While some industries are winding down toward the end of the year, ad tech consolidation is showing no signs of a let up.
On Thursday, publicly traded supply-side platforms Rubicon Project and Telaria announced plans for an all-stock deal to create what they are calling the world’s largest independent SSP.
The companies described the deal as a merger, although Rubicon shareholders will own 52.9% of the combined company’s shares. Rubicon CEO Michael Barrett will take on the chief executive position at the as-yet-unnamed new company, while Telaria CEO Mark Zagorski will be its president and chief operating officer. The new company will carry the stock ticker symbol $RUBI.
Together, Telaria and Rubicon’s revenue in the year to Sep. 30, 2019 grew 32% to $217 million and will have around $150 million in cash and no debt, the companies said. The Rubicon Project’s market cap was at around $383 million before the market open on Thursday, while Telaria’s was around $350 million.
The merger is expected to bring down the new company’s costs by around $15-20 million by reducing the costs involved in being two publicly traded companies, consolidating contracts and likely trimming some overlapping roles. The company will have more than 600 employees and contractors. While Barrett wouldn’t rule out headcount reduction, he said the focus is on growth rather than cost-saving.
By acquiring video and connected-TV specialist Telaria, Rubicon gets a jump on the growing TV ad space that would have taken anywhere between two and four years for its engineers to build, according to Barrett. Zagorski said there is “an opportunity for someone to create really The Trade Desk of the sell-side — a real alternative to those walled gardens.”
Barrett said this deal, added to the wider consolidation within ad tech, should benefit publishers in the form of fee reductions as volume tends lead to lower ad prices. In addition, a bigger company should be able to help publisher partners move more quickly into growing out new areas of their ad businesses, such as video or audio, he said.
“We want to be the lower-priced player in the market, the scaled player, the efficient player,” said Barrett. “You’ll continue to see that play out as the market contracts: there will definitely be a lowering of the ad [tech] tax.”
On the advertiser side, the combo means one less middleman. Rubicon-Telaria adds to the tally of ad tech M&A deals in 2019 — and experts think the pace will only continue into 2020. There were 86 ad tech deals in the first three quarters of 2019, up from the 47 deals completed in the same period last year, according to advisory firm Results International, which defines a deal as any transaction where a company takes at least a 40% stake in another.
A flurry of deals have happened in the past couple of months, including:
- Smart Adserver acquired demand-side platform LiquidM.
- Measurement firm DoubleVerify purchased analytics platform Ad-Juster.
- Roku picked up demand-side platform Dataxu for $150 million in cash and stock.
- AT&T advertising division Xandr bought sell-side TV ad platform Clypd.
- Content recommendation platforms Taboola and Outbrain merged.
Supply-side platforms are undergoing changed roles. Advertisers and agencies have trimmed the number of supply-side partners they use. The rise of header bidding — which lets publishers offer inventory to multiple ad exchanges simultaneously — led to some commoditization of the services SSPs offer. SSPs have looked to differentiate by moving into newer areas of biddable media, like TV and audio. All the while, Google remains the SSP that rules them all and dominates the market both on the buy- and sell-side
Ad tech companies have had somewhat of a bumpy ride on the public markets over the past decade. But for Rubicon and Telaria, things smoothed out a little recently — both stocks are trading up from where they were a year ago. Both have different stories, strengths and challenges. At the market’s open today, Rubicon had a market cap of $383 million and Telaria $350 million.
Los Angeles-based Rubicon Project, founded in 2007, is one of the largest ad exchanges. The company went public in 2014 and its stock initially soared. It then ran into challenges, having been slow to hop onto the header bidding trend and by making small acquisitions that ultimately didn’t work out. The company hired industry veteran Barrett in 2017, and it has since undergone a financial turnaround.
Telaria came to be in 2017, when it rebranded from the publicly traded company Tremor Video and sold its demand-side platform to mobile ad tech company Taptica. Telaria is a specialist in video and was quick to move into the rapidly growing connected-TV advertising space.
Luma Partners and Needham & Company served as financial advisors to Rubicon Project, while RBC Capital Markets was financial advisor to Telaria on the deal, which is expected to close in the first half of 2020.