As the digital media landscape prepares for the impending death of the third-party tracking cookie and new platform and privacy rules are enacted worldwide, companies will likely look to acquisitions to bolster their first-party data strategies and shore up their privacy compliance.
Deal volume in the adtech market in 2023 was “one of the worst years ever,” according to Conor McKenna, partner investment bank LUMA Partners. But the prospect for acquisitions in 2024 looks brighter now there is more clarity around cookies going away and a rosier view of the economy.
Business Insider spoke to 11 experts who shared their thoughts on whether the coming together of LiveRamp and Habu could indicate further consolidation in the marketplace and which players are likely to be active in the coming months. Some of our experts didn’t want to be named as they were not authorized to talk about potential deal prospects or on behalf of their companies.
Adtech consolidation is inevitable
Experts believe M&A is inevitable because the cookie was a simple, free solution that enabled many important functions — which are being replicated by numerous startups.
Today, companies like ID5 provide so-called alternate identifiers, which are considered by the industry to be “cookie replacements.” Lumen measures ads based on the amount of attention they get. GumGum targets ads to people based on what content they consume online. But marketers cannot continue working with this level of fragmentation, experts say.
“You have all these little pieces of the puzzle,” said one exec at a data company. “They’re going to need to come together in one end-to-end solution. They can’t be separate companies and steps.”
But even as all the cookie’s functions must be rebuilt, it’s not yet clear which of those functions marketers care about, Luma’s McKenna said.
The answer to that question will determine what types of adtech companies will be the hot acquisition targets, or whether acquisitions that have already happened will pay off.
For instance, LiveRamp’s purchase of Habu was a bet on clean room technology, but as Shailin Dhar, partner at the holding company FIT Holdings pointed out, “There are very few teams actually utilizing data clean rooms.” He noted that while ad teams aren’t using these clean rooms en masse, many have activated them, which bodes well for the Habu acquisition. But soon, these companies will begin scrutinizing that investment.
“All of these companies that spent money on data clean rooms at some point are going to say, what are we doing with this?” Dhar said. “There’s the cost of bringing data in, storing it, staging it, then what’s the utility?”
ID5 CEO Mathieu Roche noted that the utility of these cookie-less adtech solutions really depends on the specific needs of each marketer.
“If you want to use retargeting,” he said, referring to a tactic where marketers show ads to people who’ve been to their websites, “then email-based identifiers are unlikely to be useful because most people you want to retarget on your website aren’t logged in.”
Companies of interest
While the ad industry hasn’t settled on which adtech categories will win out among marketers, individual companies within each category have started to set themselves apart, experts said.
With Habu going to LiveRamp, acquisition attention could turn to its competitor InfoSum, said Myles Younger, head of innovation and insights at U of Digital, which offers digital advertising training.
Companies supplying cookie replacement identifiers could also be targeted, said Dan Salmon, partner at New Street Research. “ID5 is one that sticks out, being 100% independent,” he said.
“If you’re bullish on alternative IDs, which many companies are, then you’ll be bullish on ID5,” said Wayne Blodwell, CEO and cofounder of Impact Media. ID5’s technology is deployed by the most online publishers of any identity service, according to Sincera, which measures which adtech companies are used across the industry.
ID5 CEO Roche brushed off the idea of an ID5 acquisition, saying it has had multiple acquisition conversations ever since the company was founded in 2017. “Even when it was irrelevant to us, we had those discussions,” Roche said. “Usually those discussions are just people kicking the tires and there’s nothing to them.”
LiveRamp, also, could be an acquisition target, Salmon noted, as it builds out new data offerings like the clean rooms it will inherit from Habu.
But not everyone is predicting the Habu acquisition will necessarily lead to an influx of M&A around cookieless adtech. Elgin Thompson, managing director at Citizens JMP Securities, said he hasn’t noticed increased M&A interest around these solutions — not as much as the retail media category, which is where retailers like Walmart offer their data to power ads.
“Retail media — or commerce media — is still number one, just in terms of activity level or interest level,” Thompson said.
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