Author: Scott Denne

Oracle crosses device matching off its shopping list

Scott Denne

Contact: Scott Denne

Oracle wastes no time matching Adobe’s cross-device announcement last month with one of its own as it acquires Crosswise, an Israel-based startup that sells data to enable advertisers to link disparate devices to a single anonymous profile. As digital advertising moves from its home base in the desktop into phones, tablets and connected televisions, cookies have lost most of their value as a mechanism for targeting and measurement. Any vendor selling marketing and advertising software for targeted campaigns must move beyond the cookie, and cross-device data providers like Crosswise offer the most obvious path to getting there.

Purchasing several marketing SaaS firms in the early part of the decade was Oracle’s initial foray into the world of marketing software. But following its 2014 reach for BlueKai, an audience management platform and data exchange vendor, all of the company’s efforts have been dedicated to building a digital advertising and marketing data offering. In addition to the pickup of BlueKai (see our deal value and revenue estimates for that transaction here), Oracle paid hefty amounts to buy offline retail data provider Datalogix (estimate) and a source of online behavioral data in AddThis (estimate).

The addition of Crosswise gives Oracle a stronger story around identity. The rationale behind its earlier purchase of Datalogix was to give its BlueKai software the data and infrastructure to form a better picture of consumer identity. Datalogix accomplishes this by taking data traditionally associated with direct mail (household demographics) and matching it with information from retail loyalty card programs and online behavior to form consumer identities that cross the online and offline worlds. Crosswise fills a significant gap in this by linking devices and enabling Oracle to offer a single set of data to power targeted ad campaigns and then measure the impact online and offline.

Several acquisitions of cross-device matching providers have left few available targets for the next round of would-be buyers. Most deals have been modest tuck-ins, such as purchases by privately held companies AppNexus, Lotame and Qualia Media. Oracle’s acquisition of Crosswise, a three-year-old startup with just $5m in funding, is likely a bit larger than those, yet far smaller than the most recent transaction in the category – Telenor’s $360m purchase of Tapad in February. Drawbridge, one of the pioneers and largest independent player in this segment, is the most visible target. Others include Adbrain and Augur.

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Facebook’s success in mobile media can’t be left to F8

Scott Denne

Contact: Scott Denne

As Facebook opens its annual F8 developer conference today, it’s worth noting that while the company is clearly ascendant in mobile, it’s not dominant in digital media, where it is very much the challenger to Google. Facebook’s growth is impressive. Revenue spiked 44% to $18bn (80% of that in mobile) in 2015, a number it reported just after its 11th birthday: Google passed the $20bn mark in nine years and today is nearly quadruple that size. In the next phase of growth, where Facebook is positioning itself as a mobile media vendor, not just a social media vendor, Facebook faces a distinct set of challenges than Google was up against when it grew from its base in search to owning the Web.

Once Google sewed up the search market, it faced scant competition as it soaked up much of the digital advertising landscape and was the clear winner in the first phase of digital media. The same isn’t true of Facebook. It finds itself facing an incumbent in Google and its future lies in the outcome of a comparatively fluid media market. Now that it’s emerged as the dominant social media platform, the company is taking a subtler approach as it seeks to win the next phase of digital media. In addition to facing a strong incumbent, Facebook is saddled with higher expectations – its stock trades at 16x trailing revenue, while Google was valued between 5-6x at the same moment in its own history.

Facebook plans to own the next phase of digital media by offering measurement, metrics and distribution to enable advertisers and publishers to transition into mobile. The best indication of the difference in strategy is that while Facebook was widely expected to launch a media-buying platform along the lines of Google’s DoubleClick Bid Manager, its recent relaunch of Atlas instead focused on measurement and attribution. And most importantly, it focused on measurement of people and demographics, the lingua franca of today’s television business, not cookies and intent – the currency of display advertising. While Google made a mint dismantling the print media market, Facebook is pursuing a potentially more lucrative opportunity in capturing the shift of TV budgets to digital and hoping to do so wherever those dollars land – in-apps, in online videos, on its network or in any new format that could emerge from mobile.

