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Blackstone’s Allen: Expect More Ad Tech M&A Dealmaking In ‘13 – In Contrast To The Wider Market

Ken Allen, BlackstoneMost media industry observers expect to see a another strong year in M&A for the Ad Tech sector. For example, a survey [PDF] of 231 top media/tech executives released last week from media investment bank Jordan, Edmiston Group, Inc. and Econsultancy shows an upward trend in organizations planning an acquisition in the next 12 months, with increases across every revenue category.

The sharpest increase on a percentage basis can be seen in those entities with $10 to $50 million of revenue, where nearly 50% more companies are planning an acquisition in 2013, as compared to 2012. The focal areas for acquisitions are online media & technology and data & analytics, with mobile media & technology as a growing area of importance. To get a sharper perspective on digital advertising M&A activity, we turned to Blackstone Group Managing Director Ken Allen for thoughts on deal outlook for social media, mobile, data, acqui-hires and “marketing automation.”

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BMO's Salmon: Facebook Starting To See Online Video / TV Ad Budget

Dan SalmonDan Salmon is an equity research analyst at BMO Capital Markets and covers advertising and marketing services.

Salmon upgraded Facebook from "Underperform" with a $15 target to "Outperform" and $32 target and explored his outlook in a research note to investors on Monday. You can download it here (PDF).

AdExchanger: Where are the ad dollars that are being poured into Facebook coming from? Other publishers? Is spend moving from TV, yet? And, how do you see this evolving?

DAN SALMON: I don't think there is one particular bucket to highlight for where the dollars are coming from. I think most every advertiser is re-evaluating what Facebook offers after a flurry of new ad products over the past three to six months. This is particularly the case for their mobile strategies but the question about spend moving from TV is an important one. While the Facebook story around mobile is very well understood by investors, I think we'll be hearing a lot more in 2013 about how Facebook is helping marketers with more video advertising. The merging of online video and TV advertising budgets has been a big theme that Facebook has been missing out on; that no longer appears to be the case.

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BMO's Salmon Reviews An Update To His 'Digital Marketing Hub' Thesis

Dan SalmonDan Salmon is an equity research analyst at BMO Capital Markets and covers advertising and marketing services.

Salmon recently discussed with AdExchanger.com the latest industry events as well as an update to his ongoing analysis of the marketing ecosystem titled, "The Race For The Digital Marketing Hub: Version 2.0." Download it (PDF).

AdExchanger: In this 2.0 version of the Digital Marketing Hub, what was the biggest surprise for you?

DAN SALMON: I think it was less about being surprised and more about the fact the Hub is really starting to happen. That wasn't the case four years ago when I started to write these reports. Then, it was largely about web analytics tools like Omniture, the beginning of programmatic buying and RTB in display, and the continued use of basic enterprise marketing software suites, which were more about marketing mix modeling and asset management. And these things tended to be dispersed around the enterprise, rather than weaved together to present a holistic view of marketing spending and the related data.

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Google's Q2: Proving YouTube ROI, Mobile Mania, Enter Motorola

Google offered very little that was new on the display business during its second quarter earnings call, and analysts didn't press for details. Instead they hammered execs with questions on the newly acquired Motorola business and mobile search monetization.

But a handful of details do jump out with links to display and video ads…

During Q&A, Sanford Bernstein analyst Carlos Kirjner asked how Google plans to give brand marketers visibility into ROI for YouTube campaigns.

Nikesh Arora, chief business officer, told him, "Brand is not just about the online space. It's also about the television space. We've done some exciting things with single-source panels in Germany, looking at efficacy not just on YouTube but on television. We've incorporated that into our sales pitch. You get higher ROI, higher reach, higher frequency on YouTube."

Then on mobile, Arora noted more than a million advertisers are now advertising through 300,000 mobile apps. He said AdMob has begun to permeate Google's sales culture. And he compared the state of mobile to desktop search in 1999. At that time, "Susan's team was doing phenomenal product innovation. We were working with advertisers to get better landing pages, better sites."

