ExchangeWire European Weekly Round-Up

ExchangeWire rounds up some of the biggest stories in the European digital advertising space. And in this week’s edition: Landmark Conversant purchase tops record period of M&A for ad tech; Mega stacks spur debate; Twitter and Microsoft step up their ad services, and European programatic market valued at over €2bn.    

Alliance Data's purchase of Conversant tops record period of M&A

The biggest story in the last few days in ad tech has been the announcement that Alliance Data Systems has greed to purchase Conversant – formerly ValueClick – in a deal worth $2.3bn, making it one of the biggest M&A deals in ad tech history.

The deal will see Data Alliance acquire all outstanding shares of Conversant for a combination of cash and stock valued at approximately $2.3bn, or $35 per Conversant share, and will be subject to regulatory approval, with completion expected by the close of 2015.

Once the deal is completed Conversant – which recently rebranded from its earlier carnation as ValueClick – will operate as part of Alliance Data's Epsilon arm.

Alliance Data claims the acquisition will complete its end-to-end marketing capabilities, particularly in the ever-important cross screen sector, with Conversant's Common ID initiative, cited as a particularly attractive asset.

A press release announcing the deal reads: "Most importantly, the combination of the two companies provides scale in the rapidly growing display, mobile, video, and social digital channels, and adds important capabilities to Epsilon's digital messaging platform, Agility Harmony."

Conversant's data is also expected to enrich Epsilon's existing offline and online data set, allowing for more effective targeted marketing programmes, according to the pair.

Ed Heffernan, Alliance Data, CEO, said: "Importantly, the acquisition 'bulks up' Alliance Data in digital marketing, which is experiencing the fastest secular growth.

"Another salient benefit is a more balanced and diversified Alliance Data. Once the acquisition is completed, 35%  of consolidated revenue will be from Epsilon/Conversant, 25% from LoyaltyOne and 40% from Private Label."

The move is a landmark strategic purchase and demonstrates that in a significant year of M&A activity in the ad tech sector, there are large players on the purchase trail other than Google, et al.

A survey published by advisory firm Results International this week demonstrated that the first half of 2014 saw 209 M&A deals in the ad tech sector, making it a record period for such activity.

Advertising and marketing technology deals are being fuelled by three mega-trends, according to the group’s partner Julie Langley, who identified video advertising, data and analytics providers, and mobile as key drivers of the trend. See below:

1. Video advertising: H1 2014 has already seen 14 deals - up from just seven through the whole of 2013 – as video demonstrates high rates of click-through and engagement.

2. Data and analytics: The consumer journey to purchase is increasingly complex and marketers are demanding an increasingly detailed view of that journey. With deals like Rakuten’s acquisition of attribution group DC Storm, H1 2014’s deal count of 18 is set to treble versus 2013.

3. Mobile: H1 2014’s deal count (43) virtually matches 2013’s (45) already, driven by activity across areas such as payments, loyalty, marketing automation and messaging.

The rise of the mega stack 

As identified by the multi-billion dollar purchase of Conversant by Alliance Data, the emergence of 'mega stacks' has been one of the key trends of 2014, and this week separate testimonies from some of the leading minds in ad tech commented on this on ExchangeWire.

The week's content kicked off with an epic post by Danny Hopwood, Vivkai, head of platform, EMEA, who offered his assessment of the current programmatic landscape in light of recent consolidation.

This piece, which broke records in terms of 'shares' on social media forums, details his views on recent positioning by Amazon, AOL, Facebook, Google, Microsoft, Yahoo, and other notable ad tech players such as Rubicon Project, as well as VC funded DSP and technology companies.

"The effects of consolidation are essentially just different forms of pressure.  Pressure to perform on a plan, pressure to change your business, pressure to build to be bought, pressure to merge, pressure to educate, pressure from your VC investment relationships," writes Hopwood.

"What’s important to realise here is that no one ecosystem is going to be able to do everything so if you’re using one ecosystem DSP, or one standalone DSP you’re going to be hindered in your ability to provide access to the other ecosystems. This is a new landscape, prior to previous 12 months Google was the only ecosystem."

He further adds: "The building blocks are falling into place across the largest and most prolific digital bodies that we interact with daily, and for now we can’t rule this out.

"Programmatic trading is here, some companies will be around for the future, some might not, and some that might not exist right now might be the glue that finally provides that ‘one view’ to rule them all."