Facebook’s bet is that once advertisers see that mobile works, more will shift to that medium and the company will be the largest beneficiary. It’s well positioned to do that. Nearly one billion people per month engage with the social network across multiple devices, making Facebook better positioned than anyone to link different devices into a common digital currency. The challenge in that strategy is that Facebook must not only be the dominant social network (to power its measurement capabilities), it must also remain the dominant mobile media provider – the money’s in selling the media, not the measurement.

That’s a more difficult and unpredictable path than the one it (or Google) faced in building out a browser-based business. Innovation and change is no longer limited to what can be done at a desk and on a PC. The mobile medium is still nascent. The next phase of digital media will play out across many types of devices (phones, TVs, watches and more to come), and many of those devices are part of consumers’ lives in a way that a TV set or PC never was. All of this makes the future of mobile media challenging to predict. Facebook’s need to own the unpredictable explains its wildly valued – though reasonable – purchases of Instagram, WhatsApp and Oculus VR and will be justification when the company bets on the next new media. Over the next two days, we’ll be watching to see what Facebook thinks that might be.

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Accenture tries its hand in Japan with IMJ buy

Scott Denne

Contact: Scott Denne

Accenture reaches into Asia with the acquisition of a majority stake in digital agency IMJ, the latest in a series of deals as it builds out a digital marketing and advertising practice to cut away at the market share of the world’s largest ad agency holding companies. The target, which provides campaign strategy, design and analytics services to marketers and has 600 employees, will bring Accenture Interactive into the Japanese market.

The acquirer’s Accenture Interactive digital marketing and e-commerce services arm generates about $2bn in annual revenue and is the fastest-growing unit in its digital practice group, which itself posted 35% growth in the most recent fiscal year. Much of that rise has come via M&A – Accenture has now nabbed nine firms to boost Interactive since 2013, the year it formalized its marketing practice.

It’s not alone. Many other consultants and IT services shops are buying into marketing tech and services at an increasing rate. Alongside today’s announcement from Accenture, software development and design specialist Persistent Systems bought GENWI, a maker of software to push content out to mobile apps. And at the start of the year, IBM snagged an ad agency and two digital marketing firms. Deloitte, Cognizant and Epsilon, among others, have also gotten in on the act.

As we detail in a recent report, the growing amount of data and devices along with an increased desire for integrated customer experiences are giving IT services firms an opening to sell to marketing departments, as the challenges of CMOs begin to resemble those of CIOs. The hurdle for Accenture – and many of its peers – has been the dearth of creative and design talent, which is being mostly resolved through M&A.

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Verizon makes latest play for OTT business with Volicon buy

Scott Denne

Contact: Scott Denne

Verizon makes it latest move to push more video content across its network with the acquisition of Volicon, a maker of video archiving and analysis software. Though smaller than its previous efforts on this front – the purchases of CDN vendor EdgeCast (see our estimate for that transaction here) and media and advertising provider AOL, the deal highlights the continuing appetite among Verizon and other media delivery and storage suppliers to take a share of the expanding market for digital video.

Volicon offers broadcasters workflow software that enables clips and content to be pushed from broadcast to digital, as well as the ability to archive content for regulatory compliance (such as FCC mandates around sound levels). The company will be tucked into Verizon Digital Media Services, which itself is now part of AOL though was founded in 2010 to help Verizon capitalize on its Fios fiber-optic network to enable broadcasters and other content providers to deliver digital services.

Video consumes substantially more bandwidth, storage and compute capacity – and therefore more revenue – than other forms of content and communications, leading other infrastructure vendors to expand into services that attract broadcasters and other video content suppliers. IBM inked a pair of deals for more than $100m each in December and January, while Amazon Web Services spent heavily on Elemental Technologies back in September. Video consumption continues to move beyond linear television and into mobile, connected TV and other digital channels, and the providers of pipes and plumbing will be watching as it does.