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Analyst: DG Unlikely To Get A Better Bid Than Rival Extreme Reach

DG and Extreme ReachDigital ad management provider DG will likely face serious questions from its shareholders amid rumors that the company rejected a $20 dollar per share bid from video ad services company Extreme Reach.

While Irvine, TX-based DG possesses some advantages in the digital marketplace, particularly thanks to last year's $414 million acquisition of ad tech firm MediaMind, which added a number of sales offices and expanded its global reach. But that deal, along with the purchase of Enliven Marketing Technologies four years ago, has also contributed heavily to DG's heavy debt load, which limits its appeal to other potential buyers and lenders.

Extreme Reach's offer, backed by PE firm Providence Equity Partners, according an unidentified source cited by Reuters, was valued at $550 million. DG spurned the bid from Extreme Reach over anti-trust concerns, though sources AdExchanger spoke to doubted that as a reason, saying that the two companies combined annual revenues from TV distribution are in the $300 million range (roughly $450 million if MediaMind and internet ad dollars are factored in), suggesting that it was too small to register with regulators, noted Mark Zgutowicz, a senior research analyst for Piper Jaffray.

There are obvious complements, especially in the area of the connected TV ad serving, between the hardware-based DG and the cloud computing services from Extreme Reach, which is headed by former executives with Fastchannel, which merged with DG in 2006. (DG eventually dropped Fastchannel from its name.)

In assessing the prospects of the two companies,  Piper Jaffray's Zgutowicz told AdExchanger, "This is a two-player race and a zero sum game."

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Pivotal's Brian Wieser on Agency Prospects: The More Things Change…

ANABoth the following are true:

  1. It’s a brave new world for holding companies. New competitors, fee structures, and technology requirements are forcing change to the old service models.
  2. The fundamentals of agency groups are as strong as they were before the digital disruption. Tech fragmentation is helping rather than hurting.

At the Association of National Advertisers financial management conference this week, marketing procurement agents heard a range of speakers discuss the present and future of agency holding companies. One highly anticipated panel promised clarity on trading desks, and the CEOs of those programmatic buying hubs did not disappoint, offering a spirited defense of their practices while pledging to embed staff directly with operating agencies.

Pivotal Research analyst Brian Wieser also addressed the room, making a strong case that agencies are insulated from potential usurpers like Google, IBM, and Accenture by rising fragmentation and client confusion.

“Many investors think technology will disintermediate services. I disagree with that,” said Wieser, who comes to investment research by way of stints with Interpublic Group and ad tech firm Simulmedia. “For the agency group as a whole...I would argue social media in particular, but fragmented media in general, is arguably the most important thing for agencies.”

The sheer number of vendors, exemplified by the LUMAscape, creates extra labor (hence, fees) for agencies. But perhaps more than that, clients depend on their agency account managers to vet the dozens or hundreds of vendors – both media and tech – using a strong base of knowledge to filter pitches.  That cognitive dependency preserves the agencies’ importance – even if the payment structure still needs to be sorted out.

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Forrester Analyst O'Connell Reviews DMPs, Sees Company Culture As Roadblock For Implementation

ForresterForrester analyst Joanna O'Connell leads the charge - along with fellow analyst Michael Greene and others - in a report on data management platforms (DMPs). Her findings look at a number of companies providing DMP services in the data-driven advertising space. Among O'Connell's observations on DMP integrations, "Be prepared for a time- and labor-intensive process that requires the participation of the marketing, IT, legal, and customer relationship management (CRM) or analytics departments." Read a bit more about the report here.

O'Connell discussed the report's findings and some additional observations with AdExchanger.com.

AdExchanger.com: For marketers, what do you see as the leading use case for a DMP today in digital?

JO: Interactive marketers have so much audience data at their disposal – from their site-side data to their offline (like CRM) data, to their media data. Imagine being able to 1) create a single view of a user and 2) use all those data assets to make smarter decisions about how to talk to each user you encounter through your digital media initiatives, your site-side messaging, etc. That’s what I think makes the DMP powerful – bringing data intelligence to every digital interaction a marketer has with users. Big brands (or companies with many sub-brands) like CPGs could do so much more with their own data than I think most do – a DMP can help. Some folks also like DMPs for their data collection and aggregation capabilities – sparing employees the time and energy necessary to do it in more traditional, manual ways – provides value.

