Ad Tech Investment & M&A: It's Back

Investment rollercoaster

After a prolonged snooze, investment and M&A dormancy in ad tech is perhaps finally at an end. After a steady drizzle of activity, a torrential downpour of consolidation poured upon the industry in June. In this article, ExchangeWire research lead Mat Broughton pops his head out from under the brolly to look at the recent moves, and how these reflect the overall state of the industry.

SSP consolidation

Last month saw a major merger in the independent ad tech space, with French firm Equativ combining with Canadian ad exchange Sharethrough. The as-yet unnamed combination (let’s see how easy it is to pronounce!) will command net recurring revenue in excess of USD$200m (£158m), and solidifies its position in key markets, as both actively target the CTV market for expansion, while Sharethrough adds the strings of attention and sustainability to Equativ’s recent strides in curation. 

Despite ongoing disruption to SSPs, including pushback against MFAs and uncertainty around Google’s deprecation of the third-party cookie following concerning tests of its Privacy Sandbox APIs, both Equativ (+16%) and Sharethrough (+20%) are achieving impressive growth, as both are outpacing the average annual revenue increase (+13%) reported across the EW Ad Tech bucket of public firms through Q1.

Going forward on the supply side, expect further investment into developing areas such as curation, retail media, and of course AI. Exchanges are also set to further organic and inorganic expeditions into CTV and attention products, as the market looks towards inventory quality as a shelter against the aforementioned headwinds. Potential ramifications of the upcoming Google-DOJ case, which will doubtlessly be discussed in-depth at ATS London, could yet add further fuel to the supply-side fire…

Movements in mobile

A vibrant start to the summer continued within the mobile space. Verve Group snapped up the aptly-named mobile video and gaming network Jun Group in June for USD$185m (£146m), while simultaneously raising SEK450m (£33.5m) through a directed share issue. Though Verve Group has been making attempts to diversify to a more omni-channel offering, the acquisition strengthens the Swedish firm in its traditional mobile heartlands through an increased buy-side client base. 

At first, buying up a mobile ad firm when looking to diversify seems a little strange, however Verve has managed to bag itself a bargain. Adding Jun Group bumps Verve’s revenue up by 25% to €447m (£378m), while the acquisition multiple of 3.8x EV/adj.EBITDA is extremely reasonable in the technology space. Why so cheap? Jun’s prior owner, Advantage Solutions, is in a spot of bother having spread itself too thin, and is therefore doing a reverse Supermarket Sweep by divesting heavily. Previous sales include Strong Analytics (to OneSix), Atlas Technology Group (to Crisp), Adlucent (to Barkley OKRP) and its various foodservice businesses to Prospect Hill Growth Partners.

Sticking with diversification attempts within mobile, another eye-catching acquisition took place in June, with French mobile games publisher Voodoo buying social media platform BeReal for €500m (£422m). BeReal put up the for sale signs earlier in the year as it struggled to reach profitability, despite attracting 40 million active users and significant hype over the course of the pandemic. Voodoo meanwhile has been on a mission to diversify from its hypercasual gaming roots, a segment that was hit particularly hard by Apple as a result of the rollout of “Do Not Track”. On paper, the move makes sense, however, given that BeReal has built its reputation on authenticity, with users only able to post within a certain window to prevent enhancing their images, Voodoo needs to be careful about the type of ads it shows through the platform - hypercasual games have been plagued in the past by low-quality and sometimes false advertising in efforts to bolster user acquisition.

These two acquisitions serve as a perfect microcosm of how investment and consolidation in the mobile space is set to develop within the coming months. The pandemic and onwards has been a rollercoaster few years for the mobile industry - we’re now reaching the point where some want to go for another ride, and the rest want to get off because they feel sick.

The dichotomy of mobile - 2024

Changing channels - CTV and audio

The year kicked off on a strong note, with US retail giant Walmart buying up TV manufacturer Vizio for approximately USD$2.3bn (£1.8bn). We covered that acquisition in a feature article at the time. In short, the move represents a major shift in Walmart’s strategy from fostering partnerships to maintaining greater control of an owned-and-operated CTV and retail media ecosystem, all in pursuit of delicious profitability. 

