adtech industry snapshot - arbor...
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AdTech Industry Snapshot Arbor Advisors LLC
Arbor Advisors provides M&A and capital
raising advisory services to high-growth
technology companies
Representative Arbor Advisors Transactions
Has been acquired by
The undersigned acted as
financial advisor to the seller
in this transaction
Has been acquired by
The undersigned acted as
financial advisor to the seller
in this transaction
Has been acquired by
The undersigned acted as
financial advisor to the seller
in this transaction
Has been acquired by
The undersigned acted as
financial advisor to the seller
in this transaction
Has been acquired by
The undersigned acted as
financial advisor to the seller
in this transaction
Has been acquired by
The undersigned acted as
financial advisor to the seller
in this transaction
Has been acquired by
The undersigned acted as
financial advisor to the seller
in this transaction
Has been acquired by
The undersigned acted as
financial advisor to the seller
in this transaction
Has been acquired by
The undersigned acted as
financial advisor to the seller
in this transaction
The Arbor Advisors Difference
Aligned Interests Focus exclusively on advising
entrepreneurs, never investors or buyers
Operational Experience Experience building companies as
entrepreneurs
Negotiation Framework Optimize results using the Harvard
Negotiation Project framework
We are experts in Negotiation
Harvard
Negotiation
Project
Stanford
School of
Engineering
Market
Market Overview
Digital Advertisement Scheme
Capitalization and Growth
Purchases Allocation in 2017
Digitalization Across Industries
Market Map
Forces Shaping AdTech
Deal Activity
Summary
Strategic Investors
Select Strategic Acquirers
Select AdTech Active Strategic Investors
Financial Sponsors
Summary of Select PE Investors
Valuation
Key Public Comparables
Operational & Valuation Metrics
Recent AdTech Software Transactions
How Growth Affects Valuation
Market Timing
Contents
3 3
SUCCESS
Refers to a good or service being offered
by a company ideally a product
IMPROVE
Refers to a good or service being offered
by a company ideally a product
REBRAND
Refers to a good or service being offered
by a company ideally a product
3 EASY STEPS Your Subtitle Here
Advertising Technology Market Overview
Digital Advertisement Scheme
ADVERTISERS PUBLISHERS
Technology
Media
Marketing
Digital
Content
MarTech
AdTech
Digital
Content Content sites,
MCNs, game
publishers,
aggregators
AdTech Display, search,
video, mobile,
social, content
marketing/native,
connected TV
MarTech Data, analytics
and predictions,
sales automation,
email, commerce
technology,
shopper
marketing,
payments
Source: WalkerSands Communications, G2Crowd
Ad
Buying
Team
Ad
Operations
Team
Direct
Deals
Ad Exchanges
(RTB)
DEMAND
SIDE
PLATFORMS
AD
CAMPAIGN
MANAGEMENT
SELL
SIDE
PLATFORMS
PUBLISHER
AD
MANAGEMENT
Ad
Networks
40.4%
37.1%
28.8%
24.2%
23.0%
17.1%
Global Digital
Advertising spending
Capitalization and Growth
6 6
Social media advertising expenditure as
share of digital advertising spending
worldwide in 2016 - 2017 by region
69,672
84,480
97,210
109,364
122,878
137,305
14,264 16,569 17,657 19,045 20,387 21,674
69,373
78,228
96,090 96,315
104,030
111,226
2015 2016 2017 2018* 2019* 2020*
Display
Classified
Search
Internet advertising spend
worldwide 2015 – 2020, by
type (in million U.S. dollars)
Source: Statista, markettechseries
$211 B
43.6%
38.5%
29.7%
24.1%
23.0%
17.6% Western Europe
North America
Asia Pacific
Central and Eastern Europe
Latin America
Middle East and Asia
2016
2017
Purchases Allocation in 2017
Source: Statista, brightroll
7 7
37%
29%
39%
29% 29%
19%
15% 16%
32%
28% 27%
24%
21%
15% 15%
12%
Socialmedia
marketing
AdTech E-mailmarketing
Analytics Contentmarketing
Searchmarketing
Mobilemarketing
Datamarketing
Purchased in the past 3 years
Purchased in 2017
51% 24%
12%
7% 6% Mobile
Search
Banner
Digital video
Other
In U.S.
