With over 400 hundred private M&A martech/adtech deals completed in 2015, and analysts predicting even more for 2016, adtech companies across the spectrum are thinking about the options for both buying and selling. Below we examine three deals that have taken place so far in 2016 to see what are the key drivers fuelling this acquisition frenzy.
The first trend is larger companies acquiring smaller companies in order to increase their reach and scale as evidenced by the RNTS acquisition of Inneractive for $46 million in cash (plus up to $26 million in earn outs and retention payments). Listed on the Frankfurt Stock Exchange with a market capitalisation of €230m, RNTS is a self-proclaimed “holding company that owns multi-national businesses in the mobile ecosystem, with a specific focus on developing innovative platforms”. RNTS is the parent company of Fyber, which is a leading mobile advertising technology platform, and RNTS clearly sees synergies between these two companies.
Inneractive, the target, is an Israeli business founded in 2007. Inneractive is a fast growing, mobile RTB-based ad exchange focussed on display, native and video ads. Inneractive claimed it had revenues of $42.2 million in 2015 and projected it could double revenues in the next few years.
RNTS is outwardly trying to increase its reach and scale: as outlined in the press release, combining Inneractive’s 630 million monthly active users across 180 countries with Fybers 500 million monthy active users will significantly increase scale and allow Fyber to explore key new verticals such as entertainment, news, messaging and social networking. At the same time connecting the platforms will increase the volume of parties buying and selling inventory to create a much more liquid marketplace for both companies.
This acquisition is therefore clearly indicative of a global company that is looking to scale and expand. The strategy is to buy similar smaller companies that operate in different markets in order to increase size and become a market leader. As Tech Crunch reported, size is often seen as success in adtech because scale is viewed as the key to optimising price revenues. The past few years have seen many of these types of acquisitions and they seem set to continue as the market consolidates further on this basis.
While consolidation along the lines of the above is often focussed on the larger company scaling, there has also been evidence of smaller companies making themselves available for acquisition by larger companies, to benefit from the experience and global offering that their soon-to-be parents have in order to expand their own offering. This driver can be seen in the recent acquisition of NativeX by Mobvista.
Recognised as the third largest mobile advertising network, after Facebook and Google, Mobvista purchased the 12 year old NativeX, who has an audience of 1.3 billion mobile users and works with over 1000 publishers, for $25 million. NativeX provides native ad solutions for mobile games and ads, including its robust native video advertising platform. CEO of NativeX, Rob Weber, who will additionally become a VP for the Mobvista Group post-acquisition, has said the reason behind the deal was that:
“it’s important to be competitive globally in [our] space… by combining with a company that is strong in Asia, we’ll be able to see faster growth.”
The acquisition will allow NativeX to expand its distribution of its native ad technology throughout the world to become truly international. Acquisitions such as this also allow companies to expand their teams in order to keep up with expected growth. Many smaller companies offer great products which are successful in their own rights but need to come under a larger umbrella in order to distribute across the world and increase revenues.
Finding a Solution
The adtech M&A market isn’t all about physical growth and many companies are on the look-out to integrate with companies which can solve some of the problems they face or improve products.
One example of this is Outbrain’s acquisition of Revee. Outbrain operates by providing a web user with suggested articles, slideshows, blog posts, photos or videos with those recommended publishers paying Outbrain for directing traffic in their direction.
According to Tech Insider one of the biggest problems Outbrain was facing was determining which content is the most popular in order to set up their traffic signals. They were being guided by assumptions such as “video is more valuable than text” or daily or monthly averages. The problem is that popular content changes drastically and the yield on some pages over the course of a day can change in large proportions.
Enter Revee. Revee’s analytics products can produce a real time analysis of what is happening on each page allowing Outbrain to know exactly how much pages are worth at that moment. And so Outbrain bought Revee in order to launch a new product that lets publishers know exactly how much individual articles are generating in revenue, in real time. This acquisition allows Outbrain to prove its products do work and increase the amount they spend with them.
Judging from the first few months of 2016 consolidation in the market doesn’t look set to slow down. The above demonstrates that there are different drivers behind these acquisitions, and different strategic thinking. In the adtech market, where there are constantly new companies offering new products, staying ahead is key and this includes keeping an eye on the competition, courting the bigger players and looking to solve issues through acquisitions.