The Glow of social media businesses

Scott Denne

Contact: Scott Denne

ADTZ Group picks up Glow in the latest instance of a tie-up of two social media firms. Social media is arguably the most potent means for marketers to reach new audiences and engage with known customers. Despite that, there’s limited potential to build a business around this channel: there are few companies reaching significant scale and exits so far have run the (limited) gamut from strategic tuck-ins to outright fire sales.

London-based Glow was one of dozens of players that launched with a platform to enable marketers to make their Facebook ad campaigns more efficient. A few years ago, Facebook was lacking some basic functionality that gave Glow and its peers an opening. Lately, though, the ad formats and new features – including custom audience targeting, the ability to integrate broad product catalogs and a growing suite of ad formats – have limited the need for such tools, which has made growth hard to come by for many vendors servicing this ecosystem.

In the past two weeks, there have been three tuck-ins in this space. Last week, Rakuten Marketing scooped up Manifest Commerce, a provider of a social ad platform for retailers with noticeable overlap with Facebook’s Dynamic Product Ads service (launched a year ago). And in mid-February, Sprinklr inked its eighth deal with the purchase of Postano, a four-year-old social analytics firm with $3m in trailing revenue.

Glow’s focus was on direct-response advertisers and it had built several tools that go beyond what Facebook offers today, such as data integration for building custom audiences and reach into Twitter. Indeed, all companies serving this market struggle with finding the right balance between offering tools that add value beyond what the core platforms provide. If they go too far afield, they narrow the addressable market – if they don’t go far enough, they risk seeing their opportunity swallowed up by Facebook’s next product announcement.

Though the opportunity to launch many of these businesses came from a deficit of product functionality on the part of Facebook, we believe the best opportunity for these vendors today is to provide a range of workflow tools and services (both media buying and strategy) to link multiple social networks. Our surveys show that social media is gaining a leading share of people’s attention; however, if Facebook continues to be the overwhelmingly dominant platform – and from an advertisers’ perspective, it certainly is – there might be little any company can do to build a sustainable, scalable business around social.

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To ‘D’ or not to ‘DSP’: the question for Adobe

Scott Denne

Contact: Scott Denne

Could Adobe be the company to deliver an exit to some of programmatic advertising’s pioneers? Though the shift to programmatic (i.e., automated) media buying is reshaping the landscape of advertising – in digital and beyond – the companies that built the first programmatic media buying platforms (most commonly called demand-side platforms, or DSPs, in the ad-tech space) have seen almost no exits.

Owning a media buying platform fits squarely with Adobe’s strategy of building out a wide suite of marketing software. While other enterprises have wavered from this approach – Oracle took a data-focused strategy, while IBM is turning more toward services and Teradata is abandoning its marketing software ambitions altogether – Adobe has stayed the course with a software-led roadmap. Its strategy has been to scoop up marketing vendors whose products are ancillary related to ones where it has an established channel. For example, its acquired Demdex (an audience management platform) and Efficient Frontier (a paid search platform) units sell largely to existing Adobe Analytics (fka Omniture) customers. It’s been a successful strategy – sales of the company’s Marketing Cloud products grew 16% last year to $1.4bn.

In the past, a combination of higher prices and business models that were more focused on services than software may have kept Adobe out of this segment of ad tech. Now would be a good time for it to get in as more players are proving that they can build direct relationships (and therefore more predictable revenue) with marketers. Currently, many of the large ad agencies still treat media buying platforms as a media purchase, rather than a software purchase, though that’s slowly changing and more agencies are adopting an approach where they advise their clients on which platforms to use. Buying into this market now would enable Adobe to leverage its existing partnerships with agencies – Publicis Groupe was named its ‘Marketing Partner of the Year’ at a recent Adobe sales conference.

Adobe does have media buying capabilities today. It has built display buying services off of the Efficient Frontier (now Adobe Media Optimizer) pickup, though that platform wasn’t initially built for real-time bidding. We view DataXu and Turn as the two best targets for Adobe to explore. Among other capabilities, DataXu has been building out its video advertising and multi-touch attribution technology, which would plug other holes for Adobe. Turn, for its part, has invested in workflow and data analysis capabilities that would align well with Adobe Analytics and possibly with some of the creative software tools that make up a large part of Adobe’s presence in the advertising space.

