B&N Investors Salivate Over Microsoft Nook Deal

Barnes & Noble investors reacted with pure unadulterated joy to the possibility that Microsoft is considering entering the e-book market and will acquire the company’s Nook unit for a whopping US$1 billion. Shares rose by a dizzying 24 percent on Thursday, when the rumor surfaced, courtesy of a report in TechCrunch that cited internal documents. By the close of Friday trading, shares were up another 5.6 percent, at $23.31.

Nook Tablet

The Nook Tablet

The Nook is viewed as an underfunded underdog in the fight against Amazon’s Kindle, and to have Microsoft swoop in to save the day is almost a deus ex machina.

“Microsoft could potentially make it a fair fight,” Charles Lewis Sizemore, a Covestor portfolio manager, told the E-Commerce Times.

A Perfect Match

Microsoft has been showing signs of interest for some time: It has already invested US$300 million in the Nook and inked a revenue-sharing agreement for e-books purchased through Windows 8.

The deal would allow B&N to monetize a great asset that is not being fairly valued by the market due to negative perceptions of the old school brick-and-mortar retail model, Sizemore said.

As for Microsoft, it would provide “a new line of business to offset their slower-growing Windows and Office businesses,” Sizemore said.

“As Microsoft is aggressively competing in the tablet market, integrating a Nook app into Windows 8 devices could fill a niche that is not currently being filled,” he pointed out, “and e-books are a very profitable, high-margin business.”

The Xbox has evolved from a video game console into a home entertainment system, Sizemore noted, and adding the Nook to its fold could aid Microsoft’s strategy of building its brand in consumer and entertainment products.

It really is a match made in heaven, suggested N. Venkat Venkatraman, a business professor at Boston University.

“Microsoft is trying to explore every possible avenue to create the third mobile ecosystem around the Windows platform in phones and tablets,” he told the E-Commerce Times, and “B&N needs to offload the Nook business as part of its restructuring.”

One reason B&N shareholders reacted so happily to the possibility of a Microsoft purchase, he added, is that it appears Microsoft is paying a premium to get Nook as it rushes to create a third credible ecosystem.

The Downside

B&N investors should be careful for what they wish for, cautioned David Cadden, a professor in the Entrepreneurship and Strategy Department at Quinnipiac University.

“Although sales in the last quarter were disappointing, the Nook is the single growth vector for Barnes & Noble,” he told the E-Commerce Times. “The sale of the Nook brings in $1 billion to Barnes and Noble; however, it’s not quite clear what Barnes & Noble could do with that money.”

Unfortunately, the big box bookstores may not have much of a future, Cadden continued. “The Nook was one element that drove traffic to such stores.”

Further, the Nook might not fare so well in Microsoft’s hands, he argued. “Its history with devices, particularly tablet devices, has not been particularly rewarding.”

No matter which company owns it, the Nook will have to continue facing down Amazon, Sizemore said, which “is an entrenched competitor and will be hard to unseat.”

Perhaps the only related industry that would be untouched by a Nook sale would be the tablet and e-reader market itself.

E-readers are mostly still loss leaders, Sizemore pointed out. “Many readers — myself included — use free reader apps on our smartphones. This is about high-margin e-books and their platforms, not the readers themselves.”

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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

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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