As cookies crumble, M&A execs seek viable alternatives
Third-party cookies are on their way out, and when they go, they’re going to take parts of the ad industry along with them.
It may not happen today, and some argue it won’t even happen in the first six months of the year. But this consolidation will happen eventually now that Google has started to squeeze cookies out of the Chrome browser. When those cookies crumble, companies will be left scrambling for a new recipe to bake their ad revenue.
For some, this upheaval spells opportunity — a chance to innovate, adapt and thrive in a transformed landscape. But for others, it’s a storm they might not weather. Mergers of desperation, hostile takeovers or even total shutdowns are in the cards.
A handful of companies are on the prowl for acquisitions, and they’ve been biding their time, waiting to see if Google would actually go through with something a lot of people thought was off the table. Now, they’re ready to pounce, especially in the second half of the year, looking to take advantage of lower interest rates to snap up some deals that are both attractive and won’t break the bank.
Public market activity
What happens next is anyone’s guess, and boy, are the rumors flying. But this isn’t just idle chatter, with much of the speculation centering upon ad tech companies on the public markets.
For example, LiveRamp — a company that has been subject to takeover speculation in the last 12 months — revealed its intention to purchase data clean room provider Habu to Wall Street late yesterday (Jan. 17).
The pair claimed the cash and stock transaction, which valued Habu at $200 million, would help create an “interoperable platform for data collaboration across all clouds and walled gardens globally” that will help drive “further adoption of core identity and connectivity solutions.”
In a press release, LiveRamp CEO Scott Howe added, “Through this acquisition, we will further empower our customers to unlock insights, use cases, and revenue streams by seamlessly connecting data and deepening measurement, across any platform or partner they prefer.”
Elsewhere, publicly listed ad tech entities Verve Group and Viant are also believed to be open to M&A activity. Sources point to how both parties were in separate talks with MediaMath over a potential takeover prior to the DSP’s bankruptcy filing late last year, with some believing they may be open to further prospects as the year goes on.
Meanwhile, other sources point to the sub-cohort of ad tech companies that filed an S1 during the heady days of 2021 but didn’t quite make it onto the public markets.
For example, Altice-owned Teads had eyed a $5 billion valuation after listing to go public on the Nasdaq, only to postpone such plans after Wall Street cooled on the process during its 2021 roadshow.
Albeit, sources with knowledge of such developments informed Digiday that, while Teads had appointed bankers to explore its strategic options last year, the appetite for such a deal has since cooled.
In the middle of all this action is Michael Beebe, CEO of Dstillery, an AI-based audience data and targeting technology company based out of New York. He’s knee-deep in talks with those same acquisition-hungry companies looking to buy their way out of the cookie conundrum. Not that he plans to sell Dstillery — it’s not even on the market.
The reality is other companies, from strategic buyers to private equity investors, are sparking up these conversations to explore joining forces through partnerships or taking over Dstillery outright. These conversations have tipped Beebe off with a treasure trove of insights to understand where the market might be heading as the year unfolds.
“When this activity surges, it will be big companies making bets on technologies that will either fill gaps for them or exploit gaps that their competitors have,” said Beebe. “Emerging solutions that have proven their viability and scalability are going to be at the top of the list for M&A.”
And from the looks of it, that list of top contenders is going to be a pretty exclusive one. So many companies, whether they’re in the business of alternative IDs or contextual advertising, are facing their own set of challenges.
For example, take authenticated IDs. Sure, they’re stable, but there are big questions over how well they can scale and if they’re really playing nice with privacy rules — we’re looking at you, hashed emails. On the other hand, there’s contextual advertising, which is free from those privacy headaches, but many marketers are skeptical about its effectiveness and scalability. Then there are the probabilistic solutions, which seem to stir up a mix of all these concerns.
And that’s just the tip of the iceberg.
There’s a lot at stake for a variety of other sectors, including location-based ad tech vendors, data clean rooms, third-party data vendors and measurement firms. They’ve long depended on the robust data-sharing abilities of cookies, but now they’re facing a significant hurdle: maintaining their targeting, analytics and attribution accuracy in a world without third-party cookies.
Despite this, many of these companies are playing it cool. Some are shrugging off the risk, while others are touting supposed miracle cures. But let’s be honest, once those cookies bite the dust, a lot of these grand claims are likely to come crashing down, more fantasy than reality.
Probing genuine contenders
For the players in the acquisition game, sussing out the genuine contenders in this shifting landscape is a complex puzzle, packed with tough calls for corporate development leads and private equity mavens. And to add to the challenge, they’re having to do all this while metaphorically blindfolded, unsure if these businesses can actually sprint without the crutch of third-party cookies.
“There are a lot of startups that are going to fade away because they haven’t done enough to prove themselves and for those that have then there’s the chance they’ll get absorbed by a larger company relatively quickly,” said Andreas Roell, managing director for digital marketing services at Madison Alley, an M&A advisory firm in marketing and media.
Private equity investors are also expected to come to the fore. After a quiet 2023, they’ll have a ton of money sitting around, waiting to be invested. They need to put this money to work to earn returns for their investors.
“There’s existing [private equity] funds with money to spend and new ones that haven’t even started investing,” said Charles Ping, managing director at Winterberry Group. “As interest rates start to turn down then everything starts to move a bit and confidence comes back.”
New selling points
Shailin Dhar, a partner at FIT Holdings, told Digiday his investment advisory firm (which specializes in ad tech) has been vetting potential transactions for private equity, venture capital and investment banks in recent months. Unsurprisingly, much of the interest centers upon potential opportunities around AI.
“We’re auditing their exposure to non-human, or artificial activity in their datasets,” he said, noting how much of the due diligence undertaken by such outfits — which is much more rigorous compared to four years ago, according to multiple sources — centers on data quality.
Dhar added, “So much of the rest of the web technology market relies on the datasets from ad tech (like, audience data, specifically) … data quality is now top of mind because more and more companies are positioning themselves to train models, and that wasn’t even the case two years ago.”
However this consolidation wave shakes out, it will happen over years, not months. The real shift kicks in only when third-party cookies take their final bow, which increasingly looks more like the first quarter of 2025 than it does the end of 2024. When that happens, expect a fierce showdown as wannabe-cookie-replacements vie for the throne, and the weak ones fade away in a two- or three-step shakeout.
Even so, it’s important to note the downfall of third-party cookies is just one piece of advertising’s latest consolidation puzzle. There are AI, economic pressure and cross-media measurement issues stirring the pot, too. Still, the cookie issue will play its part. These moves create ripples. When Apple took the axe to those same cookies in 2017, ad sales took a nosedive in some areas, and that was with a browser holding barely half of Chrome’s U.S. market share. Now, with Chrome in the mix, the impact is poised to be sharper. The problem, at least for now, however, is pinpointing how sharp that impact will be.
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