Merger Mania Hits Online Marketing
With the web being the dynamic entity that it is, it is not surprising to hear about the many mergers and acquisitions that take place each month in the online marketing space. However, certain recent deals have taken aback even the most experienced marketers. These market moves cannot be put down to the usual flurry of activity which has led to online businesses being traded at very healthy profit multiples. They are potentially Herculean transactions which could change the shape of the space in which we operate.
The Google Doubleclick acquisition continues to make waves in the online marketing industry. Although it has now been referred to the US regulators, industry rumours suggest that the deal is expected to go through. It is likely that Performics, the PPC and Affiliate arm of Doubleclick, is to be jettisoned from the new marriage due to competition fears. But even the substantial Google deal has become old news in light of activity which has taken place in its wake.
Smarting from losing Doubleclick to Google, Microsoft stunned many industry observers with the $6bn purchase of Aquantive. This figure is three times the amount Microsoft has paid for any other company and is the industry’s biggest deal, doubling the price paid for Doubleclick. Borne out of the market-leading direct agency AvenueA at the turn of the century, Aquantive went on to build a robust adserving platform in Atlas. It added GoToast (at the time the market-leading bid management software) to its product portfolio, alongside agency businesses including the remnants of Razorfish and, in the UK, DNA.
Interestingly (and predictably), it looks like the ‘big guns’ are focussing on two primary assets – search and technology. Rumours abound that these deals could see the birth of ‘super-agencies’, in which search engines effectively have the technical abilities and skill sets to interface directly with merchants and run their search campaigns on a bilateral basis. Should this be true, the death knell to the major SEM’s will be the final removal of their agency commissions. Whilst smaller SEM’s and full service off-shoots may be able to survive due to their agility and fee structures, anyone running a major SEM relying on agency commissions should be very concerned indeed.
As is often the case however, while these plans are outstanding on paper, the benefits will only be fully realised upon their execution. It will be a huge hurdle for these technology companies to integrate their relevant functions and combine them with the human element. It is the human side which has enabled agencies to carve out such an important niche in the market – adding value. We all know that the strongest marketing initiatives are the products of well laid plans and individual talent. It will be interesting to see how the latter is added into the mix to give the SEM sector a run for its money.
Not all the deals, however, are about technology businesses moving into the agency sector: the reverse is also happening. Sir Martin Sorrell has joined the party in his WPP juggernaut by buying 24/7 Realmedia. As well as opening up a significant remnant inventory arm to the WPP network, 24/7 also owns the Openadstream adserving platform. This acquisition could be a very shrewd move indeed, as it offers the benefits of an in-house tracking tool and the economies that come with it.
With rumours of a possible liaison between Microsoft and Yahoo! still rife and the current hotbed of activity within the internet TV sector, it looks like the rate of consolidation is set to continue. If it is accepted that three months in the online world equates to a year (or more!) within traditional industries, is there anyone willing to gamble where the balance of power will lie by Christmas?
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