There's been an explosion in advertising and marketing tech deals this year, according to new data, a sign of life for a sector that not long ago was looking ready to crumble with the deprecation of third-party tracking cookies.
Why it matters: A collision of recent events — including the surge in e-commerce, gaming and streaming during the pandemic, a massive recovery in advertising, and the race to replace cookies — has made ad and marketing tech firms more palatable to public shareholders and more intriguing to private investors.
Driving the news: Outbrain is expected to go public this week. The "chum box" firm raised $200 million ahead of its IPO earlier this month. Its rival Taboola started trading publicly last month via a SPAC merger.
- Taboola CEO Adam Singolda told Axios that investors are eager to capitalize on the growth of advertising with firms that facilitate transactions on the open web — as those that power their own closed transactional systems, like Facebook, face greater regulatory scrutiny.
- Aside from the two chum box giants, there have been several ad tech firms that have announced bids to go public or have gone public in the past year, including Integral Ad Science, DoubleVerify, Viant, AppLovin, PubMatic and Innovid.
- Ad tech giants that have long been publicly traded, like The Trade Desk and Magnite, have seen their share prices increase ten-fold from five years ago. Even Criteo, which faced an existential threat when it focused mostly on ad retargeting solutions via cookies, has seen its share price recover from years-long declines.
The big picture: Big ad tech firms have for years held back from going public, in part because the markets never valued ad and marketing tech companies the same way they valued other tech companies.
- "What’s fascinating is to see how few public companies, even as recently as four years ago, were public," says Terence Kawaja, the founder and CEO of LUMA Partners, a leading investment bank focused on digital media, advertising and marketing. "Today, there are 20+ companies that are public with five or six more coming."
- Kawaja says there was a "pent up supply" of quality, scaled, profitable ad tech properties that were suitable for public markets, but the markets weren't valuing ad tech companies very high prior to the pandemic.
Another factor that's driving a surge in ad tech is the rise in ad-supported streaming.
- “The mass migration of viewership from linear TV to streaming has created significant tail winds for the [connected TV] ad tech ecosystem which is now expanding into the public markets," says Tal Chalozin, CTO and co-founder of Innovid, an ad tech company that recently announced plans to go public via a SPAC merger.
- "We’re very optimistic about the opportunity for Innovid as a public company given our legacy and focus on CTV advertising infrastructure.”
- While YouTube is considered a market leader in connected TV advertising, Facebook, Microsoft, Amazon, Twitter and others are not yet major players, creating an opening for companies that facilitate digital TV ad-buying.
Be smart: There was concern years ago that privacy regulation and the sunsetting of cookies would kill ad tech. Instead, the opposite has turned out to be true.
- "The deprecation of cookies has created a lot of change," says Mike Woosley, COO of Lotame, a large data management platform. Publishers are eager to find new solutions for ways to target consumers without using cookies, and are leaning on ad tech innovators for solutions.
- Woosley argues that government scrutiny of Big Tech giants has actually caused some of the bigger players in the ad tech space, like Google, to back away from some of their dominant behavior, creating opportunities for other players in the market.
The bottom line: "There are a lot of companies going public and there is a lot of optimism," Woosley says. "A smattering are doing it through SPACs. With a SPAC, getting public is easy, but staying public can be very hard depending on your long-term results. So some of the public excitement needs to be proven."