A tragedy for one business can translate into an opportunity for another. What came out of the collapse of Borders’ Bankruptcy?
According to the Small Business Administration, over 50,000 companies across the country go out of business each month. Given current economic conditions, that number has probably been much higher in recent months. What is a tragedy for one business person translates into an opportunity for competitors that have cash and are interested in purchasing the assets of defunct businesses. Typically when we discuss buying assets of failed businesses we think about equipment, machinery, vehicles and other tangible assets, but that isn’t always the most valuable type of asset available for sale. Many times the intellectual property that is for sale is worth far more than any fleet of vans.
The Borders customer e-mail list
A recent example of just how good these deals can be is the case of the Borders Group bankruptcy. After being unable to find a willing buyer for the entire company, Borders was forced to liquidate, and its assets were sold at auction. Leading competitor Barnes & Noble bid aggressively for the company’s intellectual property and won with a bid of nearly $14 million. But Barnes & Noble wasn’t really interested in using the Borders trademark. What they wanted was the company’s customer e-mail list, which contained a mind-boggling 48 million subscribers. Assuming that all intellectual property except for the e-mail list was worth zero dollars, Barnes & Noble paid 29 cents per name to acquire the massive list of interested book buyers. This is an amazingly low price given the quality of the list. The users are people who have bought books from a large corporate book seller and are sufficiently interested in books to opt-in to an e-mail list. The list even included each customer’s previous purchase history. However, before Barnes & Noble executives could pop the champagne, problems with the sale began to surface.
What’s more important: e-mail privacy or ownership rights?
From Barnes & Noble’s perspective, they won the auction, the information was theirs to use and that’s that. But the bankruptcy court had a different opinion, and they appointed consumer privacy ombudsman Michael St. Patrick Baxter to make sure that consumer privacy was respected in the transition process. The court was concerned about protecting the privacy of the subscribers’ e-mails and initially took the position that the 48 million subscribers would have to “opt in” to the Barnes & Noble e-mail database, a position which the buyer vehemently opposed. After much negotiation, the company reached a compromise with the ombudsman: An e-mail giving the users the option to opt out would be sent to the entire database. While not ideal, this is far better than requiring customers to opt in, which would have more than likely led to the vast majority of the list not porting over to Barnes & Noble.
Lessons for your business
When buying customer lists from defunct competitors make sure that the details of the transfer are negotiated beforehand by asking the following questions.
- How much information is contained in the list?
- When was the last time the list was scrubbed for duplicates and errors?
- What is the list’s performance for delivery rates (if known), open rates and click-through rates?
- Is the list double-opt-in or at a minimum opt-in? (Double opt-in means the customer has to take a second step, like clicking on a link in an e-mail in order to join the list.)
- What steps are required in order to incorporate the list into my own e-mail marketing database?
