"The first half of last year was less active and the largest single transaction was Syncapse’s purchase of Clickable for $30 million," CDP Managing Director Colin Knudsen told AdExchanger.
It's been clear for some time that consolidation in the space has been under way since at least late last year. There appears to be a growing sense that there's too much overlap and not enough differentiation in services in the demand side platforms, video advertising and social media marketing. The industry is at a point where investors either want to see a return from companies that have taken on tens of millions of dollars of venture capital, or at least greater promise that these businesses are showing signs of building actual scale. The patience that came with the growing revenues of online ad revenues is at an ebb.
This is one reason, perhaps, that companies such as Tremor Video have sought a place in the public markets. Since opening its doors in 2005, Tremor has raised a whopping $116 million. The company filed its IPO last Thursday, raising $75 million – noticeably less than the $90 million it had hoped for when it filed its amended S-1 over a month before.
As the S-1 numbers showed, in 2012 Tremor's total revenue rose a mere 16%, from $90.3 million to $105.2 million year-over-year. At low end of the spectrum, Magna Global expects online video dollars will grow 23% this year, while eMarketer says online video spending in the US, where 90% of Tremor's revenue derive, will rise 41%. In the meantime, the stock has traded downward every day since its IPO was filed (after the initial opening price of $10, Tremor's stock closed Tuesday at $7.95 – a loss of 20% in less than a week.)
Analysts say that a company will file for an IPO when its investors demand it, reflecting a desire to be made liquid again. While it's unclear what led Tremor to decide on the IPO route, its general situation nevertheless represents a cautionary tale for companies that have taken on too much funding to make it easy to sell to a larger company.
Specifically, if you can't scale your business by ensuring that revenues grow comparably to the larger industry environment, the public markets may not offer much refuge. But for the moment, deal activity in the ad tech space is still healthy and buyers and investors are not keeping their wallets closed; but as reports like CDP shows, it is likely to become more difficult to pry more and more dollars out of the individuals and companies with those fat wallets.