NEW YORK, December 30, 2016 — By Ryan Joe, AdExchanger
Ad tech mergers and acquisitions (M&A) has been a roller coaster in recent years, and 2016 certainly didn’t let up.
In 2015, public and private marketplace sentiment cooled, but 2016 saw a resurgence – albeit a much more cautious one than in years past.
“Good businesses in ad tech will find owners,” said Tolman Geffs, co-president of JEGI.
Marketing tech that helps clients deal with known prospects and consumers garnered the most interest, he said. There’s also a divide between businesses that can provide these connections, versus those that sell dollar bills for 98 cents.
“You look like a genius ‘til you run out of funding,” Geffs said.
So it’s now a world where software companies trade for higher multiples than services companies. This shift has led to another interesting trend: services companies trying their best to go SaaS. But that’s easier said than done, and Geffs has noticed a lot of square pegs trying to fit into round holes.
“SaaS companies with ‘a large customer success team’ isn’t SaaS – it’s a service business in denial,” he said. “Now, technology-enabled services are good businesses, and we love them, but you have to be clear what you are.”
For instance, consider the trading desk Accordant, which JEGI advised as it sold to Japanese holding company Dentsu Aegis.
“Accordant built a good business with sufficient capital invested,” Geffs said. “They met Dentsu at the right time when Dentsu had a large programmatic trading business but felt their teams would be helpful.”
The Trade Desk, which IPOed in August, had a similar situation. “The Trade Desk was a special case,” said Elgin Thompson, managing director of digital capital advisors. “They didn’t take in a lot of money and kept a lower profile.”
While The Trade Desk’s fortunes – its market cap as of this writing is $1.04 billion – might serve as a barometer for the state of ad tech in general, investors are more cognizant that each company is different.
But this theme really began taking hold in 2015. And many of that year’s investment trends, such as interest from private equity, continued through 2016. One notable shakeup, however, has been the impact of Chinese investors: A group of Chinese companies bought Opera Software, for instance, though it eventually bailed on Opera Mediaworks. Smaato, Media.net and AppLovin also all went to different Chinese firms.
These investments could substantiate the opportunity for Western ad tech firms to break into the tantalizingly huge Chinese market. This could be a sign that from the far east will emerge a new ad tech renaissance.
Terry Kawaja, CEO of Luma Partners, which advised Media.net, told AdExchanger in August that the Chinese markets – like their Western counterparts – are willing to invest in good, profitable ad tech businesses.
Thompson is more cynical.
“Asian markets like trophies,” he said. “I’m not talking about the Tencents and the big trading companies, I’m talking about the pockets of money that just pop up and throw out billions. It’s hard to speak to their motivation, but from those who I have met, it’s a trophy investment.”
Like Geffs – who told AdExchanger in October that the Chinese buyouts are “not a material portion of the overall M&A” – Thompson isn’t particularly bullish. “You’ll probably see one, two, three a year,” he said. “China gets so much press because of the potential and the size of that market, but it’s more of a trickle.”
So what does all this sound and fury – from the usual big strategics, private equity, a potentially hotter public market and China – all mean for still-independent ad tech companies?
“Viewed in the context of secular trends, everything is noise,” said MediaMath CEO Joe Zawadzki.
He added he’s mostly focused on all the projects dotting its roadmap, and the state of ad tech investment isn’t front and center for him.
“The only time it matters is if you’re in capital-raising mode,” Zawadzki said. “Then it’s good to have a healthy market because it leaves a lot open.”
The following is a partial list of 2016 M&A activity.
Oracle Buys AddThis: Oracle kicked off the new year by powering up its Data Cloud. In acquiring publisher audience platform AddThis, Oracle gets a heap of data showing what people are reading and sharing.
Telenor Buys Tapad For $360M: Norwegian mobile carrier Telenor’s plan was to keep Tapad as a standalone subsidiary – with Telenor treated as a particularly special client. How that manifests isn’t entirely clear – what will Tapad do with Telenor’s datasets, for example? – but the acquisition definitely helps Tapad reach markets beyond the US.
