In recent years, enterprise giants like Salesforce, Oracle, IBM and Adobe monopolized M&A activity as each marketing cloud raced to buy their way into ad tech.
That tide has turned.
These days, strategic acquisitions are more about expanding access to content, audiences and new means of distribution. Just look to media company team-ups like Disney-21st Century Fox, Meredith-Time Inc. and Time Warner-AT&T, which have dominated recent deal activity.
And Verizon and Comcast’s bid for 21st Century Fox’s assets “indicates a desire to control premium film and TV assets at scale,” noted Elgin Thompson, managing director of the investment bank Digital Capital Advisors.
Expect that trend to continue into 2018.
“This will be the year of the comeback of media companies making acquisitions,” said Tolman Geffs, co-president at media and marketing investment bank Jordan, Edmiston Group (JEGI). “As a group and a category, they are in lean-forward, invest mode and ready to play offense.”
And while media companies didn’t snap up a lot of ad tech in 2017, that might change this year.
AdExchanger broke down some of the categories and companies that experts say will color digital marketing and media M&A in 2018.
The media companies
If the best offense is a good defense, then consider that strategy to be a big motivator for media company M&A in the year ahead.
With Facebook and Google taking more than 75% of every ad dollar, content owners need to monetize their first-party data and expand their addressable audiences.
So after buying content and scale, the next step is ad tech.
JEGI’s Geffs predicted many media companies will invest in DMP and DSP-like capabilities to capitalize on their large cross-platform data sets. And because publishers are concerned over data leakage, they may opt to own, rather than to rent, their tech tools.
Media companies will also need to acquire their way into programmatic and advanced TV.
Media conglomerates like Disney may want to plant their stake in advanced TV with acquisitions spanning video workflows, ad buying or even dynamic video content platforms, predicted Martin Kihn, a research director at Gartner.
Up until now, Disney’s been somewhat of a laggard in the data department, as peers like Comcast’s NBCUniversal and Fox Networks doubled down on audience platforms to support their advanced advertising businesses.
Beyond the legacy broadcasters and content companies, look for new media companies like Group Nine, the publisher of NowThis Media, Seeker, The Dodo and Thrillist, to acquire either content or ad tech assets.
With a fresh round of funding from existing investor Discovery, German media giant Axel Springer and VC firm Lerer Hippeau, Group Nine is well capitalized to expand video content and technology through what Group Nine CEO Ben Lerer described as “selected acquisitions.”
While Verizon has years’ worth of ad tech acquisitions inherited from AOL and Yahoo, experts predict AT&T’s new investments into data-driven advertising will turn up the pressure.
“Verizon continues to rationalize their existing ad tech assets in its post-integration efforts,” Thompson said. “That said, the pipeline of available acquisitions for them has never been longer. AT&T's new regime is experienced and well positioned and theoretically could challenge Verizon for acquisitions. However, by the same token, both can afford to be choosy.”
While telcos have already accumulated a lot of digital and mobile data, they might want to build out the programmatic pipes next to monetize it all.
“There could be more acquisitions like Singtel and Turn – [like] Verizon or AT&T acquiring a DSP at a discount,” noted Gartner’s Kihn.
The marketing clouds
The marketing stacks have been the go-to acquirers in years past, but that era is coming to a close.
“They have a lot of digestion to do,” JEGI’s Geffs said. “Buying software and data is one thing; making it all work together is another thing.”
Kihn predicts mar-cloud acquisitions won’t completely go away – they’ll just come in a different flavor.
“There are still a number of strong independents in the location and device graph space, and this data can be used for targeting, measurement and outside marketing for research and security,” he noted. “Acquirers could include IBM, Oracle and SAP.”
Conversely, cloud interests are changing, with new capabilities like artificial intelligence driving forward new technology innovation.
But despite deeper investments into media and AI (think Salesforce’s Einstein and IBM’s Watson), most marketing clouds still rely on email as their primary channel focus.
“They all need better segmentation and predictive capabilities,” Kihn said. “I think there will be more acquisitions like Zeta and Boomtrain – mar tech clouds acqui-hiring AI and ‘orchestration’ startups. Acquirers could include Salesforce, Google and even Amazon.”
IBM and Salesforce will mostly be interested in media as a way to access data and behavioral insights for each of their respective AI efforts, predicted Thompson.
“From that perspective, risk/reward analysis would suggest partnering with the ad tech sector, rather than owning,” he said.
The ad platform pack
Finally, you can’t rule out existing ad and mar tech platforms as M&A acquirers.
Companies like Sizmek, Marketo and Mediaocean, are backed by private equity and could foreseeably buy/build their way into larger stacks augmenting both ad and mar-tech.
“The next tier would include a mix of public, PE-backed participants: The Trade Desk, Criteo, SendGrid, Sizmek, Mediaocean, Marketo, Cision, Rubicon, MediaMath and AppNexus,” according to Digital Capital Advisors’ Thompson.
JEGI’s Geffs agreed, noting that for every strategic exit, expect one or two more consolidation plays.
“There are a lot of duplicative companies with a fair amount of capital that need to be rationalized,” he said. “People are resourceful and innovative, but I still think there will be a fair amount of consolidation.”