Embedded Specialized Accomplished
OMMA DDM Conference
July 24, 2013
The Imminent Ad Tech Shakeout:
Is Consolidation in the...
2
VC Investment in Ad Tech Declining
Source: Headwaters MB
$645.3
$786.9
$1,242.0
$543.1
$431.0
$945.9
$573.3
$257.8 $253....
3
M&A Activity Increasing as Investors Lose Patience
Ad tech transactions for the first half of 2013 doubled YoY from the ...
4
Recent M&A Activity
Date Target Buyer / Investor Comments
Jul 2013 IgnitionOne
(spinout from Dentsu
led by management)
A...
5
What’s Driving This?
Investors have realized that Ad Tech Businesses are generally profit-challenged
Too many “point sol...
6
Ad Tech IPOs
Tremor Video’s recent IPO suggests previous unsuccessful attempts at securing buyers as
those with interest...
7
Ad Tech Public Companies
Few ad tech companies are publicly traded; few that are public are performing well
― Millennial...
8
Market Still Controlled by Small Number of Top Vendors
Advertising agencies agree there is too much overlap amongst comp...
9
Display Ad Landscape – Unsustainable Number of Players
Source: LUMAscape
10
Search Ad Landscape – Same Here
Source: LUMAscape
11
Video Ad Landscape – … and Here
Source: LUMAscape
12
Mobile Ad Landscape – and it’s becoming an issue Here
Source: LUMAscape
13
Social Advertising Landscape – as well as Here
Source: LUMAscape
14
Agencies / Advertisers Want to Deal with Fewer Vendors
and More Single Stack, Multichannel Solutions
Source: LUMAscape
...
15
So What’s Happening? Consolidation of Point Solutions
toward Broader Platform Offering
Source: LUMAscape
16
Potential Consolidators?
Company Capital Raised Investors Comments
AppNexus $75.0M (Jan 2013) TCV, Venrock, Tribeca • D...
17
Spring 2013
Online Advertising Report
Strategic Buyer Interests
Low Interest / Valuation High
Mobile /
Video
Social
Onl...
18
DMP Trends
DMPs have become fragmented as well – need for a DMP for DMPs / DSPs to emerge
― Validate and “cleanse” data...
19
DMP Trends
59.0%
69.0%
73.0%
76.0%
83.0%
84.0%
84.0%
86.0%
90.0%
93.0%
0.0% 20.0% 40.0% 60.0% 80.0% 100.0%
Advertising ...
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Dan chen

  1. 1. Embedded Specialized Accomplished OMMA DDM Conference July 24, 2013 The Imminent Ad Tech Shakeout: Is Consolidation in the Horizon?
  2. 2. 2 VC Investment in Ad Tech Declining Source: Headwaters MB $645.3 $786.9 $1,242.0 $543.1 $431.0 $945.9 $573.3 $257.8 $253.3 $324.5 109 98 90 99 96 75 63 57 48 56 $7.3 $8.8 $17.7 $6.8 $5.3 $14.6 $11.5 $5.5 $6.2 $7.1 0.0 20.0 40.0 60.0 80.0 100.0 120.0 $0.0 $200.0 $400.0 $600.0 $800.0 $1,000.0 $1,200.0 $1,400.0 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 NumberofDeals Value(in$mm) Aggregate Deal Value Number of Deals Avg. Deal Size Ad tech businesses have largely proven to be unprofitable and challenging businesses to exit successfully
  3. 3. 3 M&A Activity Increasing as Investors Lose Patience Ad tech transactions for the first half of 2013 doubled YoY from the beginning of 2012 ― Investors in the ad tech space are losing patience with slow returns, pushing their companies to either find buyers or show a clear path to profitability 17 34 $163 $1,246 $0.0 $400.0 $800.0 $1,200.0 $1,600.0 H1 2012 H1 2013 0.0 10.0 20.0 30.0 40.0 Value(in$mm) NumberofDeals Number of Deals Deal Size
  4. 4. 4 Recent M&A Activity Date Target Buyer / Investor Comments Jul 2013 IgnitionOne (spinout from Dentsu led by management) ABS Capital, Persimmon Capital • Buyside marketing tech platform • Single stack solution for multi- channel media buying in search, display, mobile, and social • Competes with Turn, MediaMath, Adobe, Marin Software, Kenshoo, Criteo and Rocketfuel. • $100M revenue Apr 2013 Dedicated Media LIN TV • Multichannel ad buying platform Jan 2013 Akamai’s Advertising Decision Solutions Unit MediaMath • Akamai’s data co-op and management platform • Pixel-free tracking technology Jan 2013 MediaWhiz - $10M Matomy • Multichannel performance marketing platform Jan 2013 TapIt! Media - $23M Phunware • Mobile display ad mediation
