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Change is in the wind as the digital media sector descends on the halls and meeting rooms of the Consumer Electronics Show this week.
The impact of Google Chrome withdrawing support for third-party cookies will be a consistent topic of conversation among this cohort as each prepares for an entirely different business reality in the next 12 months.
For some, the following year will also see a renewed period of mergers and acquisitions in the sector after 2023, which was quiet compared to the frantic state of corporate development in the immediate aftermath of the Covid-19 pandemic.
According to this week’s annual market report by investment bank LUMA Partners, total global deal value in the space fell to a 10-year low in 2023 with total global deal value dropping below $3tn, a 17% decline from the prior year.
Stabilizing interest rates
Prohaska Consulting’s M&A expert Mark Wright told Digiday that lofty valuations were hard to come by in 2023 as potential buyers, such as private equity firms, felt the rising tide of increasing interest rates.
“For the buy-side, the cost of debt to finance acquisitions was very high,” he said. “PEs typically buy companies with a combination of investor cash and debt to juice investment return multiples.”
Boris Fridman, managing director of marketing tech & data at advisory firm Madison Alley Global Ventures, believes stabilizing interest rates in 2024 could reverse this trend.
“Adding fuel to the fire are rising equity markets and the cost of debt financing, which is beginning to come down,” Prohaska Consulting’s Wright added. “If rising equity markets and declining debt costs are not a head fake, expect industry M&A to take off in 2024.”
PE’s continued interest
Meanwhile, Fridman also noted how the comparative lack of public listings has blocked access to liquidity for potential buyers. “This has precluded liquidity for a lot of strategic buyers, but, of course, in 2023, there were decreased numbers of acquisitions, but there were still some PE-led buys,” he adds, pointing to purchases such as Bridgepoint-backed MiQ purchasing Grasp in 2023.
Prohaska Consulting’s Wright maintained the drive for further inefficiency in the ad tech supply chain — a move that is likely to be brought on by the decline of third-party cookies — is expected to further this trend.
“The supply chain in digital media is notoriously inefficient compared to linear television,” he added. “Achieving TV-level supply chain efficiency will require immense supply chain compression, which will drive supply chain consolidation and a ‘musical chairs’ disintermediation. The key to thriving and surviving will be ever-increasing operating scale, which will drive M&A.”
But what to buy?
Meanwhile, Suzane Mokbel, director at Madison Alley Global Ventures, also noted that many prospective buyers will pay attention to how consumer adoption of generative AI tools such as ChatGPT before deciding to go back to market.
“Generally, companies in third-party data activation and measurement really have to acquire companies and technologies that enable them to get close to first-party data and be a little bit more creative on the contextual space,” she adds.
Such acquisitions will be necessary, especially as Big Tech players make AI the core of their investment priorities.
As Mokbel said: “Take the application of machine learning and AI as it relates to both first- and third-party data, as well as content, and this is where acquisitions should happen in 2024.”
Despite several setbacks over executing third-party cookie removal (primarily from Google Chrome), the industry’s major web browsers have been withdrawing support for third-party cookies for several years.
The subsequent period has seen several “alternative IDs” geared primarily toward ad targeting and measurement. Several sources tipped the providers of such services as likely popular targets among potential acquirers in 2024, particularly among strategic buyers.
For example, in mid-2023, Digiday reported how LiveRamp, the purveyor of Authenticated Traffic solution — held M&A discussions with credit bureau Experian, with sources indicating such lines of communication remain open.
Meanwhile, several ad tech companies listed on the public markets between late 2020 and early 2022, which saw this cohort increase from single figures to almost two dozen, are also potential targets.
According to sources, several companies among this cohort are trading significantly below their market debuts, a dynamic that could prove attractive to PE buyers.
“You have a lot of such as companies such as AdTheorent and Nexxen that are trading close to their cash position, and that creates an opportunity for some companies to take them private,” comments one source, who requested anonymity due to potential commercial sensitivities.
The source concluded, “I’m surprised there wasn’t more taken off the market in 2023, but that’s probably because of the [unstable] geopolitical conditions.
“The advertising market is quite volatile, and it does stabilize [on the public markets] every five years or so, but we’re in the middle of a storm right now, so staying on the public market is just not a good idea.” — Ronan Shields
Omnicom sets creator-based audience fusion arrangement with YouTube
Omnicom today will unveil a collaboration with Google as it continues its string of multi-partner initiatives and partnerships announced at CES 24 to advance the planning and measurement of influencers and creator channels, Digiday has learned. This follows a partnership with TikTok Omnicom announced yesterday at CES.
This initiative revolves around a first-to-market, generative AI-assisted global effort to more precisely discover YouTube influencers and creators as well as optimize YouTube creator video performance for Omnicom clients. The collaboration allows Omnicom’s “Omni” open operating system to fuse data between Omni’s and Google’s audiences and is expected to be fully operational in Q1.