Adobe isn’t the only vendor that could make a move in this segment. We’ll have a detailed report on the exit outlook for this corner of the advertising software market in our next 451 Market Insight.

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Acxiom’s ramp beyond email matching

Scott Denne

Contact: Scott Denne

LiveRamp is set to start its annual RampUp conference for the second time under Acxiom’s ownership. That purchase is proving to be immensely successful and in need of a follow-up. Acxiom bought LiveRamp in May 2014, and the target now generates in a quarter what it posted in the entire year leading up to its sale. It has also brought Acxiom meaningful partnerships with a wide swath of the ad-tech ecosystem, something it had struggled with earlier.

Part of the reason for LiveRamp’s success to date is scarcity. There are few other companies that provide the ability to convert customer identity (email addresses, in LiveRamp’s case) into cookies. There’s a growing demand from advertisers to do this as they increasingly look to first-party data to plan and launch digital advertising campaigns. That’s part of a larger trend of advertisers synchronizing and optimizing media spending across channels amid a media landscape that’s shifting rapidly as audiences transition their time to digital (social, mobile, connected TV and other IP-enabled channels). For advertisers to manage and measure this, they’ll need data that connects and links the disparate pieces.

Businesses with a history in legacy media and those that smell an opportunity to enter the media and marketing arena are scooping up assets to help solve this problem. In the former category sits Nielsen, the media measurement giant that nabbed eXelate last March, adding a data exchange and audience management platform to enable Nielsen to provide a digital bridge to link its media measurement business with retail purchase tracking. In the latter category, Oracle made itself into a substantial player through multiple deals, including its recent reach for AddThis.

Linking email and cookies gave Acxiom a piece of the overall data puzzle; however, its competitors are angling to be the de facto data provider for the entire marketing and advertising ecosystem, not just a few select applications. And while there’s a ways to go before the winner is crowned, there is a sense of urgency to expand these data sets. The more diverse data that a vendor can co-mingle on a server, the more accuracy and reach it has. So scale will beget scale in this market. Acxiom has begun to expand its offering into television, with an assist from the tuck-in of Allant Group’s TV unit. To keep pace with both rivals and the needs of marketers, the company will have to continue to explore emerging segments such as cross-device identity matching (it has several partnerships there) and mobile location data.

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There’s not much data in these shoes

Scott Denne

Contact: Scott Denne

All kinds of legacy brands are racing into the mobile app business. The latest example: shoemaker ASICS’s $85m reach for FitnessKeeper, maker of the RunKeeper app. The purchase is the first step in ASICS’s five-year-plan to become a direct-to-consumer business. To do so, ASICS will need a direct line of communication with and data about its customers. Shoes and apparel provide neither – RunKeeper offers both.

In the past, brands that built businesses via mass-media marketing and retail channels relied on inexact measurements to understand and reach the audience for their products. Data taken from surveys and panels was the main source of such knowledge. The rise of digital marketing ushered in a new set of metrics through which to gauge the success or failure of marketing strategies and tactics: this is finally providing legacy brands with the data and tools they need to execute on the latest metrics.

Sports and fitness companies like ASICS have been particularly aggressive in moving into mobile. Under Armour has picked up four mobile app providers since late 2013, spending more than $700m. Adidas inked a deal of its own last year by paying $241m for runtastic. Weight Watchers, Anytime Fitness and TopGolf have also bought apps related to their core businesses in the past 12 months.

Having that direct line into customers will surely be a boon for ASICS; however, a mobile app is a business unto itself and the challenges of developing and marketing an app are growing. Our conversations with app marketers indicate that the cost of downloads has risen substantially in the past year or two, while our surveys show that downloads are increasing. Therefore, ASICS and its peers will have to compete for engagement with a growing cohort of apps on each user’s phone. In our 2015 US Consumer Survey, 29% of respondents had downloaded five or more apps in the past month, up two percentage points from the same survey a year earlier.

