Mergers, acquisitions and investments in the interactive ad industry dropped sharply last year, according to a new Petsky Prunier report.
As part of its analysis of investment and acquisition deals in the overall marketing, advertising and digital media industries, the company tracked 167 deals in the interactive ad space. It found, to nobody’s surprise, “a significant decline in transaction volume in 2008.”
Compared to 2007, last year saw a 29 percent drop in the number of publicly disclosed interactive ad segment deals. In terms of money spent, investors and acquirers shelled out five times less in 2008 than they did in 2007, said Petsky Prunier.
In the fourth quarter, there were 31 recorded deals, about 18 percent fewer than in the preceding quarter, and these totaled about $346 million, about 29 percent less than Q3, according to the analysts. Compared to the fourth quarter of 2007, transaction volume in the final quarter of 2008 was down 55 percent and dollar volume was down 77 percent, said Petsky Prunier.
The company found that most transaction activity took place in the interactive agency segment, where eight deals were recorded for an estimated total of $83 million. That’s a 27 percent decrease in volume and a 65 percent decrease in dollar amount when compared to the fourth quarter of 2007.
Petsky Prunier Managing Director Scott Wiggins noted that the 2008 numbers look particularly bad because they are being compared to those from 2007, a year that was an apex for interactive company deals.
“The comparison to 2007 is probably unfair,” said Wiggins. “2007 was probably a high-water mark in the online advertising industry. By contrast, many years would look especially less active than 2007.”
Because “we are living through a pretty severe trough right now” it makes 2007 “look all the rosier,” said Wiggins.
That said, Wiggins isn’t totally pessimistic about 2009’s prospects. He said there are a number of factors, including a probable return to credit availability, that might “normalize” the M&A activity this year. “At same time, there is still cash on the sidelines because of the funds they were able to raise during the peak,” said Wiggins. “I think there will be buy-side demand because of the availability of credit and the amount of capital ready to be deployed.”
Meanwhile, sellers have become more realistic about the worth of their companies, said Wiggins.
Petsky Prunier characterized the M&A and investment activity as being selective and relatively small in value, with most deals taking place “to accommodate the evolving needs of agency clients, moving away from disparate specialists and platforms in favor of agencies with broad capabilities and geographic reach.”
The analysts said the biggest chunk of interactive advertising segment deal money was spent in the ad networks/exchanges arena, “led by Akamai’s purchase of ad targeter Acerno for $95 million.” Petsky Prunier found that e-mail service providers broke the general trend by attracting “more attention” and money in Q4 than they did in any of the previous four quarters. The analysts noted four transactions involving e-mail service providers totaling $62 million.
On the other end of the scale, Q4 of 2008 brought only one deal involving an online lead generation company. There were a dozen in Q4 of 2007.
Citing the Aegis Group purchase of IF in Malaysia, Publicis Groupe’s purchase of Tribal in Brazil and the purchase of Wysiwyg, of Spain, by Microsoft-owned Razorfish, Petsky Prunier noted that large agency holding companies continued to buy interactive agencies during Q4. The analysts observed that many of these deals involved “international expansion” and focused on companies outside the United States.
Overall Petsky Prunier found 140 fourth-quarter transactions, worth $4.7 billion, in the marketing, advertising and digital media industries. It said aggregate deal volume was down 42 percent from Q4 of 2007 and 27 percent from Q3 of 2008 while money spent declined 79 percent and 61 percent, respectively.
This week in digital, we said goodbye to Facebook Exchange and Post-it wars, as we welcome TAG's latest anti-fraud development, Shift, and maybe Siri integrations?
This week at Shift 2016, Andres Sosa, Executive Vice President of the online retailer TheOutnet.com, gave a talk on innovation and content-creation. It reminded ... read more