With speed to market being the underlying 'make or break' factor for the adtech industry, record numbers of mergers, acquisitions, and consolidations will continue.
Yesterday, Vector Capital agreed to pay US$145 million to acquire Rocket Fuel, the artificial intelligence company that predicts optimal customer responses. A backer of Sizmek, Vector Capital has effectively come to the rescue of Rocket Fuel, which was valued at US$2 billion in 2013, following its IPO, dropping in value as advertising technology becomes much harder to compete in and data duplication lowers effectiveness across campaigns.
On Monday, nToggle was acquired for US$38.5 million by the Rubicon Project, an adtech firm that has experienced a year-over-year earnings decline. The acquisition will allow the Rubicon Project to utilize nToggle's technology around bid request optimization to create a cost-effective programmatic buying experience for advertisers.
And it's not just adtech consolidation; agencies are also getting in on this.
In a bid to boost its capabilities in predictive analytics, Dentsu Aegis Network has approached data analytics firm Aquila Insight Limited. Should the deal go through, Aquila will become part of Merkle, a performance marketing agency under Dentsu Aegis Network, rebranded as Merkle|Aquila. In April, a similar deal was made for Divisadero, a digital analytics consultancy based out of Spain.
Every ad tech company we interview claims to be better than the others, more transparent, and more viable as a partner for reaching qualified media impressions. The problem is, there are so many of them claiming the same USP, that it is hard to make sense from all the noise. Advertisers feel the same way, and with interest towards programmatic waning, mass consolidations are necessary to keep potential customers interested and take on the duopoly.
The acquisitions clearly demonstrate that acquiring a data stack makes much more sense than creating one over time from scratch, especially in a mature market such as in 2017. This is because speed to market, as evidenced by the duopoly, is of utmost importance and integral to survival. Granted, the new players lack the ecosystem that Oath and the duopoly have, but the aggregation of their data and targeting capabilities could potentially rival when depth is valued over width, from quantitative valuation towards qualitative.
As scale has proven to be no longer enough, it will evidently now take double-digit billions for adtech companies to achieve profitability and lower the impact of margin compression on their bottom line. For Q3 2017, we anticipate more news of agencies making more acquisitions for the trifecta purposes of integrating tech stacks, acquiring quality super cookies and locking in the technical talent that will make sense of it all.
|Babar Khan Javed is Campaign's Southeast Asia editor.|