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Infoblox jumps on threat intel bandwagon with IID buy

Scott Denne

Contact: Scott Denne Scott Crawford

Adding threat intelligence to a wider security portfolio has potential, though as a stand-alone offering growth has been tough to come by. Against that backdrop, we’ve seen a notable uptick of acquisitions in this space, with Infoblox’ purchase of IID being the latest. The DNS security vendor will pay $45m in cash for IID and its threat intel capabilities, putting the deal right in the same neighborhood as several other recent transactions.

Today’s move combines two companies with a background in securing network identity. Infoblox has roots inside the network, while IID specializes in external networks. Part of IID’s early focus was to protect individuals and organizations from phishing risks and its offering has since matured into an intelligence aggregation and sharing strategy centered on IID’s ActiveTrust threat data exchange platform. The deal combines Infoblox’s ability to manage and control access to enterprise networks with threat intel gathered from multiple sources, including vetted contributors to ActiveTrust. IID will enrich Infoblox’s capabilities for providing secure DNS, network DHCP/IPAM services and control automation through greater insight into network threats. AGC Partners advised IID on its sale.

The potential to add threat intelligence to an existing channel and related product line is pushing up valuations in this segment. Last year, LookingGlass and Proofpoint paid $35m and $40m for Cyveillance and Emerging Threats, respectively. Though there was some variation in the multiples of those deals, most recent threat intel acquisitions have printed above market valuations. Infoblox appears to be paying north of 4.5x trailing revenue (based on its disclosure that IID had $10m in 2015 billings), while Emerging Threats fetched a valuation closer to 10x. Even FireEye’s purchase of iSIGHT, the largest we’ve tracked in the subsector at $200m, got done at 5x. The Cyveillance sale was the exception to this trend, yet it still landed more than most divestitures at just under 2x.

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Cloud calling: With latest deal, BroadSoft aims to entice enterprises to cloud UC

Scott Denne

Contact: Scott Denne

The transition to consumer VoIP and other Internet Protocol communications is well under way, though at the largest enterprises the market for IP-based communications still has plenty of room to grow. Capturing more of that opportunity led BroadSoft to today’s purchase of Transera, a maker of call-center software and analytics. BroadSoft sells software and SaaS that enables telcos to replace their customers’ hardware-based PBX systems with IP-based unified communications services. By expanding its call-center offering, BroadSoft hopes to make its software more appealing to the largest consumers of communications services.

BroadSoft is a frequent acquirer of modest-sized companies. Since the start of 2015, it has inked four acquisitions of such firms to expand internationally and add new products to its portfolio. It hasn’t spent more than $40m in cash annually on M&A in each of the past few years. The pickup of Transera seems to be a similar scale – BroadSoft expects the target to add $7- 8m in revenue for 2016 and to be mildly dilutive to earnings.

As businesses march toward more hosted and IP-based communications systems, vendors and service providers in this space are looking for ways to differentiate beyond basic phone services and give larger organizations a more compelling reason than cost to embrace cloud communications. That was the rationale behind RingCentral’s reach for collaboration platform Glip last year, as well as BroadSoft’s own internal collaboration effort, Project Tempo. Moving beyond calls and call routing has also spurred a push for greater call-center capabilities, a move that’s been reflected in deals from BroadSoft’s rivals: ShoreTel closed the acquisition of Corvisa earlier this year to expand its presence in this sector and 8×8 snagged a pair of call-center companies last year.

For BroadSoft, offering improved call-center analytics isn’t just about winning cloud communications business from competitors – it’s also about getting large businesses onto the cloud to begin with. According to one of 451 Research’s Voice of the Enterprise surveys , 81% of IT departments that had recently deployed unified communications (voice, video and messaging) did so on-premises. That was the highest level of on-premises deployments of any application category in the survey and suggests to us that BroadSoft and its peers will need to find more applications that are unique to the cloud if it wants to entice the largest companies onto it (55% of the respondents to the survey come from enterprises with more than 10,000 employees).

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