Read the full transcript here.

Meanwhile, at this week's ATS Tokyo event, keynote speaker Brian O'Kelley, AppNexus, CEO, proffered his advice to local attendees, telling them to focus on innovating in the ad tech space, instead of the increasingly commoditised aspect of the sector.

“As this explosive growth continues we’ll reach a phase when the market standardises,” he said.

“Right now is the time that that differentiation has the most market value. The most valuable thing you can do for your business is to differentiate or die.

“AppNexus wants to be a scaled commodity business that helps its customers provide ad tech, that they can then innovative on top of,” he said.

“If you can’t do that, you will do that. Commoditisation will destroy your business and margins.”

Twitter updates Tailored Audiences 

Twitter this week updated its Tailored Audiences tool adding the ability to let advertisers use the social network for lookalike modelling, and target their existing customers via their phone numbers, as well as bolster their audience reach using mobile advertising IDs.

The new suite of services lets advertisers identify audiences similar to their existing users in order to promote their mobile apps on the social network – a service that has performed extremely well for rival social network Facebook.

In a blog post announcing the update, Kelton Lynn, Twitter, group product manager, revenue, said: "You can directly create new list audiences — and manage existing audiences on ads.twitter.com — through our new audience manager tool.

"To augment the total reach of tailored audiences you can create using your customer info, you can now build audiences using mobile phone numbers in addition to email addresses.

"We also support Apple iOS and Google Android mobile advertising IDs so you can create audiences of users with your apps installed or who take certain actions like viewing a product or achieving a level in your apps." 

Microsoft bolsters mobile app inventory 

Eager to underline its credentials in the 'post-PC era', Microsoft came good on its earlier promise to bolster premium mobile advertising inventory available on its Advertising Exchange (MAX) with this week's announcement of Windows Phone and Windows 8 Ads-in-Apps. 

Microsoft this week announced that premium mobile ad inventory (from Windows 8 and Windows Phone apps) is now available on the Microsoft Advertising Exchange (MAX) in partnership with AppNexus.

The Ads in Apps inventory is now available on MAX in 35 countries across Europe (in France, Germany, Italy, Spain and the UK) as well as in Australia, Brazil, Canada, Japan and the US, and provides advertisers and developers with the ability to reach consumers across screens – both beyond the PC and web browser environments.

This includes a multitude of Microsoft platforms including; Skype, Outlook.com, MSN, and now Windows 8 and Windows Phone 8 apps, with all ads served on an on scroll basis.

Simon Halstead, Microsoft Advertising Exchange, and channel partner management, director, explained the rationale behind Microsoft’s recent positioning as a resource for advertisers looking to access premium media inventory across screens to ExchangeWire.

"After sitting in on panel after panel at Dmexco and ATS London over the past fortnight, listening to conversations dedicated to topics like RTB, transactional third-party data and multi-ad ecosystem trading, it’s clear that the march of programmatic shows no signs of abating in Europe or beyond.  And at Microsoft it’s a trend that is warmly embraced," he said.

"Building on the expansion of additional markets through the last 12 months… We are introducing Ads in Apps as there is a clear evolution at the moment taking place within digital advertising at the moment, in which the major players across the ecosystem are finding more efficient ways of helping brands tell their stories across screens online.

"The growth of programmatic is a big part of this shift, and this development shows Microsoft is committed to playing its part in Europe and further afield.

"The addition of Windows 8 Ads-in-Apps and Windows Phone inventory is a key step toward our vision of offering programmatic buying across all major Microsoft services."

The moves comes the same week as Microsoft's rumoured purchase of Swedish gaming firm Mojang was confirmed for an estimated fee of $2bn, giving an insight into the direction Satya Nadella, Microsoft, CEO, wants to take the company after taking over in February this year (i.e. placing a great emphasis on its Xbox division).

European ad tech market valued at €2.1bn 

The IAB Europe has published a survey indicating the European ad tech market was worth €2.1bn in 2013, representing a growth rate of 111% from 2012 when it was valued at €0.98bn 

The figure was based on a survey with IHS Technology crunched reported ad spend – including desktop and mobile display – reported by IAB chapters across the region, transactional data, statistical and econometric models to infer a European market size.

The project has been managed by the IAB Europe Programmatic Trading Task Force, which has been established by various tiers of the industry, and follows the July publication of the first pan-European IAB programmatic trading whitepaper.