It’s a tale of the haves and the have-nots. Deal values for mar tech are exploding, according to M&A activity surveys from Jordan Edmiston Group (JEGI) and Petsky Prunier, highlighting the first half of 2016.
By contrast, ad tech, despite heavy consolidation speculation, is still in a slump.
JEGI noted $13.3 billion in deal value in marketing services and tech for H1 2016, up from $12.7 billion during the same period in 2015.
Almost half of this activity (49.4%) came from the mar tech subsector, which saw $6.5 billion in deal value. Compare that with ad tech, which made up only 5.4% of the sector’s deal value at $721 million.
“[There’s been] a continued shift of investment to the CMO side of organizations and to automation, efficiency and effectiveness in marketing to your customers and your best prospects,” said Tolman Geffs, co-president of JEGI.
Meanwhile, ad tech needs to clean up issues like fraud and viewability in order to rebuild investor confidence.
“It’s like you’ve got two classic New York City fruit stands across the street from each other,” Geffs said. “One of them you know that every time you buy an apple, you’ve got a one in three chance of getting a horse apple instead. Guess which bodega is getting more business?”
Within the mar tech sector, email remains active because of its high addressability (content marketing grew 1.1% to $148 million in deal value). Social media was also active, most notably with Microsoft’s $26.2 billion purchase of LinkedIn.
“Anything that speaks to designing and measuring how consumers experience a brand is pretty important,” Geffs said.
Mar tech deal activity is also fueled by new players like management consultancies and technology companies entering the space with a long-term brand focus in mind.
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In Q1 2016, IBM acquired Resource/Ammirati, an agency that focuses on brand experience and design. Deloitte, McKinsey, Accenture and PricewaterhouseCoopers have built out billion-dollar agencies, partly by acquiring creative shops that help them build long-term brand experiences.
“Advertising isn’t the point,” Geffs said. “The brand is the point. Advertising is one tool – and probably nowhere near the most important tool – in conveying that experience. They’re all moving toward, how do you design the experience of a brand and how do all the other pieces and parts, including advertising, support that?”
Mar tech also has a stronger business model: SaaS-based pricing keeps customers on board for the long haul, while ad tech is dependent on how much a client chooses to spend per month.
And with mar tech, ROI is directly observable – customers give their personal information in exchange for some type of reward, and the success of that relationship is measureable. In ad tech, fee transparency related to programmatic makes it difficult to understand what actually goes into a buy.
However, ad tech isn’t completely stagnant, as shown by the above numbers. And as the industry continues to chip away at issues like viewability and fraud, deal activity will rise in the space, Geffs said.
Petsky Prunier also saw a strong period for mar tech deals in 1H16, according to its M&A activity summary released Thursday. Deal activity value among mar tech companies reached $16.4 billion, up 88% from last year’s $11.2 billion, while digital advertising saw total deal value at $3.9 million, down from $5.17 million last year.