On that note of profitability, 2024 has not been kind to Paramount Global. The firm lost a whopping USD$554m (£432m) in the first quarter alone, as its linear operations continued to slide and its Paramount+ streaming service unable to make up the shortfall. Its on-then-off merger with Skydance is now definitively back on, barring any last-minute bidding from rivals, with the Ellison family (of Oracle fame) and RedBird Capital partners set to invest USD$8bn (£6.2bn), valuing the merged company at roughly USD$28bn (£22bn).

As discussed on a recent episode of The MadTech Podcast, Paramount has struggled to build a strong brand following for its streaming service, and concerns remain that its current strategy to boost content visibility by placing it on multiple third-party platforms could hinder user subscriptions to its own service. A key snippet from the earnings call suggests that the revised Paramount will stay on the same course, for better or worse: “We’re going to be fairly agnostic (in terms of streaming distribution partners) here.  We’re very proud of the relationship (Skydance has) with Netflix and also with Amazon. And we’re going to maximise the value of our content whether it’s on our platforms or whether it’s on our partners’ platforms.” 

At a time when IPOs across all industries remain sluggish, the ad tech world saw its number of public companies decrease in June. Happily however, this was not due to some corporate implosion of dramatic proportions, but was instead due to TV advertising specialist Cadent completing its acquisition of AdTheorent for USD$324m (£253m), a move which was announced earlier in April. The move serves to transition towards a more omnichannel offering (sound familiar?)

Switching from visual to audio, iHeartMedia division Triton Digital gobbled up contextual targeting and brand-safety solutions provider Sounder for an undisclosed fee. The move has ostensibly been made in an effort to alleviate marketer concerns with fragmentation and brand safety in identifying the most appropriate shows to advertise against, thus obtaining more programmatic spend which previously would have been funneled directly.

Across both CTV and audio, the market is heavily fragmented during a period where consumer purse strings are tight. Further consolidation is therefore expected on the publisher front. On the tech side, CTV continues to attract significant interest, however with virtually every firm across the supply chain now operating within the space in some capacity, investment and M&A towards CTV is more likely to be limited to solutions which address gaps within a given firm’s offering, as opposed to CTV generalists.

Dealings in data and privacy

Expansion was the name of the game for one of our most-recent featured acquisitions, as Seedtag staked its tent within the Australian market with the purchase of creative intelligence solutions provider JustEggs. Contextual evidently continues to appeal across the globe, in turn benefiting Seedtag, which entered into the Indian and Peruvian (both 2023) markets, alongside Canada earlier in the year.

From the latest to the earliest. In January, data platform LiveRamp acquired data clean room software provider Habu for approximately USD$200m (£156m). From the perspective of LiveRamp executives, they gain a provider with integrations across major walled gardens such as Amazon, Google, and Facebook, which can then be leveraged with LiveRamp’s own clean room with, built upon its extensive consumer identity graph and own partnerships (900+ brands) for activation on the open web. The multiple for the acquisition is punchy -  inclusive of synergies it expected to deliver USD$18m (£14m) in revenue thus implying an EV/Revenue multiple of >10x - however covering fragmentation across both the open web and walled gardens in the emerging clean room sector could prove to be a highly shrewd move.

Pressing fast forward back to the M&A glut in June, Mozilla announced the purchase of Anonym, a firm specialising in privacy-preserving advertising solutions. The move serves to help scale Anonym, while serving as Mozilla’s entry into digital advertising beyond its Firefox browser. Looking through the acquisition wearing one’s positive Deirdre Barlows, the combined firm could reap the rewards of third-party cookie deprecation, given that its solutions aim to address key post-cookie challenges: namely attribution, effectiveness measurement, and reach/frequency measurement. Wearing one’s Deidre Barlows of negativity, the fact that Anonym relies heavily upon the pseudonymisation of user data could prove problematic, as demonstrated by Xandr falling under scrutiny for not granting data deletion requests, a key tenant of GDPR, as it was unable to verify the identity of consumers who had made such requests due to pseudonymisation.

As data legislation continues to mature within Europe, and further laws are developed in other markets, investment is expected to continue within the privacy and contextual arenas. Expect some fast buys at spicy multiples closer to the cookie deprecation deadline (unless it shifts for the 57,543rd time).

Investment: It’s back

In closing, though some economic rainclouds persist, conditions across virtually every segment of the ad tech space are leading towards consolidation, and therefore investment opportunity. No less than five major deals took place last month alone, and there’s little sign of that slowing back down again. Investments. Mergers. Acquisitions. Multiples. Currency conversions. Earn-outs. It’s back.