German investment group MGI nears deal to acquire mobile ad firm Verve

MGI states on its website that its strategy is to acquire “preferably distressed companies with sustainable revenue streams, restructuring and integrating those portfolio companies onto single state of the art platforms and generating leverage and scale advantages.”

The companies in MGI’s portfolio include PubNative, which offers an app-focused mobile supply-side platform; AppLift, which provides an app-marketing platform; influencer marketing agency ReachHero; and Gamigo Group, a provider of a free gaming platform.

MGI reported revenue of  €28.6 million ($31.7 million) for the first half of 2019, representing a 20% increase over the period a year earlier. Its earnings before interest, tax, depreciation and amortization rose 28% for that period, to €7.5 million ($8.3 million), as compared with the year-earlier stretch. The company had €26.2 million ($29 million) in “cash and cash equivalents” as of June 30, 2019. MGI lists in its filings that its headquarters are in Malta.

Founded in 2005, Verve was an early entrant into the mobile ad tech market; it has worked with advertiser clients including Best Buy, Diageo and AT&T. The company raised more than $30 million in funding, according to AdExchanger. But in recent years, Verve encountered difficulties. In 2018 the company wound down its European operations, citing its concerns about regulation in the region. The General Data Protection Regulation, which requires companies to ask European consumers for their consent before collecting personal information, went into effect in 2018.

Verve has since reduced its U.S. head count, too, through a series of layoffs in 2019. Last year the company reduced its total number of staffers worldwide to about 100 people, compared with a head count of a little more than 200 the previous year, as Adweek reported.

While marketers have long been interested in location-based ad targeting (and some companies have wanted to reach potential shoppers near their physical stores), “walled gardens” like Google and Facebook are best players at the technique and tend to offer the best solutions, said Ana Milicevic, co-founder of digital advisory firm Sparrow Advisers.

“The use case for the open internet location play often doesn’t justify its creepiness trade-off,” Milicevic said. “That, I think, is the crux of the problem for location companies: not that they’re collecting information, not . . . whether they’re being good custodians of this data.” She added, “But on the activation side there’s only really so much you can do without being Big Brotherish.”

Consumers are also becoming more aware of when apps share their location data in the background, and many users are taking control over which of their apps do so. Apple’s September release of an iOS update, which includes regular reminders about when apps are sucking up user data, has led to lower opt-in rates for location tracking by consumers, Digiday reported earlier this month.

The potential acquisition of Verve by Media and Games Invest would be just the latest in a long list of recent ad tech deals; 15 ad tech mergers and acquisitions took place in the fourth quarter of 2019 alone, according to investment bank Luma Partners. In December supply-side platform companies Rubicon and Telaria merged in an all-stock deal. Earlier this month Advanced TV specialist Cadent acquired identity solutions business 4INFO. And also this month News Corp offloaded Unruly to Tremor International for a fraction of the 2015 acquisition price for the video ad tech company.