Data has been called the “new oil” for a while and it seems to grease the wheels of every acquirer’s shopping list in the marketing space.
Whilst the broader ‘Digital Media’ space is being tipped by Digiday to see an “an oncoming flurry of private equity-backed mergers and acquisitions”. This is all against the backdrop of the ongoing antitrust case with Google from US lawmakers and noises of the potential breakup of that ecosystem. Naturally, brands want to ensure their media spend is optimised and meeting this goal is underpinned by having agencies on-side with data-driven measurability and performance skillsets. Ergo, demand for acquisitions.
So what trends are we seeing from buyers in the space?
Marketing Mix Modelling
- Performance and measurability are vital in assessing the value of digital media.
- Media companies often try to do this themselves, but advertisers and publishers see this as somewhat marking their own homework.
- So we have seen a real buzz around specialists in Marketing Mix Modelling (MMM) and marketing revenue optimisation. We have sold two such companies in fact ( Brightblue Consulting in 2021 and magic numbers this year) and we see plenty more consolidation to come.
- As well as the big media agencies, consultancies like Accenture, McKinsey and BCG all have specialist teams in this space but data consultancies are eating into their turf, using AI / tech to produce richer, faster insights and increasingly powered by Private Equity for M&A.
Digital Media
- Data is of course a lynchpin of contextual and targeted advertising.
- Whether that is across more ‘traditional’ digital media (websites) or indeed emerging media like connected TV. Buyers are continually talking with us about this area.
- Naturally, an ecosystem like Youtube, which is eating linear TV’s lunch, provides a fertile pasture for agencies that can harness data – and there are a few of them, especially in the burgeoning TikTok ecosystem.
- The goal for agencies is to boost the effectiveness of the inventory acquired, drive stronger margins on that media, and ultimately, profitability.
- So buyers are eager to acquire those companies that have a business model – agency, managed service, or tech solution – which leverages data effectively and profitably.
First Party Data
- Naturally any agency or tech solution that is able to leverage a brand or publisher’s first party data is also sitting pretty high up acquirers’ lists.
- A company will be in-demand if it is able to analyse point of sale data, perhaps it has a DSP within its arsenal, perhaps the company is prominent in the ‘connected commerce’ space.
- On top of this, there is high demand for agencies in retail media (think a retailer like Walmart selling ad space in their stores or online) and commerce media (think British Airways selling ad space on their planes or online). Everyone is becoming an advertiser and the way they can make the most money from that media space is by harnessing the data – most likely through a third party. Buyers want in on that action.
Other data-centric disciplines (cloud integration & analytics, CRM, CX , etc)
- Whilst a bit of a catch all, essentially any consultancies that are offering data-centric specialisms are drawing regular demand from acquirers that want more effective solutions for clients.
- The major groups are at it: We announced DMPG’s sale to Havas this month – a data-centric agency with a long list of specialisms including the Adobe Marketing Cloud.
- The IT consultancies are too, like Infosys are continually looking to acquire these skills as well.
- That said, there’s a growing number of consultancies that are moving away from data transformation work and focusing more on data management services. Transformation projects are somewhat short-lived and can be hard to predict in terms of resourcing and profitability. Whereas management services provide more recurring revenues and reliable margins.
So, with so much flux in the data space, we can expect M&A activity to continue at pace. The main obstacle to deals is a shortage of suitable assets to acquire. But where there is demand, supply usually finds a way to satisfy it.
Links:
2 https://digiday.com/media-buying/google-is-facing-a-potential-breakup-what-are-the-likely-outcomes/
3 https://www.verdict.co.uk/infosys-looking-to-acquire-firms/
