AdTech Growth Off to a Slow Start in 2016

Halfway through 2016, the AdTech industry is taking a look at whether prognostications about this year’s investments are coming true. A summary:

  • A June report on Techcrunch.com reports global digital advertising is on pace to grow by more than 10 percent this year to almost $160 billion. In comparison, the market grew by 17.2 percent last year, says the New York Times. The comprehensive global ad market is expected to grow by 5 percent this year, to $500 billion.
  • Q1 reports also showed EdTech financing slowing down from last year, FinTech investments growing at close to the same rate and MarTech and HealthTech funding continuing to grow. The details:
    • EdTech funding plunged dramatically in Q1 of this year compared to the previous quarter, totaling just $375 million and putting 2016 on track for the lowest numbers in that category since 2013. Some predict the drop will amount to 57 percent by year’s end, compared to last year’s 64 percent increase. “The flurry of $100 million-plus mega-deals that shaped EdTech trends in 2015 have been conspicuously absent so far this year,” notes CB Insights.com.
    • In FinTech this year, the first quarter of 2016 showed growth of 96 percent for venture capital-backed firms compared to Q1 of 2015. Last year as a whole saw a 106 percent jump in that category.
    • Despite predictions of a major slowdown, Q1 funding in MarTech reached $2.24 billion compared to $2.16 billion in the same quarter last year. “MarTech has clearly emerged as one of the favorite tech sectors despite a general slowdown in deal flow,” reports Pranav Vadehra on Martechadvisor.com.  “These numbers tell a story of MarTech going from a niche sector to an important driver of the startup economy, nationally and internationally.”
    • HealthTech financing saw 50 percent year-over-year growth compared to Q1 of 2015, with last year as a whole an industry record setter. Total funding for Q1 2016 reached $981.3 million, the highest first-quarter total since 2011.
  • Digital media ad dollars (per time consumed per medium) remain low compared to radio and TV. One report shows only 12 percent of all advertising is now on mobile, though Americans spend 25 percent of their media-viewing time there. In comparison, 16 percent of advertising spend goes to print media, which occupies only 4 percent of consumer time. Agencies expect digital ad spend to surpass TV ad budgets (now at $30 billion) by the end of 2017.
  • Major acquisitions in AdTech this year to date have included Corus Entertainment’s purchase of the Shaw Media Group for $2.65 billion; Nexstar’s purchase of publisher Media General for $2.1 billion; and Golden Brick Silk Road’s acquisition of mobile firm Opera Mediaworks for $1.2 billion. Other 2016 purchases so far include the following (prices were undisclosed unless noted):
    • Salesforce acquired marketing tech firm MetaMind and agency Vertiba.
    • WPP bought agency the CMI Group.
    • SheKnows bought video publisher Hello Flo.
    • eBay bought marketing tech firm Cargigi.
    • Olapic bought social media company Piquora.
    • YellowPages acquired JUICE Mobile for $35 million.
    • RTL Group bought video network firm Smartclip for $53.4 million.
    • gShift bought social analytics company InNetwork.
    • Verizon bought video and connected TV firm Volicon.
    • The New York Times acquired analytics agency HelloSociety.
    • Nielsen bought mobile analytics company Informate Mobile and analytics firm Pointlogic.
    • AKQA bought agency Potato.
    • RNTS Media bought mobile ad exchange company Inneractive for $72 million.
    • Merkle bought marketing tech company Comet and agency London DBG.
    • PostMedia bought content marketing firm Ampifii.
    • Outbrain brought analytics company Revee.
    • Mobvista bought mobile network NativeX for $24.5 million.
    • Millward Brown (part of WPP) bought agency Analytics Quotient.
    • Fandango bought vertical publishers Rotten Tomatoes and Flixster.
    • Asics bought mobile app RunKeeper for $85 million.
    • Time Inc. bought data aggregator Viant.
    • AdStream purchased video/ad server firm Deluxe AdServices.
    • Telenor bought DSP Tapad for $360 million.
    • IBM acquired agency Resource Ammirati.
    • SSI bought analytics company Instantly.
    • Qualita bought attribution company BlueCava.
    • Univision bought publisher The Onion.
    • Ericsson bought data aggregator FYI Television.
    • Internet Brands bought marketing tech company DemandForce.
    • j2 Global purchased publisher Offers.com.
    • Zealot Networks bought video firm AdRev for $20 million.
    • Dentsu bought analytics agency Navegg.
    • Revcontent purchased content marketing firm ContentClick.
    • Fyber bought mobile network firm Heyzap for an estimated $45 million.
    • Oracle acquired data aggregator AddThis.
  • For the remainder of 2016, analysts overall are somewhat bearish about further AdTech investments. Among recent comments:
    • On Digiday.com, Josh Engroff uses the phrase “extremely uninteresting from an investment standpoint” to describe ad server tech companies, mobile ad networks, third-party data management platforms, retargeting networks and companies built around tracking users.
    • Rob Hodgkinson on Techcrunch.com says: “With the growing threat of online ad blocking and the much-debated issue of click-fraud, many investors struggle to see the upside of backing businesses involved with the seemingly murky world of advertisement technology. (But) now is precisely the time for venture investors to break away from the herd and think about making that contrarian bet on AdTech.”
    • Matt Byrne on Exchangewire.com: “In recent years, funding via venture capital has started to dry up for AdTech. This follows a period of over-investment and disappointing public market performance for the industry. The harsh reality is that Brexit is likely to compound this trend.” Byrne points to reports showing European funding from venture capitalists fell by more than one-third in quarter two of 2016 versus the same period in 2015.
    • Ricardo Bilton on Digiday.com: “Thanks to a drumbeat of complaints about an oversupply of agency-like AdTech firms, threats from ad blocking and questions about the performance of public AdTech firms, AdTech is not the belle of the VC ball, to say the least. The drop in optimism for AdTech can be traced, in part, to the performance of the first crop of AdTech firms to go public in 2013.”
    • Jerry Neumann on Digiday.com: “We haven’t seen many new (AdTech) companies get funded in a while because the winners have already been decided, whether people who aren’t the winners know it or not.”

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