Among internal groups that must implement or engage with a DMP - such as marketing, IT, legal, and customer relationship management (CRM) or analytics departments - where is the biggest roadblock?

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Forrester Analyst Greene Sees Opportunity With Programmatic Buying But Not Necessarily For Brands

ForresterForrester Research recently published a for-purchase report titled "The State Of The Digital Media Buyer." Authored by analyst Michael Greene with the help of his research co-horts Emily Riley, Joanna O'Connell, Jennifer Wise and James McDavid, Forrester positions the report as insights for the publisher on what the buyer is up to.

Greene discussed the report's findings and implications for the industry.

AdExchanger.com: How are you defining "programmatic buying" today?

MG: Historically, "programmatic buying" has been largely synonymous with exchange-based buying, an environment where the buyer optimizes bid price against impressions in an auction. But with the advent of "private" exchanges and new types of publisher-side price controls, programmatic buying is beginning to expand in scope beyond the traditional auction. In this sense, programmatic buying is largely about creating workflow efficiencies through increased automation - both within and outside of auction environments.

What are the attributes of those media buyers that are being drawn to programmatic buying?

Like online advertising as a whole, direct response buyers were the first to embrace programmatic buying. Still, we're seeing an increasing amount of branding-focused activity. Eighty-three percent of the buyers we surveyed said that they have branding goals for their campaigns. We're seeing lots of programmatic buying activity from what I'd call brand-conscious direct response marketers, i.e. marketers optimizing to direct response goals who are sensitive to brand, especially as it relates to content-adjacency. Major auto, name-brand retailers, and even some CPGs are buying programmatically today.

Considering current momentum once again, where do you think programmatic buying will shake out a year from now?

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Online Video Continues To Drive Digital Growth Says ZenithOptimedia's Barnard

ZenithOptimediaThe research team at ZenithOptimedia reported yesterday that "total internet ad spend to grow 12.6%, 15.8% and 16.1% in 2011, 2012 and 2013. The brightest spot in terms of online ad growth will be online video." Read more on Radio & Television Business Report.

Jonathan Barnard, Head of Forecasting at Publicis' ZenithOptimedia, discussed the latest predictions and their implications.

AdExchanger.com: Where is the momentum in digital today? What channels are leading the pack?

JB: Social media and online video are the main drivers of digital growth today. Paid search is being restrained by the shift from desktop searches to mobile searches, which is from high-cost to low-cost environments. Classified is restrained by weak employment and property markets.

What surprised you in the data of the most recent forecast?

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BMO Capital Analyst Salmon Sees Momentum For Data And Technology Automating Marketing - And The Enterprise

Dan Salmon is an equity research analyst at BMO Capital Markets and covers advertising and marketing services.

Salmon recently discussed with AdExchanger.com his latest analysis of the marketing ecosystem in a research piece titled, "The Race For The Digital Marketing Hub: Version 1.2." Download it (PDF).

AdExchanger.com: From your analyst point-of-view, what's the biggest surprise as it relates to your Digital Marketing hub thesis this year?

DS: I think the Digital Marketing Hub idea is playing out largely as expected, but if there's one thing that surprised me, it's been the new ways in which marketing and commerce are being linked and how quickly it's happening. Certainly, the two have always been closely tied, particularly through shopper marketing and CPA affiliate network models for example. And companies like GSI Commerce have been innovating in this area for some time. But in the last 12 months, there have been a lot more new ideas than I expected. Sapient is a company that's pushing the boundaries and doing some particularly interesting things around iPads and touch-screens at retail, and a large element of MDC Partners highly lauded work for Domino's (from Crispin, Porter + Bogusky) centered around a re-build of their e-commerce capabilities. And we're only just starting to digest the marketing opportunities around the launch of mobile payment systems in the US.

Beyond convergence, can you discuss a bit more why you think enterprise software companies will become more active acquirers of "Digital Marketing Hub technology"? Any timing for this?

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