Mobile Leading platform that allows for richer
data capitalization, resulting in better
ad targeting
Search/Social Drives close to 35%
site visits, the most of all channels
Display/Banner Usually yields less favorable results
than native ads
Digital Video Increasingly overtakes TV ad budget
due to high personalization and
engagement
Other Connected TV and brand surveys
ICT
Media
Professional services
Finance and insurance
Advanced manufacturing
Oil & Gas
Utilities
Basic goods manufacturing
Mining
Real Estate
Transportation & Warehousing
Education
Healthcare
Hospitality
Construction
Agriculture and hunting
Overall
digitalization
Digital
spending
Business
processes
Digital
spending on
workers
Digitization
of work
8
>
The industry’s maturity brings a new era in which new forces will come into play
Source: McKinsey
8
Digitalization Across Industries
Market Map
9
Mobile
Display & Programmatic
Content Advertisement
Select influencers across the AdTech landscape
9
Search
Source: Pitchbook, g2crowd
Video Social Ads
Forces Shaping AdTech
USA and EU regulations diverge
Google and Facebook leadership
Analytics vendors fight against
duopoly
Emerging need for approved sellers
Most popular and influential form of
content
Regulations Starting in 2018 GDPR goes into effect in Europe, widening the gap between the two markets’ policies
Oligopoly Marketers push for more accountability due to inaccuracies and recent moral
issues
Third-party Brings more transparency
across auction inventory and
better ROI
Ad-Fraud Fake ad sellers
collected $16.4B in 2017 for services
they never provided
Video Ad Live video and
personalized video will lead the trend
for both professional and
social sites
AdTech continues to move towards more personalized, interactive and high-quality content to capture the users’ attention. Video remains the most efficient means to engage audiences. Data protection regulations
are beginning to replace audience targeting with contextual targeting. Advertisers are frequently threatening to move to alternate parties or cut the spending on leading platforms, such as Google and Facebook,
because of their reporting errors and controversial content.
Source: martechseries, Forbes
SUCCESS
Refers to a good or service being offered
by a company ideally a product
IMPROVE
Refers to a good or service being offered
by a company ideally a product
REBRAND
Refers to a good or service being offered
by a company ideally a product
3 EASY STEPS Your Subtitle Here
Deal Activity
Summary
12 12
Select Players
Private Equity Strategic Acquirers
Consumer attention spans are shortening. Advertisers are demanding more visibility into who sees their ads and whether their spend is
attracting customers. There is a clear shift towards native and personalized content, which is often distributed through search engines
and social media. Personalizing ads requires more data, and as a result data ownership is increasingly valuable in the market. Although
the powerhouses, Google and Facebook, enjoy their omnipresence and are highly acquisitive, niche solution providers are becoming
formidable competition. Having realized the tailwinds in the industry, we predict both strategic acquirers and PE investors will seek to
bolster their portfolios and further integrate digital advertisement channels. Most notably, Adobe acquired TubeMogul, a video demand-
side platform, for a striking $611.3M in late 2016. Currently, platforms that utilize the interactive and engaging elements of video content
are highly attractive in today’s market, signaling the potential for these platforms to attract strong valuations.
