Category: Web analytics

Yahoo: hunted, but still in the hunt

Brenon Daly

Contact: Brenon Daly

Amid all the speculation that Yahoo would sell itself (or not), the search engine operator swung to the other side of the table on Tuesday, announcing the $270m all-cash purchase of interclick. The planned acquisition, which is expected to close early next year, is the first time Yahoo has reached for a fellow public company in more than eight years. Yahoo has picked up more than 45 privately held companies and one Bulletin Board-listed company since it acquired Overture Services in 2003 for $1.6bn, its largest-ever acquisition. (Another interesting side note on the interclick deal: Boutique advisory firm GCA Savvian has now advised the past two companies that Yahoo has acquired.)

And in its purchase of interclick, Yahoo is getting a relative bargain, at least on one key measure. (Interclick only generates a few million dollars of cash flow each year, so calculating an EBITDA multiple doesn’t make much sense.) At a $270m equity value, interclick is valued at roughly two times projected 2011 revenue. Even with the takeout premium, that’s less than half of Yahoo’s corresponding valuation. The search engine operator currently garners an equity value of about $19bn, or 4.2 times projected sales of $4.5bn this year.

RightNow: A seller rather than a buyer

Brenon Daly

Contact: Brenon Daly

Ever since it raised $175m in a convertible debt offering last November, RightNow Technologies has been telling anyone who would listen that it intended to go shopping with some of that money. The move more than doubled the amount of cash on hand for the customer service automation vendor. And since RightNow was generating cash on its own, and had only a small share buyback program in place, it wasn’t like there were a lot of claims on the company’s treasury.

But with the $1.5bn sale to Oracle, RightNow’s M&A program has been snuffed out before it ever really got going. It would have been a dramatic change at the company, which had largely stayed out of the M&A market. Over the past decade and a half, RightNow has only tallied four deals with a total value of just $52m.

While RightNow was unlikely to ever be a big acquirer, we can’t help but make the larger point that the sale to Oracle removes yet another player from the pool of potential tech buyers. And that pool is constantly getting shallower, even just in terms of public companies. Along with RightNow, some 50 other tech vendors have been erased from the Nasdaq and the NYSE in just 2011 alone.

Keynote adds to its mobile monitoring business

Brenon Daly

Contact: Brenon Daly

Moving to bolster its enterprise mobile monitoring portfolio, Keynote Systems said Monday that it will hand over $60m in cash for testing and quality assurance (QA) startup DeviceAnywhere. (Additionally, terms provide for a potential $30m earnout over the next two years, although Keynote indicated that any payments would likely be back-end loaded.) Keynote will finance the deal, which is expected to close in two weeks, entirely from cash on hand. There were no advisers on either side of the transaction.

DeviceAnywhere is based about five miles from Keynote’s headquarters in San Mateo, California, and will move most of its 119 employees into the building that Keynote owns. The startup had attracted more than 1,200 customers, although about 1,100 of those are developers with the remaining 100 being enterprises. DeviceAnywhere brings testing and QA capabilities for mobile websites and applications to Keynote, which has focused almost exclusively on monitoring. It generated about $20m on a trailing revenue basis.

Taken together, DeviceAnywhere and Keynote’s existing enterprise mobile monitoring unit would generate roughly $26m in revenue – a level that Keynote executives project could quadruple in the coming years. The purchase of DeviceAnywhere is Keynote’s first acquisition since April 2008. Since then, shares of Keynote have basically doubled, compared to a single-digit percentage gain for the Nasdaq over that period. Keynote will discuss the acquisition more fully when it reports fiscal year results on November 3.

Meltwater in the market

Brenon Daly

Contact: Brenon Daly

Having built a $100m business with its core media monitoring offering over the past decade, Meltwater Group is looking at picking up a small company or two this year to speed the development of the company’s next big line of business, CEO Jorn Lyseggen said earlier this week. Speaking at the Pacific Crest Emerging Technology Summit, Lyseggen said the bootstrapped private company is ‘leaning toward’ deals that bring specific IP that could bolster its recently launched products around media distribution and ad spending analytics, among other areas.

Meltwater used that strategy about a year ago to help expand an existing offering that monitored social media sources. The company already had a product, Meltwalter Buzz, before picking up BuzzGain, a 25-person startup. (We understand that Meltwater paid less than $5m for BuzzGain, its first acquisition.) Recently launched offerings by Meltwater, which claims 18,000 customers, include Meltwater Press, Meltwater Reach, Meltwater Drive and Meltwater Talent

Adobe backs up Omniture buy with more SaaS

Brenon Daly

Contact: Kathleen Reidy

Continuing to show its interest in the online marketing realm, Adobe has announced that it will buy SaaS startup Demdex for an undisclosed sum. Demdex was founded in 2008 with the goal of capturing behavioral data across websites to help advertisers better segment and target ads. It had raised $7.5m in seed and series A rounds from Shasta Ventures, First Round Capital and Genacast Ventures.

