Category: advertising technology

Twitter should be more antisocial

Scott Denne

Contact: Scott Denne

Twitter’s biggest problem is that it fancies itself as the next (or at least the number two) Facebook. While Twitter is a substantial social network, its growth on that front has peaked and isn’t likely to come back in a big way. Instead of thinking of what it could be next, management seems focused on recapturing the growth of the past or, even more worrisome, turning to strategies that are best left to the largest Internet firms.

In its earnings call this week, the company emphasized what it perceives as Twitter’s strength: ‘Twitter is live.’ True, but ‘live’ isn’t a thing people are interested in. People care about live (something). As Twitter looks to invest its $3.5bn in cash, the company should leverage its strength in live commentary, live sharing and live video to build up communities and content around particular topics and interests. The core – and overly broad – platform should power a set of interest-driven media offerings, not be the main product itself. Commentary without context is unlikely to draw major brand advertisers to the platform. It could, however, draw them in with unique communities and the content to go along with them. Twitter has a perfect opportunity to build along those lines with its recent deal with the NFL to stream 10 games next season.

The amount of US monthly users on Twitter’s network has been flat for four consecutive quarters and international growth hasn’t fared much better. The company has been able to squeeze revenue growth out of a flat audience by developing its ad products. Those efforts are now losing momentum. Twitter reported revenue growth of 36% year over year, down from 48% in the previous quarter. It’s guidance for next quarter is flat.

This feels like a desperate situation. But it shouldn’t. Twitter is a media company that will shortly be larger (by revenue) than The New York Times. And it’s posting 36% growth – certainly unusual for a media company its size. The problem is that it doesn’t consider itself a media company. Management seems intent on scaling up the core platform as its top priority. It’s not likely to reignite the growth it saw in its early days – and it’s certainly unlikely to become the next Facebook, which is unfortunately the lens through which management views its potential.

Based on management comments, it appears the company is determined to invest in building out its ad-tech stack to become a one-stop shop for advertisers. Twitter simply doesn’t have the scale to accomplish this and lacks the ability to match identities across devices, which is becoming a core feature of Google and Facebook and a defining trend of digital advertising. And in video, the fastest-growing segment of digital advertising, the supply-side platforms and ad networks with the most scale have already been scooped up. Twitter’s strength lies in interest-driven data, rather than the demographic data that’s likely to continue to be the currency of video ad buys for at least a few more years.

What happened to Alphabet’s M&A bets?

Brenon Daly

Contact: Brenon Daly

As part of an effort to provide more strategic focus as well as financial transparency, Google reorganized and renamed itself Alphabet last October. In the half-year since that change, the company has lived up to the ‘alpha’ part of its new moniker, handily outperforming the Nasdaq, which is flat for the period. But when it comes to ‘bet,’ it hasn’t been placing nearly as many M&A wagers as it used to.

So far in 2016, the once-prolific buyer has announced just two acquisitions, according to 451 Research’s M&A KnowledgeBase. That’s down substantially from the average of six purchases that Google/Alphabet has announced during the same period in each of the years over the past half-decade. (Nor do we expect this year’s totals to be bumped up by Google buying Yahoo, as has been rumored. That pairing would roughly be the sporting world’s equivalent of the Golden State Warriors nabbing the Los Angeles Lakers.)

The ‘alpha’ part of Alphabet is, of course, the Google Internet business, which includes the money-minting search engine, YouTube, Android and other digital units. This division generates virtually all of the overall company’s revenue and is the primary reason why Alphabet is the second-most-valuable tech vendor in the world, with a market cap of over a half-trillion dollars. For more on the company’s progress in dominating the digital world, tune in on Thursday for its Q1 financial report and forecast.

Google/Alphabet M&A

Period Number of announced transactions
January 1-April 18, 2016 2
January 1-April 18, 2015 6
January 1-April 18, 2014 8
January 1-April 18, 2013 4
January 1-April 18, 2012 4
January 1-April 18, 2011 8

Source: 451 Research’s M&A KnowledgeBase

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.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

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.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

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.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

IBM’s Resource-ful push into the CMO office

Scott Denne

Contact: Scott Denne

IBM’s acquisitions of Unica and Silverpop basically bookended a series of deals earlier this decade when enterprise software vendors rushed for marketing applications to push to the CMO suite. That’s what makes today’s reach for digital ad agency Resource/Ammirati surprising: Big Blue shows that its strategy for winning the CMO is shifting toward services and away from software.

