Category: advertising technology

ClearSaleing has been anything but for eBay Enterprise

Scott Denne

Contact: Scott Denne

Recently divested eBay Enterprise sheds another asset as the former e-commerce unit of eBay sells ClearSaleing, its advertising attribution business, to Impact Radius. This is the second divestiture from eBay Enterprise since it was acquired by a syndicate of private equity firms in July. Last month, it sold its CRM division to Zeta Interactive.

Algorithmic attribution recently led Convertro, Adometry and MarketShare to substantial exits. Though ClearSaleing was far earlier to market than those companies, it has floundered since 2011 under the ownership of GSI Commerce (which was later acquired by eBay). Impact Radius offers a number of products for tracking marketing data and performance, including an attribution offering. With this deal, it adds algorithmic capabilities that enable it to forecast and model the combined impact of marketing and advertising spend across multiple channels.

Although algorithmic attribution has generated a great deal of interest, there are a number of roadblocks to the technology gaining widespread acceptance. The first is the technical challenge of gathering all of the necessary price and performance data across channels and linking those together via a combination of definitive and probabilistic linkages. The second is the cultural challenge of getting an entire marketing organization onboard with a new set of metrics – metrics that have potentially negative consequences for marketing divisions that were happy to gauge their success on narrow metrics such as last-click attribution and demographic reach.

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TV ecosystem turns to M&A as viewers change channels

Scott Denne

Contact: Scott Denne

Television’s unassailable position at the top of the media pyramid is under assault. Audience attention shifting to digital media and advertisers following suit are bearing down on TV revenue, just as they’ve decimated print and radio. The largest slice of the advertising industry will be up for grabs in the next few years as big-budget brand advertisers seek new ways to reach the mass scale of audiences that are becoming increasingly rare on television.

Networks have long struggled with the sting of flat advertising revenue. For Viacom and Disney, two of the country’s largest programmers, you have to go back to 2011 to find a year where ad revenue posted anywhere near double-digit growth. An unexpected subscriber exodus from ESPN this summer left Disney with a rough Q2 earnings report and caused a major selloff in media stocks. And as viewers continue to drift from traditional TV, the networks and the cable companies that distribute their content are turning to M&A to hold onto their ad revenue – at Viacom and Disney alone, there’s $13bn in annual revenue at stake (much more if you include carriage fees and licensing sales).

The cable operators have been actively scooping up tech assets to help grow revenue through this transition. The major networks, however, have been relatively muted and their efforts so far are insufficient to stem the flow of billions of ad dollars into other channels. As the infrastructure for reaching audiences changes, they risk becoming disintermediated as advertisers seek ways to reach audiences without a large-scale media buy directly from the networks.

We recently published our full outlook for M&A as the networks and service providers that make up the traditional TV ecosystem look to adapt to the growth of digital video. Subscribers to 451 Research’s Market Insight Service can access it here.

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

Cross MediaWorks drawing BlackArrow at evolving TV ecosystem

Scott Denne

Contact: Scott Denne

BlackArrow becomes the latest acquisition target as legacy media businesses seek ways to cope (and maybe even benefit) from the secular shift in television viewing habits. The 10-year-old maker of technology for delivering ads into video-on-demand streams has sold to Cross MediaWorks, a reseller of local TV ad inventory.

BlackArrow’s platform enables cable and other TV service providers to sell ads into DVR and other forms of streaming video (across both Internet Protocol and QAM standards). In addition to the ad-insertion products, BlackArrow has developed a number of capabilities that should benefit Cross MediaWorks in packaging together ad inventory, including software for affiliate stations to manage their inventory – which could have applications for Cross to sell to networks and use internally – as well as an audience management platform to enable customers to develop targeted media plans.

The company was one of several startups that launched in the first half of the past decade to pursue the opportunity to bring some of the ad-targeting techniques of the Web into the world of television advertising. For most of its life, BlackArrow – as well as peers Canoe Ventures, INVIDI, Visible World and THIS TECHNOLOGY – was simply too early. Once reliably large, TV audiences were bleeding into DVR and across a larger pool of cable networks, but media buyers had yet to feel that they needed to buy differently to reach those audiences.

During that period, the company grew to a respectable business of about $20-30m in annual revenue, mostly through its capability to enable advertisements in DVRs. Now these once-early businesses are looking timely. In addition to today’s deal, Comcast took out both Visible World and THIS TECHNOLOGY earlier this year and Verizon paid $4.4bn to push AOL’s ad technology further into the TV ecosystem.

What’s changed is that viewers are fleeing traditional television for online video and video-on-demand services, the largest of which doesn’t even have advertisements in its content. As that happens, broadcasters and service providers need tools and technologies to optimize the audiences they have. Earlier this month, both Disney and Viacom fell short on quarterly earnings due to weakness in TV ad sales. And as surveys from ChangeWave Research, a service of 451 Research, show, the move away from paid TV services is gaining momentum.

