3 Reasons Mergers and Acquisitions are Booming in the Digital Media & Mobile Ecosystems
Last year was a good year for mergers and acquisitions (M&A). That’s according to the Q1 2016 Marketing Report released by LUMA Partners, a strategic advisory and boutique investment bank. LUMA also follows and maps the growth of various digital sectors — from mobile, to gaming, to martech. (In January, it added Verto Analytics to its list of significant players in the mobile ecosystem.)
Terry Kawaja, Founder and CEO of LUMA Partners, reports that there were “262 acquisitions in digital media for 2015, a 30% increase from 2014.” Here’s our take on the data and three reasons we think 2016 could turn into an even bigger year for M&A.
Reason #1: Too many startups and a lack of product differentiation are priming the market for consolidation.
“Industry observers have been predicting a shakeout in the digital media market for years, particularly in areas such as advertising and marketing technology, which is flooded with dozens of startups with seemingly undifferentiated services.”
In other words, there are just too many tiny companies with point solutions that address common business challenges (attribution or monetization, for example) in piecemeal fashion. From the customer’s perspective, there’s a limit to how many services you can put in your tech stack and not lose your mind or drain your budget.
Reason #2: Companies are making strategic acquisitions to round out their capabilities and add new revenue streams quickly.
Another aspect driving M&As are the strategic acquisitions that larger companies are making to round out their own capabilities or find ways to add more revenue streams sooner where significant market opportunities exist.
Mobile advertising is one of those opportunities. Spend on mobile advertising is projected to reach $90 billion in 2017. Mobile app installation ads are likely to tally up to as high as $8 billionthis year. Products and services that give brands and other advertisers ways to improve their targeting and bolster campaigns outcomes will be in a solid position to reap the benefits of big ad budgets.
Of course, the stakes are high. Many acquisitions don’t pan out or take months or years of complex technical integration. Sometimes they require changing legacy technologies. (Audience measurement is a great case in point.)
Reason #3: Partner deals are enabling heavyweights to add value to their core services and thus keep existing users loyal and engaged.
We also expect to see many more strategic partnerships emerge, and some could result in acquisition or investment. We see big players like Facebook looking for ideas to keep users engaged and loyal by adding capabilities or conveniences they would find valuable. Some of the top Asian messaging apps such as WeChat, Line and QQ app publishers have innovated and refactored the user experience. They are not only about messaging; they have also built themselves into digital hubs. You can use these services, for example, to make mobile payments in a bar in Tokyo, or order transportation to the Pudong Airport in Shanghai from your hotel, or to check if the nice jacket in a Seoul mall would be cheaper online.
Facebook also recently announced that it now allows you to call an Uber from inside Facebook Messenger. And consider Twitter and GIPHY’s partnership, which allows users to search for and post GIFs without leaving Twitter; this capability is likely to increase time spent on Twitter.
Obviously as companies continue to merge and acquire new product lines, tracking the usage of mobile consumers is going to become a valuable commodity. Our own audience measurement data at Verto Analytics is the only resource on the market that currently provides a comprehensive picture of what the digital, mobile consumer is doing every hour, every day. When keeping an eye on market consolidation and industry shifts, it’s important to look for patterns in consumer behavioral data that can tell you which apps, sites and services are trending up or down. And these insights can tell us where and when the next boom, bust or business deal might take place.