LUMA Partners hosted its 5th annual Digital Media Summit on May 22, 2013 during Internet Week NY. It was a huge success! More than 500 leaders from the digital media industry were on hand (300 CEOs, 100 strategic investors, 100 financial investors) for pithy discussion of topical issues and power networking. Re-cap below:

For speakers and sponsors, DMS started the night before at the VIP Reception. This year we hosted a party on the rooftop of The NoMad Hotel. It was a terrific evening.

At DMS, there was “steak” (the hour-long breakout sessions that leveraged peer-to-peer CEO participation) and “sizzle” (main stage keynotes, fireside chats) and lots of fun entertainment in between. The morning breakout sessions covered content, commerce, video, data, brand solutions and exits, while the afternoon sessions focused on multi-channel marketing, social, mobile, programmatic premium and investing trends.

The main-stage sizzle included the following:

• Terence Kawaja and Brian Andersen opened with a discussion of markets and trends in digital media with their State of the State presentation (available on video and via SlideShare).

Morning Session

• An excellent keynote from Neal Mohan of Google who previewed Google’s incredible new Lightbox product that is squarely aimed at digital solutions for brand advertisers.

• A fireside chat with Facebook’s Blake Chandlee and Twitter’s Kevin Weil who discussed their API partnership strategies. Kevin made the second product announcement of the day with the launch of Twitter Lead Generation card product. Yes, that’s right, two of the most influential companies in digital media launched product at DMS!

Morning Keynotes

• Scott Meyer of Evidon reviewed Evidon Labs, a cool new product that brings the LUMAscapes to life.

• Amanda Bicofsky presented Behind the LUMAscapes, and Jonathan Greenglass announced our own product launch – the LUMA App for iPad. Available in the App Store, the LUMA App has graphical and drill-down data on the companies that comprise the LUMAscapes. Download it today!

Lunch Session

• The Winners’ Circle, featuring recent deal successes involving Akamai, MediaMath, Brand.net and Ziff Davis.

• Rick Chavez of Microsoft Advertising, who gave a compelling talk on the future of digital tech and the interrelation with people.
  

Afternoon Keynotes

• An episode of The Terry Springer Show that united Randall Rothenberg of the IAB with Harvey Andersen of Mozilla on stage to meet and hopefully start a meaningful conversation about third party cookie policies (since we firmly believe the industry is best served by having open dialogue about issues.) Kudos to Randall for being a great sport.

And of course there was lots of fun – from Jony Ive to Mad Men (yes, Terry is appearing on an episode next season) to the LUMAsuit (you have to see the video) and finally the premier of Terry’s Use Bitcoin comedy video – there was plenty to keep the capacity crowd entertained!

Afternoon Session

All in all it was a day of substantive content, insight, perspective, networking and entertainment with a goal of advancing dialogue in the ecosystem. We were even able to host representatives from Camp Interactive, a charity helping inner-city kids learn to code. We appreciate all the CEO and senior executive participants and want to again thank the DMS 13 sponsors; without their support, the event would not be possible.

We look forward to hosting DMS 14 next year!

According to Gartner, by 2015 the technology budget of CMOs will likely exceed that of CIOs. There is no question that marketing has become more data-driven and technology-driven than in the past. “Analytics,” “algorithms,” “optimization” – terms that in the past were typically relegated to the cubicles of specialized marketing analysts – are now part of the daily conversation in the CMO suite.

Much has been written about audience targeting, programmatic buying, real-time bidding, data management, etc., showcasing impressive advances made in advertising over the past few years. But marketing isn’t just about advertising – that is just one element of the marketing equation. The CMO is tasked with many more responsibilities, including sales enablement, corporate and product branding, marketing mix allocation, website performance and management, not to mention the earned media and social media channels. Along with advertising, these functions are increasingly intertwined around data sets.

In advertising, while still early, we are finally starting to see organizations adopt multi-channel strategies, starting with media mix modeling, followed by executing integrated advertising campaigns and finally measuring the effectiveness through attribution. Similarly, online businesses have been improving the linkage between acquiring visitors and converting those visitors to customers through greater personalization of content and offers. Marketing technologies, like ad technologies, have been advancing rapidly in recent years, enabling marketing organizations to operate more efficiently and effectively as well as to improve the customer experience. So think MarTech, not AdTech, for the fuller picture.

In recognition of this broader marketplace, we are introducing the latest in our LUMAscape series: the Marketing Technology LUMAscape. This latest landscape maps out two categories of software offerings: 1) Sales and Marketing software, and 2) Website technologies. The Sales & Marketing section captures the main categories that marketing departments utilize to plan, execute and analyze marketing campaigns. The Website section includes the technologies to create, manage and optimize websites.

Once again, we note that our LUMAscapes are not perfect but rather a continual work in progress. If you have any comments or suggestions, please email us at LUMAscapes@lumapartners.com.