As Kevin Blazaitis, head of Omnicom Media Group’s influencer practice explained, Omni audience data is translated into YouTube audience data and mapped to YouTube creator audiences, creating a sort of “punch card” that enables planners within the influencer practice to recreate brand-specific audiences within YouTube based on organic followings relevant to Omni’s 10,000 or so audience attributes.
With the audience fusion arrangement with Google/YouTube, “we’re not selecting influencers based on just the number and the count and the metadata that’s available — we’re going beyond that, to look at who are the audiences following those influencers,” said Megan Pagliuca, OMG’s North American head of activation.
Vital to this arrangement is getting Omni and Google’s data troves to play nicely together, said Clarissa Season, chief experience officer with Annalect, which manages Omni. “We’ve created a fusion mechanism where we’ve identified which audience attributes in [YouTube’s] taxonomy and our taxonomy match up,” she said. “By having this consistent audience definition, we’re able to get much richer insights. We’re able to open up greater inventory for our audience that we may not have been aware of before.”
From a client POV, Melissa Wisehart, PHD’s U.S. chief media officer, said this arrangement brings creator considerations much more up-funnel in the strategic planning process. For example, a CPG client might be looking to connect with esports enthusiasts.
“Now, instead of going out to market in a more manual, archaic way, this solution brings it back to us and says, OK, within this centralized taxonomy, here’s the top influencers regardless of what content they might be talking about, and here’s the audiences that are connecting with them,” said Wisehart. “It allows you to really bring those influencers upfront in the process, maybe develop a custom content partnership with them, and then apply that all the way through implementation, from an audience standpoint.”
Kim Larson, YouTube’s global head of creators, said the collaboration will help media agencies “unlock the potential of our vibrant creator ecosystem. [The OMG influencer practice’s] dedication to data-driven creator partnerships, coupled with paid media and measurement expertise, meets a strong market need.” — Michael Bürgi
Elsewhere from CES
- L’Oréal’s latest device hopes to take a chunk out of Dyson’s hair-dryer market share. Debuting at CES in Las Vegas on Tuesday, L’Oréal’s Research and Innovation division unveiled a new hair dryer called AirLight Pro, which will retail under the L’Oréal Professional brand. More in this briefing for Glossy+ members.
- Amazon said the generative AI version of Alexa will be used to create a voice assistant for BMW cars.
- Telly debuted a new voice AI assistant powered by ChatGPT for its TVs. It also announced new features for personalized advertising and commerce features including visual recognition tools so viewers can shop for what they see on their shows in real time. — Marty Swant
“We’re all rooting for you Linda, but you’re making it hard for us!” — Shelley Palmer to X (formerly Twitter) CEO Linda Yaccarino during a brief, early morning fireside chat as part of the Brand Innovators Summit sessions — also her first public show since her last, less successful Code Conference appearance in September last year, as overheard by Krystal Scanlon
“That’s dirty! You’re not supposed to read badges. I thought it was a friend.” — CES attendee to CES exhibitor that used their name to lure them to a showroom booth at the Venetian, as overheard by Marty Swant
Veteran’s tip of the day: Pay attention to shortcuts
Jaan Janes, vp of publisher partnership at PubMatic, has a hot tip for CES rookies: master the shortcuts. Skip the long detours — use the staircase by the Vdara to zip between Aria and Cosmopolitan. Forget the Strip’s walkway maze; this insider route is your fast track to getting around. — as told to Seb Joseph; Read the full veteran’s guide to CES.
What to do
9 to 9:40 a.m. Talent & Franchises: Building a Modern Media Company at ARIA, Level 1, Joshua 9
10 to 11 a.m. Autonomous Cooking Technology at Venetian Expo, Hall G, 60144
11 to 11:40 a.m. The State of Streaming: Engaging New Audiences with Localization and Personalization at LVCC, West Level 2, W232
2 to 2: 40 p.m. The Athletic and Google: Using Partnerships for Good at ARIA, Level 2, Mariposa 4
Other Digiday coverage
- Google is starting to phase out third-party cookies from Chrome. This marks not just the end of an era, but the beginning of a new, perplexing chapter in advertising — a terrain as unpredictable as it is uncharted. Digiday turned to seasoned ad executives for guidance through this maze, seeking clarity in the midst of profound change.
- Four years after Disney+’s debut set off the subscription-based streaming war, the introduction of Amazon Prime Video’s ads tier in 2024 heralds the ad-supported streaming war. And ad buyers are hopeful that the heightened competition on the sell side leads to product development and lower prices, with advertisers’ intensifying budget volatility looming as an X factor.
- Brands have always wanted to be where culture is happening. But increasingly, especially amongst Gen Zers, culture seems to be cultivating in ad-free, closed-off group chats and more private online communities, like Discord or the fediverse. If brands want to continue to be part of those cultural moments, agency execs say they’ll have to either find ways to access these communities or build communities of their own.
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