Case Study: The Importance of Getting Going: The Synapse Group Perspective
Michael Loeb, the CEO of the Synapse Group, is one of the nation’s leading direct marketers. At Time Inc., the magazine subsidiary of Time Warner, Loeb helped to guide dramatic growth in Sports Illustrated’s readership and later served as the founding circulation director of Entertainment Weekly. Then, Loeb went out on his own. Together with Jay Walker, who would later gain fame as the founder of Priceline.com, Loeb cofounded the Synapse Group (originally called NewSub Services) with no outside capital. In December 2001, Loeb essentially returned to Time Warner when the conglomerate’s magazine subsidiary agreed to acquire a majority interest (with a buyout option for 100% ownership) in the Synapse Group. The Wall Street Journal reported that the transaction valued Synapse in excess of $500 million.
Although Loeb chose to grow the employee base of the company well beyond the size of typical go-it-alone ventures, the company’s start-up with no capital and its reliance on extreme outsourcing provide valuable insights for any go-it-alone entrepreneur.
Loeb pioneered the use of credit card billing statements as a vehicle for magazine sales. His business is based on two central insights: First, he figured out how to create value from something that others considered almost valueless. Loeb recognized that credit card billing statements constituted a potentially valuable media that no one had previously used to its best advantage. He also recognized that magazines could be considered a service rather than a product. With a service approach, credit cards statements were a natural vehicle to offer magazine subscriptions that would end when the customer chose to end them, as opposed to the set 1- and 2-year terms created by magazine companies. This approach both put the customer in charge and was more profitable for magazine companies.
