A new survey by AdMedia Partners, a boutique investment bank in New York, finds that most ad agencies and media owners aren’t looking to buy ad tech companies, which isn’t good news to the investors that have pumped lots of money into ad tech in the last few years.
According to its annual survey on mergers and acquisitions, just 27 percent of the agencies and media owners expressed interest in ad tech firms, vs. 61% who were interested in analytics firms (see my blog post on HootSuite’s acquisition of uberVU), followed by social marketing shops, digital agencies and mobile marketing firms. Ad tech companies sit at 11th, even though the firm says they are being acquired at the same prices as analytics players (eight times earnings).
While this does suggest that ad agencies and media owners aren’t interested in ad tech, I don’t think it necessarily means ad tech is unattractive to everyone. This could just mean that the most likely buyers of ad tech companies are other ad tech companies (e.g. Google) who can see the real value and round out existing product offerings. Seth Alpert, a managing director at AdMedia Partners, says many ad tech companies represent discreet functions as opposed to a whole suite of services, and therefore have limited appeal to agencies and media owners.
Alpert goes on to tell AdWeek that “There is a broad sentiment that I’ve come across … which is that ad tech is over-invested. There are too many ad tech companies, a lot of them are point solutions [and] they need to be part of something bigger. So, I think that’s one factor here that leaves some buyers cautious.”
Further, “They should be scared to death of owning an ad tech company because A, they don’t really understand ad tech and B, they don’t know what they don’t know,” Alpert said.
I think that’s a valid point. The worst thing an agency or media owner could do is buy an asset that don’t completely understand or won’t be able to fully utilize. But there’s no doubt in my mind that ad tech is here to stay and will play a critical role in future advertising spend. But partnering may be a better route for those who don’t understand how it works or its importance, just yet. Regardless, every agency and media owner should be keenly aware of ad tech and how’s its changing the business, and should be aggressive in capitalizing on those changes, not reactive — whether that’s a buy, build, or partner strategy is up to you.
The AdWeek article can be found here.