Some years back we remarked at a conference that there were two ways that the fragmented ad tech ecosystem could consolidate: 1) M&A and 2) failure. We have seen some M&A activity though less than most expected (only one DSP of scale, one SSP, one DMP, etc.) and there hasn’t been enough failure thanks in part to persistent venture capital financing. That may be changing.

The last week of January saw a trio of announcements that may well be a harbinger of the future of the ecosystem. On January 24th, MediaMath announced the acquisition of Akamai’s ADS (Acerno) business. On the same day, AppNexus announced a $75 million all-primary financing round from TCV. And on January 28th, AdBrite announced that it was shuttering operations.

These are all good signs.

The acquisition and financing are signs that we are likely to see more deal activity from the scaled private companies as they build formidable war chests and position for a possible IPO. This is a natural process as the sector matures and the scaled leaders move to garner capabilities across the increasingly interconnected worlds of display, premium display, search, mobile, video, analytics and social. So, besides the expanding universe of interested buyers from the large public strategic companies as depicted in the Strategic Buyer LUMAscape, we now have a tier of scaled private companies as potential buyers:

Activity by this private group would be welcome since the landscape continues to fragment. While not scientific, a review of the Display LUMAscape in December 2012 compared to the December 2010 version showed that 53 companies were acquired but 74 new ones appeared. In effect, we have a game of LUMAscape whack-a-mole!

As mentioned, the other way to de-clutter the ecosystem is failure. Which is why it was good news to hear that AdBrite was shuttering. Don’t get me wrong – we’re no grave dancers, and we mean no disrespect to AdBrite or their investors. But we are long overdue for marginal companies in the advertising technology ecosystem to close. We simply didn’t need an 8th ad exchange! We denote acquired companies on the LUMAscape with a red dotted line. We may need to introduce the black dotted line and shading to denote failed companies.

So with active large strategic buyers, increasingly active scaled private buyers and the effects of a more discriminating private capital market, we might just make progress towards industry consolidation.

Today, Akamai Technologies, Inc., announced the sale of substantially all of the assets of Akamai’s Advertising Decision Solutions (ADS) business to MediaMath, Inc., a leading digital media buying platform. The ADS data co-op will bolster MediaMath’s Data Management Platform (DMP) and enable advertisers to attain greater insights from their own data by modeling it against the co-op’s unique data set. The predictive insights produced will drive greater marketing performance across all digital channels.

As part of the transaction, the two companies have forged a multi-year relationship whereby MediaMath has exclusive rights to leverage Akamai’s pixel-free technology for use within digital advertising and marketing applications. Together the two companies will be able to provide their joint customers with an even more effective set of tools to manage their data, better understand their audience, and help enhance the quality of online marketing campaigns.

Back in 2010, we highlighted the need to combine data management capabilities with media buying to effect a true platform (as in Demand Side Platform). This transaction significantly augments MediaMath’s capabilities and scale.

LUMA Partners acted as exclusive financial advisor to Akamai.

LUMA Partners has published LUMAscapes that map over 1,500 companies across seven sub-sectors of digital: search, display, video, mobile, social, commerce and gaming. Next, we developed the Digital Capital LUMAscape, showing ~350 financial firms that actively invest in digital start-ups, arranged by type, stage and geography. Judging from the over 600,000 views and downloads to date, these maps have certainly proven popular and useful.

(Download this LUMAscape here.)

Today we are publishing the most important industry map – the Strategic Buyer LUMAscape. Historically, digital acquisitions were dominated by four core companies: Google, Microsoft, Yahoo and Aol. While this group remains relevant, we have witnessed an expansion of the buyer universe as digital business models converge across media, software, services and commerce. This chart shows 150 of the largest relevant buyers of digital start-ups arranged by type, propensity, capability and motivation. Here’s the legend:

1. Type – We have grouped the buyers into four sections: media, marketing, technology and commerce/network.  The last group is a mix of firms that derive large network effects from the delivery of media, communications or commerce.
2. Propensity – The concentric circles denote a buyer’s likelihood of pursuing future digital acquisitions, which is informed by past activity and strategic direction. The closer to the center, the more likely a buyer of digital assets.
3. Capability – The coloration indicates a buyer’s capacity to make sizable acquisitions based roughly on trading multiples. Green is higher than yellow which is higher than red. This slide represents a tremendous amount of buying potential: companies within the circles alone represent approximately $3 trillion of market capitalization and $450 billion of cash and securities.
4. Motivation – The background words denote the generalized motivations of the sector buyers. Most media and marketing companies have been disrupted by digital and are making acquisitions defensively whereas technology companies are buying digital start-ups as an offensive strategy.

These categorizations are generalized and subjective and no doubt have exceptions. The goal of the slide was to graphically depict all the likely strategic buyers of digital start-ups on one page. We anticipate this slide will be utilized in board presentations and investor meetings, and hope it provides utility to the industry.

As always, we note that our LUMAscapes are not perfect but rather a continual work in progress. If you have any comments or suggestions, please email us at LUMAscapes@lumapartners.com.