Resource/Ammirati is among the largest independent ad agencies to mix creative services with digital marketing. It will join IBM Interactive Experience, the digital marketing services unit that Big Blue created in 2014 by blending its existing digital agency with researchers from its customer experience lab. The addition of Resource/Ammirati brings additional digital marketing expertise and, more importantly, a creative ad agency that develops marketing strategies and ad campaigns across online and offline media, having developed TV campaigns for Labatt Breweries and Birchbox, built mobile apps for Sherwin-Williams and designed Procter & Gamble’s e-commerce platform.

In marketing software, IBM has a set of loosely related marketing apps and seems to have rightly recognized that being half-heartedly committed to building a full marketing stack isn’t going to win the day. In IT, where IBM’s strength lies, buyers have a standard set of needs and a standard set of hardware and applications to fill those needs. Marketing is more complex. New categories and channels of customer engagement appear all the time and the best marketers are constantly making adjustments and running tests to optimize performance. Building a software stack to keep up is challenging – services are more flexible.

IBM’s move into digital marketing and agency services lessens the competition with enterprise software firms, though it invites competition from other IT service providers as well as the incumbents in the CMO suite: large agency holding companies. For its part, the latter group has become more active in nabbing IT-related services. In just the past two days, we’ve seen a couple of ad agencies purchase mobile development shops (WPP’s acquisition of ArcTouch and St. Ives’ reach for The App Business). And let’s not forget Publicis Groupe’s $3.7bn pickup of Web development firm Sapient, among other deals with a technology flare.

While IBM has a massive services business beyond marketing, it hasn’t been a careful steward of those assets of late. Last quarter, continuing a trend from 2015, Big Blue’s services revenue declined 11%, a faster rate than its software business.

Jordan Edmiston Group advised Resource/Ammirati on its sale.

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Cannella nabs MPH as TV ads become digitally measured

Scott Denne

Contact: Scott Denne

Cannella Response Television (CRT) is aiming to capitalize on the increasing need for digital metrics in TV advertising by reaching for Media Properties Holdings (MPH). The target is best known for its REVShare business, which partners with local and regional broadcasters and service providers to package and resell television inventory on a cost-per-action (CPA) basis.

Though the coming programmatic TV (i.e., television that is bought in an automated fashion and closer to real time) generates more excitement and headlines, there’s an intermediate step underway and MPH’s inventory relationships put it in a position to capitalize. It will be many years before there’s a watershed shift of television ad sales into programmatic. Despite that, there is an increasing number of younger, digitally native brands that are expanding their TV buys. As they do so, they’re looking for firm ROI metrics to measure the impact of ad spending, rather than loose measures of reach and demographics. That’s benefiting inventory sources like MPH, attribution vendors and media buying agencies with a history in direct-response advertising.

Buying MPH gives CRT a bridge into that world. Today CRT mostly develops and distributes infomercials. Owning MPH will allow it to offer short-form ads to its base of direct-response clients and attract some younger brands seeking direct-response specialists. While MPH’s inventory partnerships could enable CRT to be a player in the eventual move toward programmatic TV, it will take a substantial investment to get there. MPH has developed some analytics capabilities to enable it to price inventory on a CPA basis, though its greatest asset is its partnerships, not its tech.

Petsky Prunier advised MPH on its sale.

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Flashtalking seeks a second act in data with Encore Media pickup

Scott Denne

Contact: Scott Denne

Flashtalking reaches for Encore Media Metrics, a provider of advertising attribution and analytics, as it looks to challenge Google’s dominant position as the preeminent third-party ad server. The company has a footprint in the ad serving business through its creative capabilities, though it typically trails Google’s DoubleClick for Advertisers (DFA) ad server. Flashtalking hopes that with this deal, along with the recent purchase of Germany-based device-fingerprinting firm Device[9], the combination of its creative optimization and data capture and analysis capabilities will be enough to gain traction as a primary ad server.

The acquisition of Encore Media is likely modest in size. The target appears to have just a handful of employees and is mostly being bought to roll the technology into Flashtalking’s ad server. In those ways it is similar to Device[9], which Flashtalking snagged in September. The pair of transactions are the only two it has made since TA Associates took a majority stake in the firm in August 2013.

Flashtalking’s bid to carve away at DFA’s dominant position is ambitious. Other ad servers have fallen short in previous attempts to dislodge DFA, and Flashtalking’s own attempt comes at a time when Facebook is also making a push for this corner of the ad market. There are, however, reasons to think it could be successful. For one, a company of its size need only capture a modest overall share to reap outsized gains. Also, as programmatic advertising gains momentum, particularly among ad agencies, data-driven advertising rises alongside it. Flashtalking is betting that it can leverage its relationships and track record as a secondary ad server into a primary position.

We’ll have a full report on this deal in tomorrow’s 451 Market Insight.

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