What the 2021 M&A deals tell us about the future of online advertising
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If you’re doing business in the online advertising niche, there’s one trend you can’t help but notice in 2021 – the unprecedented number of mergers and acquisitions in the market.
Let’s quickly see if you’ve missed any of this year’s biggest buys. Here we are!
- Capital Croissance acquires Smart AdServer
- Magnite SpotX Borough
- Verve Group has acquired Smaato
- LiveRamp bought Datafleets
- TransUnion bought Neustar
- IAS has acquired Publica
- Publicis Groupe acquires CitrusAd
- AppLovin bought Mopub
And the list continues.
When it comes to mergers, one of the notable recent deals in the online advertising market has been the PSPC mergers – involving Innovid and AdTheorent, to name a few – but again, this doesn’t are just the tip of the huge M&A iceberg, driving valuations of ad technology companies to accelerate.
Related: After 7 Mergers and Acquisitions in 7 Years, I Thought I Had Seen It All. Then I did a remote merger and acquisition in the midst of a global pandemic.
Why the digital ad technology market is capitalizing so quickly
Despite the many theories and rumors that are swirling around the global online advertising community, there are only two main reasons we have been tracking such a rapid market cap over the past 12 months.
The first is the pandemic or to put it better, the rapid acceleration of the evolutionary processes that it has evoked in the industry. While maximum digitization seemed somewhat inevitable even in 2016-18, lockdowns made it the new reality faster than one might imagine. And this reality is not going anywhere.
More importantly, optimistic economic forecasts for the fourth quarter of 2021 and early 2022, particularly in the US, EU and LATAM countries, have made the big players even more eager to catch up on their investments in online advertising technology companies.
The second reason is the stricter privacy laws and regulations around the world. Just when the industry seemed to have finally embraced the introduction of GDPR and CCPA, there was LGPD, CPRA, the Chinese PIPL that will soon come into effect and many more. Add it to the catastrophic depreciation of third-party cookies, and the future of effective audience targeting already looks bleak.
In this regard, the reduced number of opportunities available to legally obtain and use first party audience data in online advertising is what fueled the buying rally in this sector in 2021 (e.g. the recent sale from Twitter’s MoPub to AppLovin for over $ 1,000,000,000).
What will the mergers and acquisitions of 2021 lead to in 2022?
Based on what we are currently tracking, market capitalization is unlikely to stop in the coming months. The momentum will likely remain unchanged in Q1 – Q3 2022 and will be followed by some slowing as we approach 2023, having reached its plateau.
As companies put the purchased technologies into action, we expect new ad technology solutions to flourish in the second and fourth quarters of 2022 and 2023, primarily focused on predictive modeling capabilities, aimed at more efficient attribution, automation of inventory mapping. , auctions and purchases and, certainly, immersive advertising.
More importantly, despite the expected evolutionary breakthrough in the global online advertising industry, market capitalization will NOT leave small businesses far behind in this “competitive race”.
The reasoning is obvious: The reach of the ad technology solutions they offer is generally affordable and more flexible (i.e. easier to customize), which remains crucial for small and medium-sized businesses in the market.