Contact: Scott Denne
Salesforce makes a bold and belated move in advertising technology with the $680m purchase of Krux. The transaction brings Salesforce into the market for audience management platforms at a higher price and a few years behind rivals Adobe and Oracle. That’s not to say it’s too late – in Krux, Salesforce has picked up a company that’s been able to thrive as software giants poured into its market.
The acquisition of Krux caps a record amount of M&A for Salesforce. According to 451 Research’s M&A KnowledgeBase, one-third of the company’s purchases have been announced since the start of 2015. Deals during that same period, including Krux, account for almost half of Salesforce’s total disclosed and estimated M&A spending.
Its recent moves have printed at aggressive multiples. In its largest, the $2.8bn reach for Demandware, Salesforce paid 11x trailing revenue for an established and growing e-commerce platform. In nabbing smaller companies, such as configure-price-quote vendor SteelBrick and predictive analytics startup BeyondCore, Salesforce paid upward of 20x. The acquisition of Krux likely came in above 10x, but shy of 20x as it’s a more mature business than those latter two. While steep, there’s justification in that price.
For one, Krux was able to grow from serving mostly publishers to mostly marketers. The company also did that at a time when most of its peers were reformatting their strategies to avoid Adobe and Oracle – Krux, in contrast, was expanding by going head to head. Second, most of its competitors had already been acquired, leaving Salesforce with few options in this category – and the players that had sold went for 6x and up. As the advertising market begins a transition from valuing reach toward valuing individuals, audience management platforms are becoming the link between a company’s first-party data and its advertising.
Krux isn’t Salesforce’s first foray into advertising – it already sells a social media ad platform and has partnered with Krux and other ad-tech providers to enable Salesforce Marketing Cloud customers to use their marketing audiences for paid media campaigns. Still, the deal goes beyond its previous ambitions in the space. Krux is built to be the repository of advertising data for sophisticated advertisers and some of the world’s largest media buyers. Salesforce’s prior efforts in this niche revolved around enabling email marketers to spread into new channels.
Look for a full report on this transaction in tomorrow’s 451 Market Insight.
For more real-time information on tech M&A, follow us on Twitter @451TechMnA.