Don’t fear the leap year: Q1 M&A figures indicate a healthy 2016 for ad tech

The year has started strongly for the ad and marketing-tech sectors, but will the upward trend continue? Results International’s Julie Langley assesses the latest M&A activity.

The first quarter of 2016 was the joint third highest on record in terms of ad-tech/mar-tech merger and acquisition deal activity, with a total of 108 deals completed.

In the public markets we saw ad-tech stocks grow for the second consecutive quarter, a positive trend within the context of a broader tech sell-off, and some exciting new buyers have entered the space.

All in all 2016 has started very strongly, but the big question is will this upward trend continue?

There are undoubtedly still some specific challenges on the horizon. Issues around adblocking, fraud and data privacy take the lion’s share of the headlines, however, the other significant issue remains mobile. Making the transition to a mobile-first marketplace is still perhaps causing the biggest headache for the ad-tech industry; chiefly how to target consumers on mobile and, particularly, across multiple devices.
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From that perspective, it comes as no surprise that mobile was the common denominator between the two biggest deals in the first quarter, Tapad and Opera. Telenor paid $360m for Tapad, while that figure might appear high, Tapad potentially offers a solution to the industry-wide problem of cross-device tracking.

This acquisition figure was dwarfed, however, by the $1.2bn paid by a Chinese consortium backed by the Golden Brick Silk Road fund for mobile-led adtech platform Opera Software. Notably, Opera is a company for which Q4 growth last year was almost exclusively driven by its mobile advertising division.

The APAC region is certainly worth watching closely. As its domestic markets become increasingly saturated, and with the economic uncertainty in China, it seems inevitable that well-resourced Asian acquirers will increasingly look overseas.

To put this into perspective we are seeing increasing activity in Asian markets quarter-on-quarter. In Q1 we tracked 10 deals completed in total by companies from Japan, South Korea and China, seven of those acquisition targets were based outside of Asia. It would seem the time may be nearing for acquirers from APAC to take their place on the global M&A stage.

There was further convergence between ad-tech and mar-tech in the first quarter, a good example being Oracle’s acquisition of AddThis, an audience tracking firm. The incumbent agencies, such as Dentsu and Publicis, are also continuing to bolster their own tech offerings in the wake of increasing competition from players from the enterprise software arena.

The first quarter also saw notable emerging acquirers spending significant sums to enter the space. In addition to Telenor’s acquisition of Tapad, Internet Brands bought Demandforce; Yellow Pages paid $26m for Juice Mobile; and Time Inc. acquired Viant.

Clearly, we’ve reached a point where virtually every category within the Telecom Media Technology (TMT) ecosystem is being impacted in some way by ad-tech and/or mar-tech. The simple fact is there are more buyer groups seeking to acquire to stay relevant. This means ad-tech and mar-tech firms able to demonstrate scalability, differentiation and innovation will continue to command a premium valuation.