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

Verizon looks to data to dial up AOL

Scott Denne

Contact: Scott Denne

Verizon is reaching for AOL in its latest move to generate new revenue streams beyond its services businesses. The purchase gets Verizon access to a broad suite of advertising technology products that it can now supercharge by injecting its own data for improved audience targeting and advertising attribution. AOL’s advertising properties will likely benefit from Verizon’s data, and the company will also have new opportunities for advertising distribution (through Verizon’s EdgeCast CDN and LTE network), as well as cross-selling opportunities with Verizon’s growing portfolio of content and media infrastructure technologies.

Verizon’s purchase of AOL for $4.4bn marks the highest amount it has ever paid to acquire a company outside its core business of wireless, Internet and TV services. It has made a number of substantial purchases to push beyond its core, including a $1.4bn deal for hosting company Terremark and, more recently, a $395m acquisition of EdgeCast. In those deals it was more generous with valuation than it’s being with AOL.

Terremark fetched 5.8x trailing revenue. EdgeCast got 3.1x. AOL is being valued at 1.6x, making it the second-lowest multiple we’ve tracked on a Verizon acquisition over the last decade. AOL, however, is a multi-faceted business, and not all revenue is created equal. Of its $2.5bn in 2014 revenue, 24% comes from its lingering ISP business and 40% from its Internet publications and portals – two businesses that hold limited appeal for Verizon. AOL’s advertising technology business, which generated $856m in 2014 and grew more than 20%, is what Verizon is really after. Shifting most of the $4.4bn in value to that unit makes the deal look a bit more generous, and puts the valuation on par with the 3.7x that Alliance Data Systems paid for Conversant – the closest recent comparison in terms of size and product offering to today’s announcement.

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

Gravity4’s Rocket Fuel bid lacks grounding

Scott Denne

Contact: Scott Denne

A startup with less than a year of operations has made a $350m cash offer to buy Rocket Fuel. While Rocket Fuel’s board has an obligation to take this offer seriously, we’re under no such obligation. This bid is ridiculous. Aside from the fact that it barely offers a premium to Rocket Fuel’s recently depressed stock price, Gravity4 doesn’t look well positioned to make such a purchase.

Rocket Fuel has struggled as a public company. Its stock is down almost 70% in the past year as the company hasn’t maintained its earlier growth rates. It is, however, still a business that generates more than $400m in annual revenue. Even with a deceleration of its growth rate, Rocket Fuel still put up 40% year-over-year growth when it posted its first-quarter totals on Thursday.

Gravity4, by comparison, has been operating for less than a year and there is no reason to think it has the kind of cash that it’s offering to pay. Even if it’s working with a financial sponsor, that begs the question, why would a sponsor need Gravity4 to make a play for Rocket Fuel? There’s nothing compelling about the tie-up from a product perspective. In fact, Gravity4’s core offering – a data management platform – is largely duplicative of what Rocket Fuel obtained in its purchase of [x+1]. Also, Gravity4’s founder and CEO, Gurbaksh Chahal, has never managed a company of that size and his legal trouble would be a distraction for a business trying to turn itself around – he was fired from his last CEO post after pleading guilty to battery and currently faces a gender discrimination lawsuit from a former Gravity4 employee.

There’s also no precedent for a deal like this. According to 451 Research’s M&A KnowledgeBase, since 2002 only 14 businesses have been taken off the Nasdaq or NYSE exchanges in a cash acquisition of more than $200m by a private company in a deal that didn’t involve a private equity firm. The median age of the acquirer in those deals: 18 years. The youngest was Novafora, which bought chip maker Transmeta for $255m in 2008 and went out of business itself the next year.

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

What does Matomy’s MobFox say?

Scott Denne

Contact:Scott Denne

Matomy Media Group has spent the past eight years buying a portfolio of performance advertising products across multiple formats and categories. Its recent focus has been on mobile, an area where we expect it to continue to build and buy, given the immense growth in that segment of digital advertising, matched with the fact that mobile is bleeding into every part of its advertising business.

The Israel-based company often takes a one-and-done approach when it buys its way into a new advertising channel. And while it got into mobile apps with the acquisition of MobFox late in 2014, we expect that the company will still actively seek deals in the space that augment MobFox’s in-app banner and video ad exchange. Matomy posted 23% sales growth in 2014, and an increase in mobile capabilities could propel that further. 451 Research’s Market Monitor projects that the global mobile ad sector will grow 52.6% to $28.7bn this year on its way to $51.6bn by 2018.

Subscriber’s to 451Research’s Market Insight Service can access a detailed report on Matomy Media.

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

Nielsen nabs data exchange eXelate

Scott Denne

Contact: Scott Denne

Nielsen becomes the latest company to pay a striking multiple to acquire an audience data manager with the purchase of eXelate. Though lower in price, the transaction values the company on par with BlueKai, an eXelate rival that Oracle bought last year.

