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GSI Commerce buys Pepperjam

The decade-old Internet company and 48 employees will remain in Wilkes-Barre.

Seated in Pepperjam’s South Main Street, Wilkes-Barre, office in May 2008, CEO Kristopher Jones describes a book he wrote about Internet marketing. On Tuesday King of Prussia-based GSI Commerce, Inc. announced it was buying the local company.

Aimee Dilger/The Times Leader

WILKES-BARRE – In the past, GSI Commerce Inc. often hired someone else to do specialized Internet marketing for its clients.

When the opportunity arose for it to be able to do all its affiliate marketing in-house, the King of Prussia company bought local e-commerce powerhouse Pepperjam.

The deal announced Tuesday was meant-to-be for Kristopher B. Jones, Pepperjam president. When he founded Pepperjam in 1999, he said he mused about who would be an ideal parent should the company one day be sold.

“GSI was always in the top one or two,” Jones said Wednesday.

The acquisition allows GSI to expand its interactive marketing capabilities through Pepperjam, which benefits from the resources of being part of a larger publicly traded company.

The two companies have known each other for the better part of five years, Jones recollected, and Pepperjam had had conversations with the executive team of GSI over that time. “We always saw the complementary nature of both businesses,” Jones said.

Terms of the deal were not disclosed. Pepperjam will become a subsidiary of publicly traded GSI and remain in Wilkes-Barre. It will retain its staff of 48 employees. Jones will remain president and report to Nick Pahade, president of GSI Interactive.

“Our goal here is business as usual,” Jones said.

Colin Sebastian, a securities analyst with Lazard Capital Markets, said the combination should be good for both companies.

“I think they’re tied to a pretty good horse with GSI,” he said. GSI is a leader in “e-commerce outsourcing” for large online retailers but did not have significant affiliate marketing operations. “This helps them build out this part of their business.”

Pepperjam has repeatedly placed on the Inc. 500 list of fastest growing private companies. It attained the No. 70 rank in 2008 after debuting at No. 293 in 2006. It reported $15.3 million in revenue for 2007 compared to $602,276 in 2004, a growth rate of 2,447.5 percent. The company had 105 employees, according to the magazine, but Jones acknowledged the staff is smaller because of downsizing done earlier this year.

Greg Ryan, a spokesman for GSI, said the company was looking to make an acquisition that would complement its existing affiliate marketing service. “An opportunity arose through Pepperjam,” he said.

Through affiliate marketing, GSI and Pepperjam can track the online performance of advertisements. Last year GSI’s affiliate marketing service generated more than $100 million in sales for its clients, Ryan said.

Having the Pepperjam Network, launched in January 2008, on its menu of services “adds muscle to GSI,” Ryan said.

Especially, Jones added, when the independent firm Forrester Research Inc. noted in its April 2009 report, “Online Marketing Benchmarks For Internet Retailers,” that online retailers spend 20 percent of their advertising budgets on affiliate marketing and online marketplaces.

“This is a real big piece of the pie,” Jones said.

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