Local firm turns data and analysis into profitable advice
By Thomas Heath,
Executives at Merkle, a Columbia-based marketing services company, blow off steam racing dune buggies across the Baja California peninsula, climbing Mount Rainier, bouncing along Colorado River white water and running with the bulls in Pamplona, Spain.
I have written about sexier companies than Merkle, which — to put it simply — collects and analyzes massive amounts of data, then advises clients — from Clorox to Disney — on how to find new customers and keep them happy.
There are no set hours for Merkle’s 1,500 employees, including the 419 who work locally. You do the job, keep the clients satisfied, and push the envelope on what you can do for them. Drive by the five-story suburban headquarters any weekend or weeknight, and you’ll find a dozen cars in the parking lot.
“We are a work-hard, play-hard kind of company,” said David Williams, the 48-year-old chairman and chief executive. “Merkle is not for everybody.”
Don’t talk to Merkle about “work-life balance.”
“If some person is going to miss a kid’s recital tonight because they are taking care of a client, [that] is a practical reality at Merkle,” said the hard-charging entrepreneur. “We are willing to do what it takes to take care of business. A lot of people aren’t willing to work that hard.”
One of the company’s mottos is “business is personal.”
It isn’t easy to get hired. The screening process includes making a presentation before three people, who then vote on whether they want you.
The rewards are high. The average Merkle salary is about $90,000, and all employees get health-care coverage. Every quarter, the company awards a handful of “dream grants,” from $1,000-to-$5,000, that allow a person or small team to do whatever they want, whether it’s go to Boston for a Red Sox game or climb down a cave in Belize.
“We really want hard chargers,” said Williams.
The company grossed around $300 million in 2011, and earns a profit of about $50 million based on a profit percentage in the mid-teens. It also has little debt.
A recent investment of $75 million by Technology Crossover Ventures, a Silicon Valley-based venture capital firm, pegged Merkle’s worth at $400 million. That means Williams, who owns just shy of half of the company, is a happy man.
This is a focused bunch. And like most corporate cultures, Merkle’s starts at the top — with a boss whose hobby is driving race cars.
Williams grew up in Philadelphia and studied marketing and finance at Shippensburg University in south-central Pennsylvania, where he graduated in 1985.
Like most entrepreneurs, Williams pined to own his own company. He planned on growing a landscaping business that he had begun in college, but one of his customers said he “was on a path to nowhere” and suggested he become a stockbroker.
Williams — born with a talent for numbers — took the stockbroker exam in 1985. He was hired by Butcher & Singer, a storied Philadelphia investment house, where he thrived.
His “aha moment” hit when he noticed that his wealthiest clients were entrepreneurs who had sold their businesses at some point in their lives.
“The only way to build equity is to actually own a business,” said Williams, who was earning about $60,000 a year at the time and trying to build a stake by investing in rental properties.
One of his customers at the time, a retired Air Force colonel named Harvey Blanton, started talking about selling a profitable Lanham-based marketing company he owned called Merkle Computer Systems. The company earned $800,000 in profits on $2.5 million in revenue. It had 23 employees.
After failing to get Butcher & Singer interested in Merkle, Williams decided to buy the company himself in 1988. He borrowed $5 million of the $5.3 million purchase price, selling a couple of his rental properties to raise the $300,000 down payment. He asked his clients if any were interested in investing in the company, and one became a partner — and a business coach.
Williams was turned down by about a dozen banks before one agreed to lend him $2.5 million. He borrowed the rest from Blanton.
He had a quick awakening when Merkle lost one of its biggest clients in his first year and Blanton took ill, removing a key advisor. But Williams pushed through.
“I wasn’t worried about failure because I had so much exposure to it [growing up],” said Williams, who says a lifelong battle with dyslexia, a reading disorder, hardened him against embarrassment.
Merkle had started as a data processing company that kept track of union and association members and where they lived. Using that as a core, Merkle rode the direct-mail and direct-marketing boom of the ’90s.
Catalogues became mainstream. Credit card solicitation grew. The Internet opened up new ways to reach customers. Big companies hired Merkle, especially the telecom giants of the day — MCI, AT&T and Bell Atlantic — all of whom were competing furiously for landline and cellphone customers.
As computer horsepower grew, Merkle married the technical aspects of large data compilation with analysis that predicts consumer behavior. To parse the information even more, it hired statistics experts.
Breaking it down
The company says its secret sauce lies in its analytics. For example, when Dell computer wanted to send catalogues to 120 million potential customers, Merkle helped them narrow the focus to those most likely to buy a laptop computer. Merkle sent out thousands of catalogues, digesting the responses to come up with a profile of a likely Dell customer. Then they used that profile to project likely customers across the United States.
Merkle prefers to work with Fortune 1000 companies and major nonprofit organizations, such as the American Cancer Society. It focuses on growth industries and large “best in breed” corporations such as Dell, Geico, DirecTV, Wendy’s, OnStar, Urban Outfitters, T.G.I. Friday’s, Disney and Microsoft.
In addition to its Columbia headquarters, it has offices in Boston, Chicago, Denver, Little Rock, Minneapolis, New York, Philadelphia, Seattle and Hagerstown.
And Williams has his sights set on raising revenue to $1 billion a year.
The company has had many offers from suitors in the last half dozen years, and Williams said receiving venture capital investment means the company will have to reach some sort of decision point in five to seven years. But no one knows the end game.
In the meantime, the racing-car enthusiast has no intention of putting on the brakes.
“I intend to work very hard my entire career,” he said. “I want to be around a really smart, hardworking group of people.”