September 2, 2009, 12:00 AM

GSI Commerce acquires Pepperjam marketing agency and affiliate network

With the acquisition of Pepperjam, e-commerce technology and services provider GSI Commerce has entered the affiliate network business and expanded its expertise in search engine marketing services.


GSI Commerce Inc., a provider of e-commerce technology and related services including fulfillment and online marketing, has acquired Pepperjam, an online marketing agency and affiliate network. Terms of the acquisition were not disclosed.

“The acquisition of Pepperjam is a strategic extension of our marketing services business that we believe will enhance growth opportunities for both GSI and our clients,” says Michael G. Rubin, chairman, president and CEO of GSI. “Last year, our affiliate marketing channel generated more than $100 million in sales for our clients. By owning our own affiliate network, we believe we can more rapidly drive innovation and service enhancements to our clients while also expanding our marketing services offering to a broader universe of prospective clients.”

GSI says it is acquiring a majority of the assets of the Pepperjam full-service interactive marketing agency, which specializes in search marketing, and the Pepperjam affiliate marketing network.

Pepperjam, based in Wilkes-Barre, PA, with 48 employees, will operate as a separate business unit of gsi interactive, GSI’s online marketing agency, according to GSI, which is based in King of Prussia, PA. Pepperjam co-founders Kristopher Jones and Mike Jones will join GSI in the roles of president and administrative officer, respectively, of the Pepperjam Network.

“We expect the company to focus on the continued expansion of its interactive marketing platform,” says Colin Sebastian, who covers e-commerce stocks as senior vice president of equity research at Lazard Capital Markets. “The acquisition of Pepperjam assets bolsters GSI’s portfolio of online marketing services by enhancing its search expertise and adding an affiliate marketing network.”

Sebastian adds that he expects GSI’s interactive marketing services to grow at a faster pace than the company’s e-commerce services. “As of second quarter 2009, GSI’s interactive marketing segment accounted for roughly 15% of revenue and it continues to perform well, in part by leveraging the company’s existing partner base to cross-sell site design, search marketing and e-mail marketing,” he says. “We expect interactive marketing services growth to outpace GSI’s e-commerce services for the next several years, as well as contribute to margin expansion.”

GSI reported revenue of $187.2 million for the second quarter ended July 4, down 3% from $193.2 million in the year-earlier period. Last month, GSI netted $87.9 million in a stock offering that it said was for working capital and general corporate purposes, including possible acquisitions.

GSI, which also operates the e-Dialog e-mail marketing services division, has more than a dozen e-retailer clients, including American Eagle Outfitters Inc., Bath & Body Works and Godiva Chocolatier Inc.


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