBs. It is also a great story of success during Covid-19,” he told the E-Commerce Times.

Deal Basics

Intuit provides a global technology platform that makes TurboTax, QuickBooks, Mint, and Credit Karma. Intuit and Mailchimp will offer an innovative, end-to-end customer growth platform that allows customers to get their business online. It will also enable them to manage marketing, customer relationships, payment processes, and access insights and analytics, along with optimizing their cash flow and staying compliant with experts at their fingertips, according to Intuit.

Key to this process is Intuit’s ability to enable businesses to combine their customer data from Mailchimp and QuickBooks’ purchase data to get the actionable insights they need to grow and run their businesses with confidence.

“We’re focused on powering prosperity around the world for consumers and small businesses. Together, Mailchimp and QuickBooks will help solve small and mid-market businesses’ biggest barriers to growth, getting and retaining customers,” said Sasan Goodarzi, CEO of Intuit.

Mailchimp brings to Intuit technology at scale along with global customer reach.

Founded in Atlanta, in 2001, Mailchimp began by offering email marketing solutions. The company evolved into offering customer engagement and marketing automation processes fueled by an AI-driven technology stack. Mailchimp’s data and technology spans 70 billion contacts and more than 250 rich partner integrations. Its AI-powered automation at scale fuels 2.2 million daily predictions.

“Over the past two decades, we have vastly expanded and evolved Mailchimp’s platform to help millions of small businesses around the world start and grow,” said Ben Chestnut, CEO and co-founder of Mailchimp.

Why Mailchimp’s Worth It

While the email marketing sector is pretty crowded, Mailchimp stands out in terms of size and scope. The company reportedly has 13 million total global users, 2.4 million active monthly users, and 800,000 paid customers, noted Charles King, principal analyst at Pund-IT.

“Plus, half of its customers are outside of the U.S. Additionally, while people tend to focus on the mass/might of large enterprises, small businesses are really the heart and soul of most economies,” he told the E-Commerce Times.

The acquisition likely represents a lucrative opportunity for Intuit to integrate Mailchimp data with QuickBooks and provide greater analytical capabilities to customers. The synthesis of financial and marketing data in this case provides valuable and actionable insights about an organization’s clients, added Lilus’ Parikh.

“It’s also a great diversification of offerings to centralize SMB operations through one platform and benefit from Mailchimp’s established user base,” he said.

Another supporting factor for Intuit’s interest in Mailchimp is the renewed stature of email, according to Elice Max, co-owner of EMUCoupon and someone who has been involved in online marketing for eight years.

“Email marketing has made a comeback in recent years. With increased digitization caused by the pandemic, all digital mediums including email have gained a renewed importance,” she told the E-Commerce Times.

Email Marketing’s Resurgence

Technology giants are looking to build more integrated and holistic solutions. Microsoft recently bought Clipchamp, a video production tool. Both companies are looking to build platforms for the new tech-savvy SMBs, Max Suggested.

“More than anything, it means a renewed confidence in the field. Experts have been talking about the death of email marketing for a while now. But a $12 billion acquisition by a big player like Intuit means email promotion is alive and kicking,” she said.

Another factor is Intuit keeping its eye on the ball. It is important to remember the significance of Mailchimp as the pioneer in marketing automation and email marketing in particular.

“Intuit is looking to make a statement that it wants to become more than a financial software company,” Max observed.

QuickBooks Synergies

One of the motivations that lies behind Intuit’s purchase of Mailchimp is its desire to lead a revolution in the CRM capabilities of SMBs, according to Will Ward, CEO of Translation Equipment HQ . Think about the effect the pandemic has had on the popularity of remote work and the amount of remote SMBs being established.

“You would expect there to be a lot of growth potential here in the next few years. With Mailchimp and QuickBooks, Intuit is providing an end-to-end customer growth platform, and with around $20 billion invested already its belief in SMBs is evident,” Ward told the E-Commerce Times.

Like any other system that handles transactions such as orders and payments, you need to work closer to the actual customer channels. With the Intuit e-commerce product, launched about a year ago, this seems like a natural step by adding marketing automation and reaching out with its e-commerce offering to the MailChimp customer base, suggested Johan Liljeros, general manager and senior commerce advisor, North America for Avensia.

“The acquisition has added synergies between the platforms while still being able to operate as independent platforms. Looking at Intuit’s offerings, it appears they are moving towards expanding [into] digital transactional experience,” he told the E-Commerce Times.

Final Thoughts

Email marketers should be ready for disruption along with other business services providers. Intuit has been both savvy and aggressive in the way it built its business, effectively becoming the 800-pound gorilla of small business accounting and tax solutions, according to Pund-IT’s King.

“With that kind of ally behind Mailchimp, life is going to become a whole lot more ‘interesting’ for other email marketers,” he predicted.

The Intuit-Mailchimp deal should offer Intuit customers significant benefits, such as new solutions and services for bolstering their businesses. At the same time, the deal highlights the fact that old technologies can continue to be vital and dynamic.

“For years, many have claimed that email is dead or dying and quickly being replaced by whatever the tech du jour happens to be. Mailchimp — and now Intuit — beg to differ,” King quipped.

Jack M. Germain has been an ECT News Network reporter since 2003. His main areas of focus are enterprise IT, Linux and open-source technologies. He is an esteemed reviewer of Linux distros and other open-source software. In addition, Jack extensively covers business technology and privacy issues, as well as developments in e-commerce and consumer electronics. Email Jack.

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