In this article, Sameer Sondhi, chief revenue officer, Verve Group, shares how the last few years have groomed the adtech industry for the significant consolidation it is experiencing now. He further shares what he believes will be the core focus of the industry this year.Â
After a relatively slow 2020, merger and acquisition (M&A) activity in the adtech sector will see a significant surge in 2021 — one that goes well beyond the natural curve of the overall market. The past few years have set the stage for this moment, and we are now looking at a maturing industry that is ripe for — and, in fact, requires — consolidation to continue to fulfill its promise.
We have already seen hints of the forthcoming M&A surge in digital advertising technology, particularly toward the end of 2020. Some of 2020’s notable moves included the following:
- Rubicon Project and Telaria merged to form Magnite, whose shares have jumped 5-fold with a market cap of almost $3.5 billion. Then, just this month, Magnite acquired video supply-side platform SpotX from RTL Group for $1.17 billion.
- Twitter acquired mobile DSP CrossInstall to bolster the value and offering of MoPub.
- Fox joined the streaming wars with its $440 million acquisition of Tubi TV.
- Comcast’s video adtech company FreeWheel acquired SaaS DSP Beeswax. Earlier in the year, Comcast also acquired XUMO, an ad-supported streaming service.
- InMarket acquired NinthDecimalOpens a new window , a location-based attribution platform.
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Taken together, these industry shifts serve as a teaser to what we can expect to unfold over the coming year. For example, as of January 2021, The Trade Desk has a market cap of almost $37 billionOpens a new window and is likely looking to add new elements to its business. Meanwhile, Xandr is reportedly looking to divest some of its assets. Beyond that, there will be at least two large IPOs (mostly gaming and media combinations) in 2021: AppLovin (rumored at $10 billion+) and IronSource (rumored at $6-7 billion+).
In other words, after being a relatively neglected sector for several years, digital advertising technology is back on investors’ radars in a big way. Investors today are seeing higher adtech evaluations, partly due to the ongoing marketplace consolidation. This consolidation helps the industry by elevating a handful of leaders within the otherwise over-fragmented space. This consolidation also opens room for the birth of new startups with innovative solutions. We expect CTV, audio, identity, and mobile app solutions and platforms to be the core focus of investors this year.
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The Forces Behind Adtech M&A in 2021
The forthcoming consolidation in digital advertising technology is a natural evolution of any space as fragmented as adtech right now. But it is also telling of the larger trends within the industry at present. Over the past three to four years, specialized vertical players have been looking to pivot toward new ambitions. For example, we saw rewarded video companies looking to launch their own open exchanges. Now, some are looking to run private marketplaces (PMPs), while others have tried to establish DSPs in-house.
Despite marketplace-driven pivots, many adtech companies have still not been able to break the barrier to long-term independent sustainability. Many are, therefore, actively looking to join well-placed global organizations that can help them expand the specialized work they have been doing in recent years.
In 2021, the industry is looking for global omnichannel platform players that can help advertisers, agencies, publishers, and other tech players leverage these platforms most effectively. While our industry generally recognizes the benefits of self-serve platforms, there are also several Tier-2 and Tier-3 players looking for managed services so they can avoid operational overheads and instead focus on sales. This is a reality that advertisers and investors alike will need to bear in mind as they place their bets.
In short, buckle up. Adtech in 2021 is going to be a fascinating ride.