  5. 5. 5 What’s Driving This? Investors have realized that Ad Tech Businesses are generally profit-challenged Too many “point solutions” funded – Too much overlap and competition Not enough revenue / profit in the market – unnecessary duplicative costs ― Every dollar of agency spend nets a publisher $0.45 on average ― Remainder gets cut up among trading desks, DSPs, exchanges, networks, data suppliers, data aggregators, ad verification, tag management, retargeters, optimization, SSPs, etc. Agencies used to be able to manage multiple vendors – now they all want to consolidate their vendor relationships Only a handful of players are achieving size, scale, profitability (AppNexus) ― Often play the role of consolidator(s) in the space and stepping in where large media strategics have bowed out; can attract growth capital Most players are running out of funding and not in a position to receive more Many driven by impatient investors to exit – oftentimes at unattractive valuations Too large ? … go IPO Too small or undifferentiated? … wind down (AdBrite)
  6. 6. 6 Ad Tech IPOs Tremor Video’s recent IPO suggests previous unsuccessful attempts at securing buyers as those with interest in the space – strategic or financial – become scarce ― Tremor raised only $75.0mm of the $90.0mm it was seeking; unprofitable - $16.0mm loss in 2012 YuMe has recently filed S-1 and others are expecting to follow suit Recent IPOs Indicative of “Last Resort” Options for Ad Tech Companies Tremor Video Stock Price Performance since IPO $6.50 $7.00 $7.50 $8.00 $8.50 $9.00 $9.50 28-Jun-13 29-Jun-13 30-Jun-13 1-Jul-13 2-Jul-13 3-Jul-13 4-Jul-13 5-Jul-13 6-Jul-13 7-Jul-13 8-Jul-13 9-Jul-13 10-Jul-13 11-Jul-13 12-Jul-13 13-Jul-13 14-Jul-13 15-Jul-13 16-Jul-13 17-Jul-13 18-Jul-13 19-Jul-13 20-Jul-13 21-Jul-13 22-Jul-13 ClosingPrice Performance - 16% from IPO open of $10.00
  7. 7. 7 Ad Tech Public Companies Few ad tech companies are publicly traded; few that are public are performing well ― Millennial Media currently at $9.00 vs IPO open $13.00, close $23.50 (down 60%) – unprofitable ― Velti currently at $1.00 vs Mar 2012 price of $13.55 (down 92%) ― ValueClick is the rare exception – its stock has risen over 30% since Mar 2012 price of $19.74 Publicly traded pure play ad tech companies are few and rare; not many are performing well Stock Price Performance Performance ValueClick +30% Millennial Media - 60% Velti - 95%$0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 ClosingPrice Millennial Media Velti ValueClick
  8. 8. 8 Market Still Controlled by Small Number of Top Vendors Advertising agencies agree there is too much overlap amongst companies that only provide simple point solutions over sustainable services ― For every one successful company, there are 35-40 unprofitable companies offering redundant products, splitting a revenue pie that is too small to sustain the entire ecosystem Few end up achieving the size and scale needed to become attractive acquisition targets or to be consolidators in the space 90.0% 82.0% 73.0% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 2008A 2009A 2010A 2011A 2012A IndustryRevenue% Top 50 Top 25 Top 10 Top 10 Ad Companies Command 73.0% of Industry Revenues
  9. 9. 9 Display Ad Landscape – Unsustainable Number of Players Source: LUMAscape
  10. 10. 10 Search Ad Landscape – Same Here Source: LUMAscape
  11. 11. 11 Video Ad Landscape – … and Here Source: LUMAscape
  12. 12. 12 Mobile Ad Landscape – and it’s becoming an issue Here Source: LUMAscape
  13. 13. 13 Social Advertising Landscape – as well as Here Source: LUMAscape