Time Inc. Buys Viant: Even publishers know the value of one-to-one marketing. Viant – which includes parts of MySpace, the ad net Specific Media, the video ad platform Vindico and the smart TV system Xumo – was acquired to help Time better target ads and link devices to real people. Of course, Time Inc. itself is fielding takeover bids.
IBM iX Buys Three Agencies In A Week: IBM’s in-house agency iX, not exactly known for its acquisitive nature, went on a spree and bought three agencies in a week. They are: Resource/Ammirati, known for brand building, digital agency Aperto and design agency Ecx.io. The latter two are German. And Exc.io is different from the former two in that its focus isn’t branding, but working with content and commerce platforms.
Merkle Buys UK-based Comet Global Consulting: Like the acquisition of DBG in February, the purchase of Comet was part of a global growth plan for Merkle. Along with Periscopix, acquired by Merkle in May 2015, DBG and Comet were core parts of the digital agency’s European offering. Merkle will later be acquired by Japanese holding company Dentsu Aegis.
IBM iX Buys Bluewolf: Wait, did you think IBM was done after buying three agencies? Turns out it was just getting started, as it also paid $200 million for digital consultancy and big Salesforce specialist Bluewolf. That’s right: IBM bought a consultancy that works closely with one of its key competitors. For IBM, it’s all about setting the stage for interoperability.
Oracle Buys Crosswise: Oracle deepens its cross-device capabilities by purchasing Crosswise for an estimated $50 million. It’s another piece of the puzzle in resolving cross-device identities. Crosswise joins other Oracle data pieces, including BlueKai, Datalogix and AddThis. Oracle had an existing partnership with cross-device vendor Tapad, which, as mentioned, was acquired by Telenor.
Rovi Buys TiVo for $1.1B: This acquisition could represent some very powerful assets coming together. TiVo, of course, is a DVR company. And Rovi monetizes interactive program guides for smart TVs. So the synergies are obvious. But wait, there’s more: TiVo has an analytics business that has data that can be used to target ads across its set-top boxes. Naturally, Rovi will take TiVo’s more recognizable branding.
Comcast Buys StickyAds, At Least $100M: Comcast bought a French video ad tech company called StickyAds.tv. The goal: help its video ad platform FreeWheel set up more private marketplaces faster. This enhancement was meant to give advertisers more monetization options than Google or Facebook.
PE Firm Vista Buys Marketo, $1.8B: One year after acquiring Mediaocean, Vista Equity Partners took the publicly traded marketing automation company Marketo and made it private. SAP and Salesforce vet Steve Lucas later joined as CEO in October, replacing Phil Fernandez, who stepped down in November. Expect a lot more changes behind the scenes.
Salesforce Buys Demandware For $2.8B: Salesforce dropped a few dimes to get the ecom platform Demandware – which would soon become the basis for the new Commerce Cloud. This is a huge acquisition, price tag notwithstanding, because it puts Salesforce into a market where it previously had very little presence: online buying. Now it finds itself more competitive with SAP/Hybris, IBM/WebSphere and Oracle.
ClickDealer Buys Fiksu: ClickDealer, owned by a holding company called Noosphere, buys Fiksu. That’s quite a change for the startup which, five years ago, was flush, as it helped drive app installs by incentivizing consumers. But the era of incentivized app installs soon waned and so too did Fiksu’s fortunes. One AdExchanger source called this one a “hostile bank takeover.”
Beijing-based Chinese Firm Buys Mobile SSP Smaato For $148M: A Beijing offline marketing services company called Spearhead Integrated Marketing Communications Group snapped up mobile SSP Smaato. Smaato began in 2005 doing ad network mediation before becoming a mobile SSP with some DSP functionality. At the time it was acquired, Spearhead intended to let Smaato continue to operate independently, while looking for synergies Smaato might have with its other assets.
Microsoft Buys LinkedIn For $26.2B: Surprise! Microsoft’s sudden connection with LinkedIn seemed to rejuvenate Microsoft’s presence in paid media. That’s not, of course, the big reason Microsoft forked over the billions it did. In a recent blog post, Microsoft CEO Satya Nadella pointed to the content opportunities, social selling and enhancing Microsoft as a B2B network that connects people and helps them collaborate. All of this would be powered by LinkedIn’s tremendous data set, featuring real identities tied to employment histories and interests.
