The paltry price paid for Unruly rattles the consolidating ad tech market

Monday’s price tag represents a haircut from the £58 million (then about $90 million) in cash upfront that News Corp paid for Unruly a little more than four years ago. News Corp had also set aside an additional £56 million pounds ($86 million) in performance-related earnouts, but it’s unclear how much — if anything — was eventually paid.

Loss-making Unruly was never fully integrated into its parent company and continued to work with other publishers, offering a marketplace that connects buyers and sellers to video ads. Its key competitor in this area is Teads, which was acquired by Dutch telco Altice in 2017. Meanwhile, News UK’s internal digital ad efforts have recently focused on initiatives such as its News IQ audience data business and its participation in The Ozone Project multi-publisher sales collaboration.

Unruly generated £43.5 million ($57 million) in revenue and an  earnings before interest, tax, depreciation and amortization loss of £8.8 million pounds ($11.6 million) in the 12 months until June 30. Tremor said in Monday’s announcement that Unruly is expected to “positively contribute to adjusted EBITDA” in 2021, which would presumably mean a head count reduction is likely. Unruly employs about 350 people.

Unruly CEO Norm Johnston, who is joining Tremor’s board alongside News UK Chief Executive Officer Rebekah Brooks, said there will be “synergies” between Unruly and its new parent company, but he emphasized that the bigger opportunity is growth.

“It’s a very competitive industry with a lot of consolidation going on and while we could continue to grow organically, this [deal] enables us to take a quantum leap,” Johnston said. “It enables us to offer more ad formats, more scale, and more data — a lot of things that would have taken us longer to do.”

Tremor, an Israel-based company whose shares trade on the London Stock Exchange, has had an unusual history. The company was first founded in 2007 as Marimedia. It then became known as Taptica, having acquired a company bearing that name in 2014. In 2019 Taptica merged with fellow ad tech company RhythmOne (previously known as Blinkx) and later that year changed overall corporate name once again to Tremor International, a nod to its 2017 purchase of Tremor Video’s demand-side platform.

Tremor’s stock currently trades at a price-to-earnings ratio far below the average of companies trading on the London Stock Exchange. Tremor’s shares closed at 177.50 pence on Monday. Tremor CEO Ofer Druker said Tremor “is trading very low” contrasted to its performance and compared to its U.S. peers, but said the Unruly acquisition — and News Corp endorsement — is a good signal to the market about the company’s strategy.

“We are not just acquiring an asset, we are gaining a partner,” Druker said.

The ad tech sector is beset with a host of challenges, ranging from new data regulations, increased demands from advertisers for more transparency and the continued dominance of Google and Facebook. While there are a smattering of high performers like publicly traded The Trade Desk, many other companies have downsized, filed for bankruptcy or gone out of business altogether in recent months. Venture investors have largely cooled on the sector and an ad tech IPO hasn’t occurred in some years.

The Unruly-Tremor deal “doesn’t suggest valuations are high for ad tech,” media analyst Alex DeGroote said. “In this ad tech landscape, the spectrum for ad tech winners and losers is very wide.”

For its part, News Corp said the sale is part of a strategy to simplify its business. Last year the company also said it was reviewing strategic options for its News America Marketing business.

“Although the divestment will likely be seen as a setback for News Corp, the terms of [the] original earnout meant News was limited to the extent it was able to integrate Unruly into the broader business – at least in the shorter term,” said Paul Georges-Picot, director at advisory firm Results International. “It has been able to set the terms this time round and comes out of the deal fairly well.”