Like eXelate, several other data management platforms have landed significant premiums. BlueKai, eXelate, Aggregate Knowledge and RUN were all valued above 5x trailing revenue, multiples that were driven by a wide pool of potential acquirers from ad agencies, enterprise software vendors and marketing data services firms – all categories of businesses that are eager for software that can manage audience-targeting data across multiple marketing and advertising channels.

With eXelate, Nielsen adds a service that amalgamates data from a variety of marketing data services providers, publishers and other sources to better target digital advertising. The target also offers software for advertisers to mix in their own customer data to inform advertising and marketing decisions. Bringing that in-house provides Nielsen with an opportunity to better leverage its audience segmentation, offline media measurement and consumer purchase data into the digital realm.

GCA Savvian advised eXelate on its sale.

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Could Publicis make the next play in social advertising?

Scott Denne

Contact: Scott Denne

Today’s announcement by Perion Network that it will buy France’s MakeMeReach marks the second acquisition in social advertising in a week. As we pointed out in a longer report, the rapid growth of advertising dollars into social networks, the coming diversification of platforms and a hodgepodge of startups serving the category are laying the ground for a busy year of M&A activity for businesses that enable buying ads on social media.

Now that Perion and Marin Software , two ad-tech vendors, have bought into the space, who will be the next acquirer? We believe Publicis Groupe, one of the largest ad agency holding companies, will make the next move here. Publicis isn’t new to social. It’s inked some recent, modest purchases of social agencies overseas (Italy’s Ambito5 and China’s Net@lk) and in 2011 nabbed a majority stake in social creative agency Big Fuel. Also, Publicis, with its recently closed pickups of Sapient and RUN, has shown a larger appetite than most agency holding companies to own tech-enabled services and software firms.

Keeping in mind that appetite for tech and Publicis’ existing capabilities in social (mostly in creative, not executing media buys), Facebook API partners such as SocialCode, Ampush, Adaptly, SHIFT and Kinetic Social would make a good match with Publicis. Valuation could trip up a potential deal, though. Most of the above listed vendors are venture-backed and might have expectations for software-like multiples, rather than the services-like multiples that Publicis typically pays (though it has gone higher, as it did with RUN ). A possible solution would be for one of the social advertising vendors to sell off its managed services business to Publicis. That would get Publicis the services business it’s more comfortable with and allow the remaining social ad firm to become the self-serve software provider that most in this space now aspire to be.

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

Mandalay parlays Appia buy into tighter carrier relationships

Scott Denne

Contact: Scott Denne

Mandalay Digital Group makes its most ambitious deal yet with the $65m acquisition of Appia in its drive to carve away at the dominance of Google, Apple and Facebook in the application discovery and installation business. Mandalay has accumulated tools that enable wireless carriers to get back in the app distribution game – a market they were essentially booted from with the launch of the iPhone and the growth of the smartphone sector that followed.

At first glance, the idea that carriers could carve away at the dominant app distribution channels seems like a long shot. And in the US, it is. In emerging markets, however, carriers have an advantage as they have existing payment relationships with customers who often lack credit cards and rely on carrier billing to buy apps and content.

Since its acquisition of Digital Turbine Group, Mandalay has built and bought tools for carriers to get their cut of the app industry, such as payments, app marketplaces and preloaded apps. With Appia, it adds a mobile ad network with an app-install focus to the mix. Mandalay expects the deal to boost both businesses as it can bring Appia’s gains in exposure to more carrier-specific channels, such as preloaded apps and carrier app stores. Mandalay also obtains another monetization channel to offer carriers.

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

Waterfall capitalizes on Archer’s bankruptcy

Scott Denne

Contact: Scott Denne Sheryl Kingstone

Waterfall sifts through Archer’s bankruptcy to pick up some mobile marketing and messaging assets. The acquirer will pay $2.9m upfront (plus as much as $1m more if certain closing requirements are met) for Archer’s marketing services division, which is essentially the iLoop Mobile business that Lenco Mobile (Archer’s parent company) bought in 2011 for $42m.

The trailing revenue of the assets Waterfall is getting isn’t clear, as it is leaving behind a side business in healthcare-focused mobile messaging. What is clear is that iLoop hasn’t fared well under Lenco’s ownership. The unit posted about $5.5m in trailing revenue, less than the $9m we estimate it had at the time of its sale.

This transaction is small but indicative of a coming trend toward consolidation in mobile marketing and messaging. The space is intensely fragmented between mobile advertising networks, mobile website and content creators, mobile payment firms, aggregators, mobile publishing and application development providers, and mobile analytic vendors.

Like Archer, several other companies could quickly find themselves in financial distress. In fact, one of Archer’s competitors, Velti, filed for bankruptcy a year ago. Others could land lucrative exits as marketing dollars continue to shift toward mobile and businesses like Adobe, Oracle and salesforce.com that invested heavily in email marketing look to expand their mobile messaging offerings.

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