Adtech on an M&A Wave
$2bn of AdTech M&A Since February, with Enterprise Buyers In the Middle of the Froth.
AdTech M&A has finally started surging in 2014, with over $2bn of M&A deals since February. Functional specialists providing specific capabilities are in high demand, while more general networks are being left behind, according to new Magister Advisors research.
Enterprise buyers have featured prominently in 2014 with Oracle, SAP and dunnhumby (a subsidiary of Tesco) all driving the pace of AdTech consolidation. In fact over the past 2-3 years the top enterprise vendors have spent 4 times as much on MarTech & AdTech acquisitions as the internet “majors.”
Overall activity in 2014 has been focused on acquiring specific functionality, like attribution (AOL/Convertro, Google/Adometry), targeting & retargeting (Marin/nowSpots-PerfectAudience, dunnhumby/Sociomantic, SAP/SeeWhy), video (Facebook/LiveRail, Opera/AdColony), B2B (LinkedIn/Bizo) and data management (Oracle/BlueKai). In each of these cases, the target provided the acquirer with a specific, incremental capability, either plugging a significant hole or providing substantial complementary functionality, to be leveraged in a broader platform.
Networks in the meantime have struggled: see the poor and elongated outcome for Adconion, the performance of public video networks like Tremor and YuMe, and TubeMogul’s difficult IPO. The reality is neither enterprise vendors nor internet majors need “scale” – they bring plenty of that to the table already, and the public markets have wisened up.
What is next?
We are very bullish on specialist functionality, like fraud detection, advertising analytics, and cross-device targeting – we expect that M&A interest will continue in these areas, as the AdTech and MarTech platform leaders continue to look to add capabilities. We are generally negative on “premium” – “premium” tends to be a sticker that says “more ad agency than tech found here” – and networks will likely continue to struggle to get attention.
We think marketing automation, retargeting and e-commerce optimisation will continue to merge and blur lines, and the question is which of the independent players will be able to build out fuller platforms to meet broadening customer requirements and deliver comprehensive solutions. With growth equity having clearly set its sites on the sector (see: MediaMath, AdRoll, FastTalking), capital is readily available for winners to do this. But the jury is out whether “buy and build” is a feasible strategy in AdTech, given the importance of integration at the data layer, though in certain capability rich areas, like mobile, this may prove out to be the winning strategy.