Smart AdServer Goes Independent Via Private Equity Firm

adsecParis-based direct and programmatic ad platform Smart AdServer will break away from its parent company, the Internet portal AuFeminin, through a buyout by private equity firm Cathay Capital for $42.1 million, the companies said Thursday.

“Smart AdServer is entering a new phase and the market is evolving very fast,” said Smart AdServer US General Manager Romain Job. “Growing the business requires further investment, and our new partner is going to be able to drive this strategy.”

“There is a huge interest in ad-serving technology because, although this kind of platform has been commoditized throughout the years, it remains at the center of the ecosystem,” he added.

Founded in 2011, Smart AdServer’s core products are Smart RTB+ and Smart Video, both launched in 2013. The firm employs a staff of more than 100 in 10 offices worldwide and works with roughly 450 publishers, marketers and agencies like Hi Media, Le Figaro, Le Monde, IQ Digital, Netbook and L'Equipe to deliver upward of 140 billion ad impressions monthly.

Cathay Capital specializes in helping firms expand globally, and that will inform the first phase of Smart AdServer’s road map.

First, Smart AdServer will work to expand its presence in North America by building out its New York office (opened in 2014) and plans to open a second West Coast office by the end of the year. Next, Smart AdServer aims to grow its foothold in the programmatic marketplace for web, video and mobile.

“On the programmatic marketplace, publishers expect easier to use platforms and more aggressive price-to-value ratios, and our vision is to facilitate that need,” said Job.

Competing With The Ad Server Trifecta

The move to break away from AuFeminin positions Smart AdServer as an alternative advertising platform for media companies, and could be seen as a play to create a fourth major ad-serving platform for the buy side to compete with Google’s DoubleClick for Advertisers, Facebook’s Atlas and Sizmek.

“DFP is the biggest player on the market and in the world,” conceded Job, when asked if Smart AdServer could stack up against the competition. “We don’t expect to take that position in the coming years.”

Given Smart AdServer generated turnover of $16 million in 2014, Brian Andersen of strategic advisory firm LUMA Partners was also skeptical of a real competitive opportunity.

“Given the numbers, as far as truly competing against Google’s DoubleClick, that would be a really tall order,” Andersen told AdExchanger. “And ad servers in general are really sticky. Smart AdServer is not only competing against Google, they’re competing against Facebook’s Atlas, and Facebook has the added advantage of integrating their own data into their ad server as a differentiator.”

Private Equity Firms Buying Into Tech

Whether or not Smart AdServer can stack up to other major players over time depends on its ability to scale. But its exit via a private equity firm could signal a separate trend.

Last week, private equity firm Vista Equity Partners snapped up Automated Insights. Automated Insights isn’t an ad server. It works in big data processing for content generation.

According to Anderson, the industry can expect more of the same type of interest to bubble up.

“In general there is a lot of private equity interest in digital media and digital marketing,” he said. “Private equity buyers are generally looking for companies that have scaled business.”

“Private equity companies have been acting, and there are others that are interested in buying a platform asset, meaning a company that has decent scale, a decent customer base, good technology and strong management teams,” he added. “There definitely could be more interest and more activity from private equity buyers.”

For Smart AdServer to be a distinct player, it could aim to scale through M&A. For example, since private equity firm Symphony Technology Group bought Shopzilla in 2011, the e-tailer has been building out its marketing solutions.

And last year, private equity fund Apax Partners bought Answers Corporation, parent company to Answers.com, and are now focused on scaling an ecommerce-centric marketing business.

What's driving equity firms’ ongoing interest in digital media, marketing and tech? The private equity players have a lot of money to put to work, for one thing, explained Anderson, but they’re also focused on chasing established industries where cash flows are growing.

“If you go back in ad tech just a few years ago it was a much smaller market with not as many scaled companies, but there are now a number of companies that are scaled,” Anderson said. “Buying a scaled player and the additional complementary assets to plug into that is a very difficult private equity play, but now the market is mature enough where that is realistic.”

 

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