Today, Demographica’s SA Consumer Initiative (SACI) has a database of 3,5 million users. That’s 3,5 million of the 14 million Internet and mobile phone users in South Africa. It’s an impressive opt-in database, and most definitely worth its weight in gold. After all, what would you pay to be able to target your exact consumer in terms of sex, age,
demographics and income level?
“Direct marketing is the most efficient form of marketing there is, particularly if you are able to target your exact consumer bracket,” says Warren Moss, founder and MD of Demographica. “Our database has huge value, especially because it’s entirely opt-in. Members of the SACI have given us permission to send them direct marketing emails, which our clients can then use to reach their clients.” Demographica’s clients currently include Shoe City, Telesure, Nissan, HP, Look & Listen, Marmite and the AA.
Demographica’s success in this space is nothing short of very impressive, but the business today looks very different from what Moss and his then-partner, Marc Pozniak, set out to do in 2006. Some hard lessons needed to be learnt first, and business plans needed to change
before the SACI came into being.
Taking the plunge
In 2005 Moss was working at Digital Planet, an online retailer. He was given R100 000 and tasked with growing the company’s small database of 80 000 people. To achieve this, they struck on the idea of ‘refer a friend’ viral give-aways. Anyone who joined the database and referred Digital Planet to as many friends as they could was eligible for a prize. Within two weeks they had grown the base from 80 000 to 800 000.
“It got me thinking about what could be achieved with an investment of R1 million,” says Moss. “Information is incredibly valuable in today’s consumer-driven world, and I started wondering what companies would pay for that information. For example, what would one bank pay for all the customer information of another bank? I had discovered how to create permission-based lists, where people opt-in to databases and share their details, and was determined to use that.”
So, in 2006 Moss approached his best friend, Marc Pozniak, and asked him if he was interested in starting a company together. Pozniak agreed and Moss resigned from Digital Planet. They raised R300 000 from friends and family and called the company Global Acquisition, but the partners soon found that R300 000 did not get you very far. “We were running out of cash, so we approached my old bosses at Digital Planet and asked them if they wanted to invest in us. They believed in us and our idea and ended up giving us a facility of R4 million, for which we gave them a 50% equity stake and immediately paid back our first investors.”
With R4 million available to spend, the partners were able to give huge giveaways to generate databases. “Everyone we pitched the idea to loved it. We spent money developing lists, but we made a lot selling them too — and then we discovered our problem. We had no repeat customers. The lists were expensive and when we went back to our clients, we discovered they weren’t using them. By this stage we had spent R1,8 million and our investors were insisting that we not throw good money after bad.”
It was at this point that Moss and Pozniak went back to the drawing board. “We were bringing in around R40 000 a month. Without touching what was left of the original investment, we needed to cut our expenses and re-evaluate our business model.”
Moss and Pozniak gave up their lease, sized down and started working from home and coffee shops. “We had no expenses, and could use the money coming in to grow the business, but grow what?” he says. “All we had were 40 000 email addresses. What could we do with that? And then we realised that what we were good at was growing databases. Instead of selling them, we could grow a database for ourselves.”
The partners used the 40 000 addresses they had to start selling advertising contracts. They would send emails to the people on their bases who suited client requirements and contracts would ensure a steady income. They created the South African Consumer Initiative and their first clients were delighted with the service: they didn’t own the list themselves, but the service was far more affordable and the work was done for them.
By mid-2008 the company was growing again — the database was bigger and there were now four divisions: lead generation (the corporate lists), CRM, social media and email advertising. The partners got new offices and began hiring a team.
But change was soon in the air again. “We were now doing too much, and Marc and I had different visions for what the company should be. We just weren’t clear on what direction we should take,” says Moss.
The solution gradually worked itself out. Two divisions, lead generation and CRM, were closed and the social media contracts were handed over to Cerebra. The company turned its focus completely to database marketing. “It was at this point that Marc and I mediated a buy-out of his shares. We were headed in different directions.”
Now the majority shareholder of the company, Moss changed its name to Demographica and began concentrating on growing the SACI. “Our biggest expansion took place in 2010,” he says. “We grew the database from one million to 3,5 million in under a year.” According to Moss, reaching 2,5 million through promotions was easy — and then they hit a wall. “Again we had to change strategy and start doing joint ventures with other companies with their own databases to grow our own, but the risk paid off.”
Today Demographica’s list includes 25% of all email accounts in South Africa and the company has paid back its financiers. It’s 100% debt free and offers to buy the list are rolling in from big corporates — but as Moss says, he’s not selling.