After what seemed like a quiet period on the M&A front, ad tech companies appear to be back up for grabs. August alone has seen tie-ups between Outbrain and Teads, and Adelaide Metrics and Rita, as the summer months thaw out a cold snap in the M&A market.
Terry Kawaja, Founder and CEO of LUMA Partners, a strategic advisory firm, says M&A activity went through “a decade-long low” in 2023, citing economic uncertainty as a major cause for the standstill. High interest rates, global wars and recessionary fears loomed over the economy, prompting ad tech companies to cut costs last year.
“In 2023 nearly all the companies in the sector got the memo on efficiency and cut costs dramatically,” says Kawaja. He notes that the EBITDA margin of public ad tech companies rose by an average 7 percent between H2 2022 and H2 2023. This made them more sustainable acquisition targets, which combined with a freer flow of capital, reignited M&A activity in 2024.
Backseat drivers
But the recession was not the only factor to never actually materialise; Google also announced it would not be phasing out third-party cookies in Chrome. Cookie deprecation had already been touted as a driver for several acquisitions in the TV space this year, including Seedtag’s acquisition of Beachfront, and Cadent buying Adthorent.
And cookieless solutions will continue to drive M&A activity, according to Mo Allibhai, Senior Analyst at Forrester, not least because Google’s latest plans involve allowing users to opt-out of third-party cookies. And Allibhai argues that between the repeated deadline delays, regulatory hurdles and non-viability of Google’s Privacy Sandbox, cookie deprecation was “largely irrelevant to anyone’s plans” over the last year.
“Google could not have played their hand worse with this rollout,” he says. “They basically announced that they’re a backseat driver, or a bit player in advertising, and I think they’re ok with that. But it almost becomes more urgent in that situation for us to take action in the absence of any leadership from the tech standard bearers. So I think everyone who’s acting in the presence of information that they believe cookies will be going away is probably correct.”
CTV, retail media and AI
Regardless of the fate of the third-party cookie, the rise of CTV continues to drive M&A in the ad tech space. Eric Franchi, General Partner at AperiamVentures, a venture capital firm specialising in ad tech, cites Outbrain’s acquisition of Teads as a particularly “bold bet on video” by the content recommendation company. “CTV and retail media are the fastest growing verticals, so it makes sense for acquirers who need to ensure they have exposure to those areas,” says Franchi.
That said, retail media has yet to spark much movement on the M&A front, at least while ad budgets remain siloed. “I think retail media is exciting, but not necessarily a core area for net growth,” says Forrester’s Mo Allibhai. “It’s more spend that was in one channel is maybe moving over to the other channel.” He adds that retail media companies will likely become acquisition targets within the next year or two.
Meanwhile AI is beginning to shape M&A deals in ad tech. In August 2023, verifiation vendor DoubleVerify announced its acquisition of SciBids, an AI-driven campaign optimisation business. Kawaja calls this “the first application of AI to media buying as manifested in a deal.”
On the flipside, the industry is preparing for the impact of AI on the media landscape, which is also shaping deals between companies who are not in the AI space themselves. Supply-side specialists Sharethrough and Equativ announced their merger in June, highlighting their combined curation and sustainable media offering, which could reduce the risk of wasting ad spend on AI-generated content. “It’s almost a deal that happened in the shadow of AI,” comments Allibhai.
He argues that the merger of Sharethrough and Equativ brings together specialised SSPs, which from a publisher perspective is more economically advantageous than working with a large, generalist vendor. “If you think about an SSP like Google, it’s more challenging to get the product team on the phone; it’s more challenging to really understand the clarity of the vision.”
Investment vs divestment
As a result, Allibhai predicts the days of watching Big Tech “fumble around with ad tech” may be numbered. “The trend I’m seeing is not really M&A so much as divestment,” he observes. This year alone has seen Amazon shutter its Ad Server (formerly Sizmek), and Oracle exit the ad business entirely, after spending billions on ad tech acquisitions, including Datalogix, Moat and Grapeshot.
“It really speaks to the fact that there’s not necessarily an easy dollar to be made in advertising,” says Allibhai. “I think maybe Oracle went on a buying spree thinking there were easy dollars to be made, and then they were divested of that notion. It’s unfortunate to me when a good piece of technology, like an ad server that really innovated in the space, such as Sizmek or Grapeshot, is acquired by a huge company who somehow can’t make it work anymore.”
On the other hand, companies that are divested sometimes enjoy a second life under new management. In January, identity specialist LiveRamp acquired Habu, the clean room provider that started life at Salesforce. “Habu will have experts working on it, people who understand the product,” says Allibhai. “I think that’s the ideal platform trajectory, as opposed to it lingering on the vine and dying from lack of investment.”
Breaking up Google
This potentially opens up one sizeable acquisition target, if Google is forced by the Department of Justice to divest Google Ad Manager (GAM), the proposed remedy in the upcoming antitrust trial against Google’s ad tech business. “I think there’s a strong chance that the DOJ forces the divestment of GAM,” predicts Allibhai. “Then it becomes an acquisition target, or becomes a spin-off unto itself.”
However, Terry Kawaja argues that divestment has little effect on the M&A market. “Amazon is still very committed to its ad business and ad tech,” he remarks, “and no entity could buy Google’s $300 billion ad tech business.”
Indeed, Google is nine times bigger than its second biggest competitor, according to the DOJ. But this leaves room for “really smart consolidation at the next tier of SSP,” suggests Allibhai, between companies that can complement rather than conquer each other.
“By bringing together people, processes and some of the technology of one company with complementary elements from another, that’s really where it’s thoughtfully done,” he says. “Whereas the duplicative acquisitions where you just horizontally acquire another player just to get their book of business, I think those are super limited. Maybe those days are behind us.”
