Oracle’s planned acquisition of data exchange and solutions provider BlueKai pushes Oracle deeper into marketing tech.
Like its peers IBM and SAP, Oracle had prioritized business departments like supply chain, finance and HR above media buying and digital marketing. And rather than building a marketing and ad stack from scratch in order to clinch CMO budget, Oracle’s gaining its stack through acquisition.
“I would say that the advantage in buying BlueKai is that it will open up and bring some relationships to Oracle that they might not have ever had,” said Rob Gatto, SVP of media and advertising at Neustar. Media agencies in particular represent a previously closed-off customer base. “Traditionally, I don’t think the enterprise software guys sold to agencies very well.”
It’s not surprising Gatto understands the benefits of growth through acquisition. He previously served as president of DMP Aggregate Knowledge, acquired by Neustar last fall for $119 million.
Directly following the Aggregate Knowledge acquisition, agency holding group Omnicom Group standardized its Annalect business around the Neustar/AK DMP in order to shrink the silos between audience segmentation and media optimization for more effective data management. (And before Aggregate Knowledge, Gatto worked at Hyperion and SPSS, which were acquired by Oracle and IBM, respectively.)
As Gatto sees it, the synergies between media analytics and the data solutions traditionally fielded by big IT providers like Oracle can make marketing and advertising decisions more expansive by tapping data flowing throughout the enterprise, not just a single department.
“Media agencies are doing a nice job bringing media analytics as a strategy to their clients and the software vendors who come from the data warehouse and analytics environment are beginning to connect it back to other parts of the organization,” he explained.
A “Wake-Up Call”
So where does Oracle’s acquisition of BlueKai leave other enterprise tech players?
“This will be a big wake-up call for the agency holding groups as well as digital media players like Google and Facebook that there is a new group of competitors vying for the CMO suite,” said Mark Zagorski, CEO of data marketing tech company eXelate. “Values are getting bigger as companies in the space are becoming stronger and more viable – moving from ‘acqui-hires’ and tech buys to real enterprise buys that can move the needle for their acquirers immediately.”
Oracle’s efforts to acquire BlueKai exemplifies the move-the-needle buy that lately has been en vogue: the DMP. Besides Neustar’s purchase of Aggregate Knowledge, the other big DMP purchase was Adobe’s acquisition of Demdex for some $58 million in 2011 (which has since become Adobe AudienceManager, combined with analytics from Adobe’s Omniture buy and rolled in to the Adobe Marketing Cloud stack).
Oracle, according to Peter Goldmacher, managing director and enterprise software analyst at securities and investment banking firm Cowen and Co., is catching up to where “Adobe was three years ago” with its Demdex buy.
“For all of Oracle’s problems, and it has a lot of problems (not the least of which is integrating BlueKai into a $35 billion enterprise business that still, for the most part, focuses on databases and hardware) it is a very good acquirer and executor against those acquisitions,” Goldmacher said.
Pressure On Competitors
Oracle’s buy puts further pressure on other enterprise tech giants, however, like IBM and Salesforce.com, whom some thought would (or will) buy a DMP.
While Salesforce.com could certainly purchase one of the remaining independent DMPs – like Lotame, [x+1], Krux or Turn, to name a few examples – Goldmacher wonders how realistic this is from a financial standpoint.
“I think [Salesforce.com] may be out of money for a little while,” Goldmacher said. “I understand the ExactTarget buy from a ‘keep the growth story going to keep Wall Street happy' perspective, but I still don’t understand it from a foundational product perspective.”
For its part, Lotame used the Oracle announcement as an opportunity to extol the benefit of DMPs. Company founder and CEO Andy Monfried said in a statement: “Our focus remains on supporting customer data management needs while being platform agnostic. … As a strong competitor and lifetime partner, we congratulate BlueKai. Oracle’s actions speak volumes about the value a DMP can create for the enterprise.”
Another DMP acquirer could be enterprise giant SAP, although Goldmacher believes it is behind with the digital marketing stack and the company’s marketing message overstates its ability to actually deliver from a product standpoint. And IBM’s opportunity, he said, lies in its analytics capabilities, but he’s skeptical a DMP purchase would help them.
IBM last fall launched a Digital Marketing Network with partners including [x+1], retargeter Criteo and BlueKai. Gerry Brown, a senior analyst at technology research firm Ovum, said he expects little impact from the Oracle-BlueKai buy on that standing relationship.
He also believes Salesforce.com and IBM will likely watch to see how the Oracle and BlueKai deal develops before committing to any similar acquisitions.
Ultimately, if data DMPs are categorized as a “separate and important segment,” as M&A activity has indicated, the space could see more consolidation, according to Ross MacMillan, equity research analyst at the global investment banking firm Jefferies. “The simple question is whether IBM, SAP or Salesforce.com do what these DMP vendors do, or is that a gap in their respective portfolios.”
For instance, while Oracle had invested in the "distribution" of content and campaign delivery – through buys like Responsys, Eloqua and Compendium – it, to a lesser extent, had the critical data element. Applications automate processes and solidify the distribution method, but without the context of data that a data exchange and DMP like BlueKai provides, it can be difficult for a marketer to decide, "Should I push an email or supply a banner ad and, if so, when and to whom?"
But Was It Worth It?
One former BlueKai exec AdExchanger spoke with was disappointed at the rumored deal size ($350-$400 million) considering its business momentum. BlueKai’s $25-30 million net revenue in 2013 indicates it sold for a 15x multiple on 2013 revenues – or a 10x multiple on 2014’s, assuming Cowen’s estimate of $40 million in revenue this year is correct.
But Goldmacher differed. “I think it’s a good outcome for BlueKai,” he said. “I think they did fine.” As a venture-backed investment, Goldmacher said, its investors “saw an exit and they took it.” He understood the impetus to sell now despite BlueKai’s public successes.
“You have enormous opportunity around data as an asset [and BlueKai sold at] around 10 times [its] sales…you’ve got to be happy if you’re in that business,” he said. “Do they want to stay independent and let the space get consolidated by all the guys with master distribution and then realize, ‘Oh shit, we’re not big enough?’ No, you sell the company, get the distribution and go work on the next big thing.”
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