LUMA’s Digital Media Summit 2016

June 5, 2016

LUMA’s 8th Digital Media Summit was a huge success and that’s only thanks to the 500 industry decision makers, including over 300 CEOs, 100 investors and 100 strategic buyers that participated, who led the discussions or supported DMS 16 as sponsors and corporate partners.

With 2016 being the presidential election year and digital advertising supply chain issues becoming more of a focus in the industry, choosing this year’s theme was not difficult: “Scape of Cards” perfectly portrayed the sector suffering from a fragmented ecosystem. See what all happened on May 17th in our DMS video recap below.

At DMS, we presented our annual State of Digital Media which covers our views on the market, the industry trends and the future of the ecosystem. We hope you enjoy it.

The State of Digital Media video presentation at DMS, plus videos of all the main stage talks, participant list and photos are available at the DMS website.

The Marketing Cloud War Heats Up

June 2, 2016

It has been a big week for MarTech M&A. Yesterday it was announced that Vista Equity Partners is acquiring Marketo for $1.8B. Today, Salesforce announced it is acquiring Demandware for $2.7B.

It is no surprise that Marketo is being acquired, since in early May it was reported that they had hired an M&A advisor to “explore strategic alternatives.” At that time SAP and Microsoft were revealed as potential interested parties. These both made strategic sense. Microsoft could couple Marketo with Microsoft Dynamics (its CRM offering), similar to Salesforce with its Pardot offering. SAP also has a CRM offering that it could integrate with, though the more logical play would be for SAP to enter into the “marketing cloud” space with Marketo as its platform to build around, just as it entered the HR space with its SuccessFactors acquisition in 2012.

So what is surprising is the buyer: Vista Equity, a leading private equity (PE) firm. A “strategic” buyer, such as Microsoft, SAP or IBM, has the ability to layer in more synergies than a “financial” buyer, with both cost reductions (such as eliminating redundant positions and offices) and revenue synergies (such as cross-selling products to existing customers). A PE firm has less synergy “levers” to pull – and therefore typically cannot justify the same valuations that strategic buyers can pay. But Vista paid a “strategic” price: $1.8 billion, a 7x trailing revenue multiple. If this were a typical “PE play” where the firm is focused on profitability, Vista would need to make significant OPEX cuts while maintaining revenue growth in a competitive market. Vista is well known for driving exceptional results utilizing its “specific operational improvements” to optimize the operations of its portfolio businesses, but we don’t believe this is the only play here. At LUMA, we have been receiving an increasing number of PE firms asking to discuss potential MarTech or Ad Tech roll-ups, since these are fragmented ecosystems with many targets. And with VCs pulling back on investments, there is a greater incentive for private companies to sell. Therefore, look for Vista to move aggressively with other MarTech acquisitions using Marketo as its core asset. Now is the time, and Vista has the capital.

The Demandware acquisition by Salesforce is a very smart move that makes perfect strategic sense, though they paid a steep price for it (a 10x revenue multiple and 70% premium to its 30-day share price average). There has long been three leaders in the eCommerce platform space: IBM with its WebSphere Commerce offering, Oracle with its ATG acquisition and SAP with its Hybris acquisition. But all these are largely on-premise software solutions. Demandware has been the up-and-comer in the market and is a cloud-based solution that fits Salesforce’s “no software” mantra. More importantly, it is extremely complimentary to its Exact Target business. What is the top marketing channel with the highest ROI used by retailers? Email. While Demandware will also logically fit with Salesforce’s Sales and Service Clouds, it is the combination of the Marketing Cloud (Exact Target) with Demandware that will drive the most value. This acquisition definitely changes the dynamics in the battle of the marketing clouds, with only Adobe now lacking an eCommerce platform offering.

As mentioned above, the fundraising environment has been tightening for MarTech companies, and is even more constricted for Ad Tech start-ups. The number of investments are down, as are average valuations. This, plus the fact that both categories are very fragmented with thousands of players, has created a target-rich acquisition landscape of willing sellers. Additionally, at LUMA we have been discussing for some time how the buyer universe has been expanding, as shown in the graphic below.

Now add private equity to the mix – and expect many more deals to come!


Introducing the Knowledge LUMAscape

May 19, 2016

Digital media and marketing is a complex, dynamic and often convoluted space. Understanding the ecosystem is essential for all constituents from marketers to agencies, publishers, tech intermediaries and investors. At LUMA, we are committed to help foster better comprehension of the sector with the LUMAscapes that map the key players in each channel as well as other content we publish. But we are not alone. In fact, there is an entire network of knowledge sources from a variety of disciplines that can help with navigation of the digital landscape.

The Knowledge LUMAscape is our attempt to map these various knowledge sources.  We hope the Knowledge LUMAscape will become an invaluable tool to all constituents by presenting the key players in each discipline in a visually simple way you have come to expect from the LUMAscapes.

LUMA enjoys relationships with many of these players and welcomes collaboration to help serve client needs.

If you have any feedback, we would love to hear from you at lumascapes@lumapartners.com!

 

Introducing the “Foundational” LUMAscapes

May 5, 2016

For years, LUMA has mapped the intermediaries of the Digital Media and Marketing ecosystem. These maps have always included Marketers, Agencies and Publishers, albeit in an aggregated way. Today, we map a larger complement to these critical players with the introduction of three new LUMAscapes: Marketers, Agencies and Publishers.

The MARKETER LUMAscape plots over 100 of the largest spenders categorized by vertical. These are the companies who are fueling the growth of the ecosystem as they shift ad spend from analog channels and make increasing investments in data and software capabilities to help them market more effectively and efficiently. They are the lifeblood of the entire sector.

The AGENCY LUMAscape maps the many entities that assist marketer clients by type and ownership group. Agencies fill a vital role in helping marketers navigate through the increasingly complex marketing ecosystem. Agencies now also include consulting and tech services companies as they bring agency-like capabilities in-house.

Finally, the PUBLISHER LUMAscape maps the major content companies by vertical in all formats. From traditional to digital-native, publishers of all kinds are helping the shift of ad spend as they develop innovative content and consumer experiences.

 

 

We publish these maps to help people navigate the complex and fragmented digital marketing and media landscape. As always, these are imperfect. If we likely have excluded or mischaracterized companies, we would love to hear from you to make them better at lumascapes@lumapartners.com!

RTL Group has agreed to acquire Smartclip

March 21, 2016

Today, RTL Group announced the acquisition of Smartclip AG, a Germany-based digital video advertising company. With the acquisition of Smartclip, RTL Group broadens its digital advertising capabilities by adding Smartclip’s digital video and connected TV solutions.

LUMA Partners represented Smartclip in the transaction.

The convergence of TV and digital video is quickly becoming a reality as we highlighted in our State of Digital Video presentation. The growing number of screens used for video viewing has sparked the need for complete solution providers.  Smartclip offers digital video advertising inventory from over 700 publishers and ad serving capabilities to Internet-connected devices. Smartclip will strengthen RTL Group’s video monetization strategy by complementing SpotX, a programmatic digital video company.  The combination of Smartclip and RTL Group gives the media company the tools to gain market share in the fast growing video advertising market.

Congratulations to Smartclip and RTL Group!