2021 is shaping up to be a breakthrough year for advertising technology. After several fallow years for ad tech companies and a necessary period of reinvention because of both changing marketing conditions and the pandemic, ad tech has evolved products, capabilities and privacy practices, which has reignited M&A interest.
Just look at recent deals. Many once-independent players have been purchased by larger tech platforms: Integral Ad Science acquired Publica and Publicis Groupe acquired CitrusAd (to name but two). There is also an increase in the number of once-independent players seeking financing through the equity markets and a wave of SPAC mergers with companies like Captify, Innovid and AdTheorent recently announcing massive deals.
That’s unquestionably good for the founders and VC’s that backed these companies, kept them running through turbulent times and helped them become worthwhile acquisition targets. And that’s how the news covers them: Ad tech is back, baby!
But after congratulating their partners and being taken out to a nice celebratory dinner, advertisers have every right to ask how an acquisition affects them. Should they be delighted at the infusion of cash that may make their partners more stable? Should they be concerned that the focus of their partners may have shifted? What are the trade-offs when the startup you valued becomes a small part of a big company? Is this a time to reevaluate partnerships and look for alternative solutions?
Let’s try to explore these by offering some questions advertisers should ask themselves as they learn about a partner’s acquisition.
What is the value of independence vs. integration?
One of the things you buy working with a smaller, independent company is their vision and the strategy that activates it.
- Does the acquiring company share that vision?
- Are they planning to bring their other capabilities in to support that vision?
- Or is the acquired company destined to support the acquirer’s vision and strategy?
To the extent that these differ, how much support will the products or services you’ve been buying be supported in the future? Is the new focus better aligned with the acquirer’s goals than yours?
Will service suffer?
- Does the larger entity have other customers in place that make you feel like small potatoes to the business when you used to feel like a priority?
- Will there be staff cuts that reduce the historical knowledge of whoever will be servicing your account?
- Will there still be the trust and the shorthand you’ve developed with your partner’s team?
- Will you start to be sold a new set of products that are off the mark from what you need?
What is the focus of innovation?
- Sometimes there are clues in the merger announcement that the acquisition was intended to fill a technology gap in the acquirer’s stack. Does this mean that the rest of the offering isn’t a priority to them?
- Sometimes the smaller company is a struggling business whose value is in their pure technology. How much focus and investment will there be on the products that you care about versus the integration of the acquired technology into the larger whole?
- Will the product(s) or services you care about fall out of the development pipeline and stagnate while others advance?
- What does the offering look like after integration, and does it have less, more or the same value to the advertiser?
Is my data still my data?
With privacy laws continuing to evolve and increased scrutiny by consumers, you have spent significant time ensuring that your data practices are the gold standard (I hope). Now your data is part of a company whose privacy practices you haven’t vetted. And beyond privacy, your strategic and performance data is now housed … where, exactly?
Advertisers should be sure to ask how their data will be treated, who has access to it, to what uses does the new entity intend to put it – and to be very clear that you expect your data to be treated as if the acquisition had not happened, unless, perhaps, there are new benefits to you. The last thing you want is for your data to help improve your competitors’ performance.
When something big happens with a trusted partner, it’s always appropriate to ask questions like these, and more, to evaluate whether the new entity is going to be better for you than the old. After all, as management consultant Peter Drucker said, “The most important thing in communication is to hear what isn’t being said.”
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