This is the first deal Adobe has done explicitly in support of Omniture, which it acquired for $1.8bn in September 2009. It certainly seems like a transaction Omniture would have done, since it had been an active acquirer itself as an independent. (The company announced four purchases in 2007 alone.) Demdex will join other technologies from Touch Clarity, Offermatica, Visual Sciences and Mercado Software in the Omniture portfolio, which is now dubbed the ‘Adobe Online Marketing Suite, powered by Omniture.’ Omniture was also Adobe’s first big SaaS buy so Demdex brings it another SaaS offering, as well.

The only other acquisition Adobe has made since buying Omniture was its $242.7m pickup of Day Software last July. There are certainly connections between Day’s on-premises Web content management products and Omniture’s SaaS Web analytics and online marketing tools, but Adobe had broader reasons for buying Day and so far, seems to position Day more alongside its on-premises content management product, Adobe LiveCycle.

IBM analyses Coremetrics, makes a deal

Brenon Daly

Contact: Brenon Daly

We were close on our earlier rumor-mongering on Coremetrics, but tapped the wrong buyer. Four months ago, we heard that the Web analytics firms was in play and had retained Goldman Sachs to represent it. (And, indeed, Goldman did advise Coremetrics in the process.) On June 15, IBM said it was picking up Coremetrics for an undisclosed amount. Originally, we thought salesforce.com made the most sense as the buyer for Coremetrics.

It’s not hard to imagine that IBM’s desire for Coremetrics increased significantly after its two most-recent acquisitions, Sterling Commerce and Cast Iron Systems. For instance, Coremetrics would give much more insight into the activities on the business-to-business network that Big Blue picked up three weeks ago when it paid $1.4bn for Sterling Commerce. Coremetrics has some 2,100 customers.

Even with this deal done, we still think Coremetrics would have been a natural fit for salesforce.com, and would have given a significant boost to the company’s effort to diversify from its legacy sales force automation (SFA) business. Sales of that product still account for two-thirds of overall company revenue.

Salesforce.com recently indicated it was willing to go shopping to increase its non-SFA business, reaching for business directory provider Jigsaw Data. At $142m in cash, the price of Jigsaw was more than salesforce.com spent, collectively, on its previous seven acquisitions. Who knows, maybe salesforce.com will turn to fellow analytics firm Webtrends, which is owned by buyout shop Francisco Partners. Incidentally, one of Francisco’s founding partners, Sandy Robertson, serves on salesforce.com’s board of directors.

Is mobile advertising back?

-Contact Thomas Rasmussen

In a clear sign that mobile advertising has grown up, Google spent a whopping $750m in stock on Monday to pick up San Mateo, California-based AdMob in what we hear was a contested process. This transaction goes a long way toward securing control of mobile display advertising for Google and comes just days after the launch of Android 2.0. Although we’ve been projecting dealmaking in the mobile advertising market for quite some time, we’re nonetheless floored by the rich valuation for AdMob, a three-year-old startup that’s raised just shy of $50m. We estimate that the 140-person firm pulled in about $20m in gross revenue in 2008 and was on track to double that figure this year (we surmise that this translates to roughly $20m on a net revenue basis).

The double-digit valuation for AdMob reminds us more than a little bit of the high-multiple online advertising deals that we saw in 2007. Viewed in that context, Google’s purchase of AdMob stands as the third-largest ‘new media’ advertising purchase since 2002. Of course, like many of those transactions, this was not based on revenue, but instead on technology and market extension, which is consistent with Google’s strategy of acquiring big into core adjacencies.

Looking forward, AdMob’s top-dollar exit is sure to have a number of rival mobile advertising startups excited. One competitor that’s preparing to raise an additional sizable round of funding quipped at the near-perfect timing of this transaction. This is an industry that has seen its ups and downs over the past few years. When we first wrote about AdMob back in May it was in the backdrop of fire sales and failed rounds of funding. If nothing else, this deal will dramatically change that.

Microsoft has been actively playing catch-up to Google in advertising and search, and is sure to follow it onto the mobile device. As are many other niche advertising shoppers such as Yahoo, Nokia, AdKnowledge, Adobe-Omniture and traditional media conglomerates such as Cox. AOL has already made its move, reaching for Third Screen Media two years ago. (We would note that AOL’s $105m purchase of Third Screen is a rare case of that company actually being ahead of the market.)

Startups that could benefit from this increasing focus on the sector include AdMarvel, Amobee, InMobi, and Velti’s Ad Infuse. However, we suspect that some of the major advances – and consequently the most promising targets – are likely to come from players that are just now getting started, with fresh and profitable approaches to location-based mobile advertising.

Some recent mobile advertising deals

Date announced Acquirer Target Deal value Target TTM revenue
November 9, 2009 Google AdMob $750m $20m*
September 14, 2009 Nokia Acuity Mobile Not disclosed Not disclosed
August 27, 2009 AdMob AdWhirl Not disclosed Not disclosed
May 21, 2009 Limelight Networks Kiptronic $1m $2m*
May 12, 2009 Velti Ad Infuse <$1m* $1.3m*
March 11, 2008 Qualcomm Xiam Technologies $32m Not disclosed
August 21, 2007 Yahoo Actionality Not disclosed Not disclosed
May 15, 2007 AOL Third Screen Media $105m $3m*

Source: The 451 M&A KnowledgeBase *451 Group estimate

Will Adobe-Omniture marriage prompt online video M&A?

