Amid green shoots of recovery in ad tech investment, a note of caution is warranted
By Ronan Shields • October 15, 2024 •
Ivy Liu
A slew of announcements confirming mergers and acquisitions in the ad tech sector during Advertising Week New York has stoked enthusiasm among dealmakers that late 2024 will deliver a flurry of such activity.
Separately, the $25 million funding announcement for one of the most prominent names in ad tech — Brian O’Kelley’s Scope3 — could have seasoned observers thinking the clocks turned back to the giddy days of 2014 when the sector was the fastest-developing sector of digital media. Still, amid such heady announcements, it’s worth exercising a note of decorum.
Last week, Zeta Global announced the acquisition of LiveIntent for approximately $250 million, funded with a mix of $77.5 million in cash and $172.5 million in Zeta’s common stock. The deal also includes potential earn outs tied to performance targets, which could add up to an additional $25 million per year over the next three years if specific EBITDA growth milestones are met.
The strategic rationale for the acquisition centers on Zeta’s need for ID-targeting (especially given the much-delayed but inevitable decline of the third-party cookie), with LiveIntent’s email-based identity solutions scratching that itch.
Meanwhile, after Digiday first broke news of such negotiations in July, JW Player and Connatix confirmed their merger plans to create a comprehensive video technology and monetization platform, dubbed JWP Connatix, geared toward servicing broadcasters, publishers and advertisers with end-to-end capabilities, particularly in the rapidly evolving CTV landscape.
Meanwhile, in the same week, Scope3, the startup specializing in garnering the trend toward sustainable marketing and helmed by ad tech godfather Brian O’Kelley, announced a $25 million Series B funding round (notably led by Google Ventures).
It is with its latest round that Scope3 has raised a total of $45 million since 2021 — with investors such as Venrock, Room40 Ventures, Craft Ventures, Aperiam Ventures and Virgo Strategic Investments — with O’Kelley noting, “The biggest AI players are monetizing through advertising, just like the search giants before them,” in the Oct. 9 announcement.
Meanwhile, fellow ad tech veteran Fabien Magalon has also announced an $8 million funding round, led by Ventech and Spring Invest, for his attention-measurement outfit XPLN.AI.
Further still, the recent market report from LUMA Partners depicts the second half of 2024 as a “soft landing” for M&A, with the number of deals in the ad tech space at their “highest levels since the first half of 2022,” with deal volume up 13% quarter on quarter during Q3.
One such notable deal was Outbrain’s purchase of Teads, the first unicorn deal in the sector for several years, with sources telling Digiday that several other parties had kicked the tires of the sell-side unit before the August announcement but balked at the price.
However, according to sources, any subsequent funding rounds or M&A deals we can expect in the months ahead will likely be more modest, even with recent interest rate cuts.
Sources at Advertising Week New York consulted by Digiday said they anticipate consolidation moves from companies on the public markets: Zeta’s purchase of LiveIntent is a case in hand, with Verve Group’s acquisition of Jun Group and LiveRamp’s purchase of Habu serving as earlier 2024 examples.
Although most sources seemed to think Criteo’s recent takeover talks with Skai had stalled, according to one M&A exec, who requested anonymity to preserve commercial relationships, the French company’s board was not convinced that the company formerly known as Kenshoo was worth more than the $500 million-plus asking price.
Similarly, others expect many of the ad tech companies that listed publicly over the 2020/2021 window to be taken private — primarily because they failed to live up to the hype cycle around digital valuations in the post-Covid world.
Many cited Cadent’s purchase of AdTheorent as a prime example of such outfits bowing out with a whimper rather than going out with a bang, and they anticipate more will follow, especially as private equity players attempt to squeeze value out of what tech such outfits actually have.
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