  14. 14. 14 Agencies / Advertisers Want to Deal with Fewer Vendors and More Single Stack, Multichannel Solutions Source: LUMAscape DYNAMIC AD INTELLIGENCE PLATFORM CENTRALIZED AD-SERVING OPTIMIZATION RE-TARGETING DATA MGMT REPORTING ACCESS INVENTORY TO REACH AUDIENCE ACROSS PREMIUM PUBLISHERS AND AD NETWORKS: VERTICALS BEHAVORIAL CONTEXTUAL VIDEOS MOBILE SOCIAL
  15. 15. 15 So What’s Happening? Consolidation of Point Solutions toward Broader Platform Offering Source: LUMAscape
  16. 16. 16 Potential Consolidators? Company Capital Raised Investors Comments AppNexus $75.0M (Jan 2013) TCV, Venrock, Tribeca • DSP Videology $68.3M (May 2013) NEA, Comcast, Valhalla, Pinnacle, Catalyst • Video advertising • DSP RocketFuel $50.0M (Jun 2012) Mohr Davidow, Summit, Northgate, Nokia • Multichannel DSP PubMatic $45.0M (Jun 2012) August, DFJ, Nexus, Helion • SSP OpenX $27.5M (Dec 2012) Accel, SAP, Index, Samsung, Mitsui • Ad Exchange and DSP JumpTap $27.5M (Jun 2012) Summerhill, Redpoint, Valhalla, General Catalyst • Mobile RTB Flurry $25.3M (Nov 2012) DFJ, InterWest, Menlo, CrossLink, Union Square • Mobile analytics and advertising DataLogix $25.0M (April 2013) IVP, Sequel, General Catalyst • DSP Collective Media $20.0M (May 2013) Accel, Samsung, Cox • Ad exchange Nexage $15.0M (May 2012) Hearst, GrandBanks Capital, Relay, SingTel • Ad exchange, mediation and DSP
  17. 17. 17 Spring 2013 Online Advertising Report Strategic Buyer Interests Low Interest / Valuation High Mobile / Video Social Online StrategicInterest/Priority RTB Auction Exchanges DSPs Self-Serve Platforms Local / SMB Search Agency SMS / MMS Marketing In-App Display FB Game Ads Ad Networks Affiliate Networks Display User Acquisition Marketing In- App Video Ad tech companies with strong technology and high potential for scalability in the areas of mobile, video and / or social attract highest interest
  18. 18. 18 DMP Trends DMPs have become fragmented as well – need for a DMP for DMPs / DSPs to emerge ― Validate and “cleanse” data from multiple DMPs / DSPs ― Provide mediation across various DMPs / DSPs in order to maximize targeting accuracy, reach ― Provide integrated DCO, tag management, ad verification capabilities as part of solution Key trend is the separation of the data layer from the execution layer in the marketing stack ― Brands want to leverage learnings of their audience profiles and customer data and apply that to all marketing and consumer touch-points – online and offline Biggest opportunity for growth lies in ability to use accurate data profiles across all consumer marketing channels ― Huge opportunity in using data to inform offline media buying ― Important areas of focus also include social, video and mobile Current implementation efforts are focused on the core purpose of targeted media buying Long-term potential for DMPs to be integrated into core business software systems to facilitate data-driven decision making on sales, product dev, fin mgmt
  19. 19. 19 DMP Trends 59.0% 69.0% 73.0% 76.0% 83.0% 84.0% 84.0% 86.0% 90.0% 93.0% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Advertising Yield Optimization Site Content Optimization Creative Content Optimization CRM Program Optimization Channel Optimization Emerging Channel Deployment Multichannel Integration & Optimization Campaign Channel Attribution Targeted Media Buying Customer Insight Development Priority Applications for Future DMPsGenerally Supported Applications by Existing DMPs 23.0% 32.0% 32.0% 36.0% 37.0% 40.0% 44.0% 45.0% 78.0% 82.0% 0% 20% 40% 60% 80% Emerging Channel Deployment Creative Content Optimization Site Content Optimization CRM Program Optimization Advertising Yield Optimization Multichannel Integration & Optimization Campaign Channel Attribution Channel Optimization Customer Insight Development Targeted Media Buying Survey conducted by IAP & Winterberry Group
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