-Contact Thomas Rasmussen, Jim Davis

When Adobe Systems and Omniture announced the details and rationale behind their $1.8bn tie-up in mid-September, some interesting items emerged. Highlighted was the obvious benefit from a combination of Adobe’s popular Flash video platform and Omniture’s analytics capabilities. As the Web analytics market has become more saturated, Omniture has recently been expanding into higher-margin niches such as online video analytics. Combining online video content management with analytics is an area in which some early startups have carved out a profitable niche over the past few years as video has finally started to move to the Web.

However, if the newly bulked-up Adobe truly moves into the space – as we suspect the company will – it will undoubtedly present an enormous challenge to an industry previously dominated by a few well-funded startups. As a consequence of other larger players wanting to get a piece of the booming sector and startups being more inclined to strengthen their position, we believe consolidation in the market is inevitable. With that as our premise, who might be buying, and who are the potential prime targets?

Among a slew of startups in the space, the two primary ones we think could be in play in this scenario are market leaders Move Networks and Brightcove. The two have each taken in roughly $90m in venture capital. It is worth noting that both Microsoft and Cisco are strategic investors in Move Networks, and we think the company would make a great fit for either one since both have a strong focus on video moving forward. Meanwhile, both IAC/InterActive and AOL are strategic investors in competitor Brightcove. While we don’t think AOL is in a position to make an acquisition like this now, we would not put it past IAC. Google with its more consumer-oriented YouTube makes a logical acquirer as well, particularly as a way to add a business-friendly enterprise offering.

And finally, we might put forward rich content delivery networks (CDNs) such as Akamai and Limelight Networks. These vendors have been buying their way into premium verticals recently to escape the rapid commoditization of their core business and would be wise to consider acquiring into the space. From the estimated $40m or so in revenue that we understand Brightcove brings in, a large part of that comes from reselling bandwidth through CDNs.

‘What’s up with Omniture?’

Brenon Daly

Contact: Brenon Daly

It wasn’t quite shouting ‘fire’ in a crowded theater, but an early Tuesday afternoon development at an investment conference concerning Omniture certainly sparked a firestorm of speculation. During the luncheon at ThinkEquity’s 6th Annual Growth Conference in San Francisco, word came out that Omniture had scrapped its presentation, which had been scheduled for 1:30 p.m. PST. Chief executive Josh James was slated to speak.

Immediately, the money managers began trying to read between the lines. Was the company in play, or had James just missed his flight or something like that? Speculation was flying around the lunch tables and hallways, with people pulling in all sorts of information. One guy noted that the company’s CFO didn’t show up at his scheduled presentation at Deutsche Bank’s technology conference on Monday, either. Another chimed in that maybe executives were delayed by the heavy thunderstorms in Salt Lake City, where Omniture is based. Meanwhile, both the price and trading in shares of Omniture was picking up, after just bumping along up to that point.

As more people at the ThinkEquity conference started gossiping about Omniture, consensus grew that something big was brewing at the Web analytics firm. By the time the stock was halted, just ahead of the closing bell, speculation had shifted to certainty: Omniture was getting taken out. The only question was who was nabbing the company. For the record, not a single one of the hallway matchmakers picked Adobe Systems as the buyer. (Under terms of the deal, Adobe will hand over $21.50 per share, or $1.8bn, for Omniture.) Instead, the names that surfaced as potential acquirers of Omniture included Microsoft, Google and Salesforce.com.

Could ad slump lead to ValueClick exit?

-Contact Thomas Rasmussen

Recently, we’ve covered the hardships of online advertising companies. However, for a clear example of just how tough the environment really is, we point to the weakness at ValueClick, one of the few remaining publicly traded pure-play advertising firms. Amid an advertising slump and tough competition, the vendor has seen its first-quarter revenue decline 20% from the same quarter last year and its own projections point to a similar decline for the current quarter. With the advertising market seemingly trapped in the doldrums for the foreseeable future, we wonder if an opportunistic acquirer might consider a run at ValueClick.

ValueClick trades at an enterprise value of about $800m. This is about half its 2008 high, and down about two-thirds from 2007, when Google and Microsoft were throwing billions of dollars around to secure market leadership. With $592m in trailing 12-month (TTM) revenue, the company trades at a scant 1.3x sales. This is a far cry from the multiples paid for aQuantive and DoubleClick of 10x TTM sales and 12x TTM sales, respectively.

With $100m in cash and no debt, ValueClick CEO Tom Vadnais has indicated that the company is interested in doing some shopping of its own. However, given the dire state of the economy, we think a takeout is a much more plausible outcome over the next year or so. The potential acquirers include the usual suspects such as Microsoft, Google and IAC/InterActiveCorp; soon-to-be-independent AOL; and large media companies. However, we would hasten to note that most of these vendors have full traditional advertising portfolios, so an acquisition of ValueClick would merely be for boosting market share.