Get ready for M&A action in the content space
With a flurry of mergers and acquisitions sweeping the industry, Julia Crawley-Boevey, director, Results International, shares her analysis.
Results International recently brought together a group of leading figures from the content industry – clients, media agencies, technology providers and publishers – to debate issues affecting the industry. Thoughts on consolidation in the sector were prompted by the discussion.
There was much comment recently at the acquisition of John Brown Group by Dentsu Aegis – no doubt driven by iProspect’s desire to marry content nous to its search and digital offering. It has also, unsurprisingly, led to some debate over what this means for future consolidation in the content space.
Generally, consolidation follows/reflects consumer needs. Content isn’t in itself new and neither is what is happening in native advertising and other forms of digital distribution. The shifting market is really a development of the worlds of PR, media and digital, driven by customers and what engages them.
Content needs to be scalable, which is where distribution comes in, and clients want to see informed work from agencies. They want to be wowed, but also want to know why decisions were made – hence data/analytics and measurement are so important. They also want to know that agencies take into account every aspect of learning at their disposal from tech and data – so the more they have of this in house, the better then can join up the circle and give clients what they need.
Given that the default user reaction is to leave, the onus is on creatives to make great digital ads and publishers to create highly engaging experiences.
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Consolidation will therefore work best when it allows great creative content that drives engagement. The iProspects of this world fall into the marketing distribution element of the circle – they’ve realised that they need good content to get up the rankings in search. That is a specific need and we are likely to see more search agencies buying into content.
When it comes to the more technology-driven side of the content space, during the last 12 to 18 months we’ve seen a lot of early stage fund raising in content-focused native ad tech businesses – those building a programmatic offer or building large ad networks such as Sharethrough.
However, VCs won’t want to see exits straight away – they want to see the businesses they’ve backed grow sizeably and generate the decent, high value return they all seek. So we’re unlikely to see consolidation immediately after these investments.
That said, there have been a couple of smaller acquisitions such as Sharethrough buying VAN, a deal fuelled by Sharethrough’s ambition to scale internationally and grow its inventory base.
Smaller acquisitions and consolidation are often driven by a need for inventory, scale or diversification, e.g. moving into a different country or geography in order to stand apart within a fragmented market. This tends to happen irrespective of broader market trends and there should continue to be a fair amount of this taking place in the months ahead.
Meanwhile, the well-capitalised ad tech businesses out there are looking for innovation in ad tech to add new capability to their existing tech stacks – like Appnexus and MediaMath and other big DSPs and SSPs such as Rubicon Project.
They’ve historically been focused on display ad buying and are now thinking of other areas of business in order to stay ahead of the market (and ultimately client trends) and maintain their growth. It is feasible that they will target native ad tech in the same way they’ve already looked at video and mobile and continue to do so.
There are some well-capitalised buyers out there who will be interested in consolidating, as well as the big agency networks looking to make strategic investments, as they have done in the past with ad tech.
There is also the strategic side, as quality of content has such a big implication on distribution – whether in native or via Google algorithms. Those people who work on the strategic level create content that is brand-aligned but also think about target audiences and where to really drill down and find them. That means we’re likely see PR players coming into the equation. The classic PR agencies have grown their digital capabilities but need to be content led. The B2B PR agencies in particular know that brand strategy requires good content.
When it comes to media agencies, there may well be consolidation between content and media planning. Driving both owned and earned media requires content-led strategies with the right material in the right places. Content goes hand in hand with media planning as it’s all about effectiveness and relevant content to build consumer engagement and that sought-after emotional connection.
Fundamentally, Dentsu’s acquisition of John Brown is a strategic play in the light of content strategy just like any other M&A trend we’ve seen. Content is still a newish fad, just like digital a decade or so ago. With the rise of all these digital platforms, brands need a different kind of campaign and they’ve labelled it content – it’s the way the industry has evolved.
There aren’t many pure content agencies out there, but a lot of existing PR and digital and even ad agencies are now coming at campaigns from a content perspective and re-engineering themselves to become content led – though if they haven’t already started on that journey it will take them a few years to make that happen.
It’s good news for the newer, pure content players on the block, many of which will no doubt be snapped up by the bigger agencies.