Impact Radius Buys Forensiq: More fraud fighting. Impact Radius helps companies track, measure and optimize their ad performance across channels. It purchased Forensiq to integrate viewability, fraud detection and brand safety into its stack. Incidentally, a few industry watchers wondered if the anti-fraud vendors would continue to remain independent through 2016. Largely, that’s been the case – with Moat, Integral Ad Science and DoubleVerify still raising money and sometimes even acquiring other companies. Forensiq was considering raising its first round when Impact Radius swooped in.
Samsung Buys Canadian DSP AdGear: Look who’s getting into the ad tech biz! Samsung’s purchase of DSP/DMP combo AdGear could very well give the tech hardware giant a way to verify audiences across digital and mobile. This is all hypothetical, of course, because Samsung has been mum on its plans around monetizing its smart TV and mobile audiences. While this acquisition isn’t as explosive as other Samsung 2016 incidents, it certainly is significant as it represents a new entrant into the ad tech space.
Mediaocean Buys Invision: While Mediaocean is largely known as a company that helps media buyers manage their workflow and billing, its purchase of Invision gives it sell-side presence. In fact, think of Invision as Mediaocean’s sell-side counterpart, as its technology contains a yield management tool and audience targeting for video and advanced TV.
Google Buys Anvato: In buying Anvato, Google inherits a suite of video editing and file encoding tools, which it can use to ensure the proper delivery of dynamically inserted ads. That means good video playback across devices and less latency. It also gives Google server-side stitching capabilities, which it can use to get around ad blocking.
Integral Ad Science Buys Swarm: Integral Ad Science (IAS) upped its bot recognition game by snapping up Swarm. This one is more of an acqui-hire, but Swarm’s team will help IAS improve its ability to analyze individual impressions to determine if any are fraudulent.
LeEco Buys Vizio for $2B: Vizio was in hot water from the Federal Trade Commission for allegedly collecting and selling viewer data without permission. So when LeEco bought the embattled TV manufacturer, it promptly separated the hardware business from the data business Inscape – which will spin out into a privately-held company.
Time Inc. Collects Collective’s UK Ad Net Business: Another ad tech buy for Time Inc., this time it acquires Collective’s UK ad net business. Collective CEO Joe Apprendi noted that both the UK biz’s top and bottom lines were growing and that it focused on brand advertisers.
Dentsu Aegis Buys Digital Agency Merkle For About $1.5B: This one was significant. Merkle was a significant independent digital agency. Not only did the Japanese holding company magnify its US presence, it added a lot of expertise in wrangling first-party data since Merkle began in direct mail before rebranding as a CRM agency. Merkle also has deep partnerships with Google and Facebook, giving it early access to new product releases from both giants.
Vector Buys Sizmek For $122M: Another private equity buy, Vector Capital agreed to an all-cash deal to buy Sizmek. The ad tech company had gone through a lot in recent years, selling off its TV business to rival Extreme Reach, rebranding, building out an ad stack and facing the devaluation of its rich media business. However, Sizmek also had its MediaMind ad server, second to Google’s DoubleClick.
Chinese Consortium Buys Media.net For $900M: As everyone predicted (or not), Beijing-based Miteno Communication Technology bought Media.net for $900 million. Miteno claimed it wanted to help Media.net expand into China.
Dentsu Aegis Buys Accordant: Dentsu is at it again, this time picking up programmatic tech and services firm Accordant. The goal: Accordant execs will oversee the Japanese holding company’s US programmatic business, working within the Amnet trading desk. For Dentsu, the purchase of Accordant and Merkle represent big steps into US markets.
Chinese Private Equity Firm Orient Hontai Capital Buys AppLovin: Another big one. AppLovin sold for $1.42 billion. As with Media.net, it’s unlikely AppLovin would have gotten that valuation from a Western acquirer. What Orient Hontai intends to do with AppLovin remains a big question mark. But if one of the trends last year prominently featured the Private Equity exit, this year it’s the Mysterious Chinese Company exit.
