Zeta Global continued its annexation of the demand-side platform (DSP) category on Wednesday, closing a deal with IgnitionOne to take over as its default DSP.
The deal also includes the transfer of some employees and accounts, primarily attached to small and mid-size brands.
Terms were not disclosed.
“It’s an expensive proposition to run a DSP yourself,” said Zeta founder and CEO David Steinberg. “Running a small DSP today is an inefficient business model.”
And so, IgnitionOne is exiting the DSP business, which comes, as Steinberg pointed out, attendant with heavy product maintenance and engineering costs.
Having offloaded its DSP biz, the company is returning to its roots in tech and data services. IgnitionOne completed a spinoff from Dentsu in 2013, three years after the Japanese holding company bought the firm in 2010.
IgnitionOne will continue to operate and provide enterprise data and technology services for holding companies and large brands, Steinberg said. Although IgnitionOne will still construct audiences and run managed media campaigns, its programmatic buys will use Zeta’s DSP.
Zeta has been on a tear recently, signing multiple similar, arguably opportunistic, deals with buy-side technology companies.
Last year, Zeta invested in and then outright acquired Visto (formerly Collective). In April, it snapped up the Sizmek DSP and Rocket Fuel managed media business out of bankruptcy proceedings, and just a few months later took over PlaceIQ’s managed media business, including 20 employees, when the location data company abandoned its DSP to focus exclusively on data sales.
The fact is, the market has dried up for most bespoke DSP providers. Data companies such as PlaceIQ or Drawbridge that launched DSPs have since retreated, and channel specialists for mobile or video have been losing out to more scaled, multi-channel DSPs like The Trade Desk. (Well, mostly they all just lost to The Trade Desk.)
For its part, IgnitionOne raised more than $85 million since 2013, and the company is folding its chances of a DSP exit beyond the deal with Zeta. The partnership does ease IgnitionOne’s annual costs, however, and provides access to Zeta’s data cloud as part of the deal, improving campaign performance for IgnitionOne’s managed media practice without it having to buy data from other sources.
So, why does Zeta want yet another DSP business when the market simply didn’t pan out for many ambitious early players?
Zeta has been pitching programmatic companies on its approach, Steinberg said, which entails those companies ditching their own inefficient or unprofitable DSPs to run on Zeta’s technology, or to sell off part of the company as part of a larger partnership with its marketing cloud.
Zeta doesn’t have to worry about the high product development investment required to run a DSP, because it has much deeper pockets than programmatic vendors. According to Steinberg, most of Zeta’s revenue comes from software licenses for its data cloud, not the media business, which accounts for less than 10%. This means the company gets value from the DSP as a way to distribute its core data cloud assets even if the media-buying tech isn’t lucrative.
Taking over DSP market share via partnership and/or acquisition is also not as disruptive a process as when other marketing clouds bought their way into new categories, Steinberg said. The painful digestion of new companies by cloud giants like Salesforce and Oracle come about because those clouds need to kludge large, disconnected code bases into one cohesive product.
“With every deal we’ve done we’ve sunset the tech and migrated customers to our stack,” Steinberg said. “We’re not cobbling stuff together.”