Salesforce Buys Krux For $700M – At long last, Salesforce got a DMP, and a pretty powerful and respected one at that. While Krux began as a publisher-focused platform, it had recently made a concerted effort to get advertiser clients as well. Meanwhile, Salesforce now rounds out its marketing cloud. Prior to Krux, Salesforce’s owned ad stack focused on social media buying. But Krux gives Salesforce access to the wider world of digital advertising. The acquisition also leaves the ad industry with very few independent DMPs. Lotame is the notable holdout.
Criteo Buys HookLogic: French retargeter – AKA performance marketing company – bought HookLogic for $250 million in cash. HookLogic helps device manufacturers place ads for their products on ecommerce sites, and its acquisition gave Criteo some significant new clients, including Kraft and Clorox. It’s easy to see how HookLogic’s business would logically hook into Criteo’s: Criteo gets stronger connections with retailers and more data around how consumers navigate and buy across ecommerce sites.
Xaxis Acquires Triad Retail Media For About $300M: Retail’s big month continues. Following Criteo buying HookLogic, Xaxis made its own play by snagging Triad, which does media sales for big ecommerce sites. This acquisition gives Xaxis more premium, retail-focused inventory to sell. And it’s also the story of what can happen after a great private equity investment, as WPP purchased Triad from PE firm Rockbridge Growth Equity.
AT&T Buys Time Warner: OK, wow. This is a telco making an $85.4 billion investment into some major content assets. Verizon might have dipped into content by acquiring AOL and Yahoo and developing Go90 – but Time Warner, which has HBO, Warner Bros., CNN and Turner to name a few, is in a completely different ballpark – more like a different sport. The acquisition underscores the huge value in companies that own content that audiences actively want. Add the ability to better understand the context in which that content is consumed – which AT&T can theoretically provide – and you’ve got enormous advertising power within your walls.
Adobe Buys TubeMogul For $540M: Previously-public video platform TubeMogul got a sweet deal from Adobe. Adobe, in turn, got a DSP. Technically, the enterprise giant already had one buying platform via Media Optimizer, but that was mostly used for search and maybe some display. But TubeMogul gives Adobe clients access to lucrative video inventory, which nicely positions Adobe to grab branding dollars. Apparently, Tube had multiple prospective dance partners.
LiveRamp Onboards Two People-Based Marketing Companies: Acxiom’s LiveRamp snapped up Arbor and Circulate, with the intent to integrate both into its identity resolution tool. Arbor is a marketplace for people-based data, and app developers use Ciruclate to monetize their first-party data. So these two companies will certainly help LiveRamp expand its own identity solution – and it might also be an instance of LiveRamp taking two potential competitors off the market.
SintecMedia Buys Operative For $200 Million: Linear and digital converge! Sintec’s solutions help linear TV companies plan, track, bill and manage content. Operative has the same stuff, but for digital publishers. So this marriage underscores a growing ad industry need to merge digital and TV planning.
PE Firm Takes Neustar Private For $2.9B: Another mar tech company takes a ride on the private equity side. This time, it’s Neustar – which had previously announced its intent to split into two publicly-traded entities – getting taken in by Golden Gate Capital. Neustar’s focus on security is unusual in marketing tech, and it remains to be seen whether that messaging (and Neustar’s relevant products) remain or change under the auspices of Golden Gate.
SAP Buys Attribution Company Abakus: SAP made further inroads into ad tech, as it now has an attribution provider under its wing. Previously, SAP began dabbling in ad tech with the build-out of SAP Exchange Media, a DSP/DMP solution. It intends to fold Abakus into its SAP Hybris Marketing Cloud.
Snap Buys Some Ad Tech, Maybe: Snapchat’s parent company bought rich media ad server Flite. Possibly. Snapchat wouldn’t confirm the news, originally reported by Recode. Snap also reportedly purchased augmented reality company Cimagine Media for between $30 million to $40 million.