Deal Count by Category Deals by Enterprise Value / Revenue Multiple
Source: PitchBook, Tech Crunch, CBInsights, Quartz
Title quote from Maersk
16%
19%
30%
2%
6%
26% Accelerator/Incubator
Angel/Seed
Venture Capital
Growth/Expansion
Buyout/LBO
M&A
47%
26%
16%
11%
0.0x-3.0x 3.0x-6.0x 6.0x-9.0x 9.0x+
SUCCESS
Refers to a good or service being offered
by a company ideally a product
IMPROVE
Refers to a good or service being offered
by a company ideally a product
REBRAND
Refers to a good or service being offered
by a company ideally a product
3 EASY STEPS Your Subtitle Here
M&A Activity
Strategic Investors
Select Strategic Acquirers
14 14
Ad Agencies
Source: G2crowd, Capterra
Social Media
Internet Portals
Commerce
Media/ Telecom
Ad/Marketing Tech
Video Platforms
CRM
Select AdTech Active Strategic Investors
2015 2014 and earlier 2016 2017 and later
Source: PitchBook, Crunchbase
SUCCESS
Refers to a good or service being offered
by a company ideally a product
IMPROVE
Refers to a good or service being offered
by a company ideally a product
REBRAND
Refers to a good or service being offered
by a company ideally a product
3 EASY STEPS Your Subtitle Here
M&A Activity
Financial Sponsors
AUM: $12,000M
Check Size: $20M-$200M
Dry Powder: $4,490M
AUM: $30,000M
Check Size: $20M - $700M
Dry Powder: $7,730M
AUM: $3,300M
Check Size: $5M - $100M
Dry Powder: $1,410M
AUM: $3,170M
Check Size: $15M - $100M
Dry Powder: $557M
AUM: $21,000M
Check Size: $5M - $40M
Dry Powder: $M
Summary of Select PE Investors
Company Stats Relevant Investments
During the period 2014 – 2018
17 17
Data as of 3/01/2018
SUCCESS
Refers to a good or service being offered
by a company ideally a product
IMPROVE
Refers to a good or service being offered
by a company ideally a product
REBRAND
Refers to a good or service being offered
by a company ideally a product
3 EASY STEPS Your Subtitle Here
Valuation Advertising Tech
Key Public Comparables
19
Source: PitchBook, Capital IQ
19
Dis
pla
y &
Pro
gra
mm
ati
c
Vid
eo
Ad
ve
rtis
ing
S
ea
rch
& S
oc
ial
EV/2017 Rev Company
1.5x
0.1x 14.2x
4.4x
0.2x 10.4x
Median Min Max
Legend
1.6x
0.8x 45.7x
0.00x
0.20x
0.40x
0.60x
0.80x
1.00x
1.00x
2.00x
3.00x
4.00x
5.00x
TEV/NTM Rev
5.00x
5.50x
6.00x
6.50x
7.00x
Operational & Valuation Metrics
Source: PitchBook, Capital IQ
($M) Trading Metrics Revenue EV / Revenue
Company Name Equity Market Cap Cash EV 2017 2017 2017
Display & Programmatic
Criteo $1,717.8 $358.0 $1,428.4 $2,296.7 0.6x
Matomy Media Group 97.4 20.8 128.3 293.2 0.4x
Albert Technologies 21.4 11.1 24.6 1.7 14.2x
The Trade Desk 1,878.3 132.8 2,192.1 308.2 7.1x
Social Reality 52.7 0.2 40.9 28.4 1.4x
iClick Interactive Asia Group 466.6 24.1 488.3 110.9 4.4x
AcuityAds Holdings 46.4 1.3 37.1 46.6 0.8x
Rakuten 12,398.8 7,786.8 14,447.0 8,385.3 1.7x
Marchex 141.1 104.4 10.6 90.3 0.1x
Taptica International 392.1 27.0 342.6 210.9 1.6x
Median $266.6 $25.5 $235.5 $160.9 1.5x
Search & Social
Marin Software $61.9 $29.4 $14.0 $75.0 0.2x
Inuvo 23.1 2.9 29.4 79.6 0.4x
Facebook 512,759.0 38,289.0 423,263.4 40,653.0 10.4x
Yelp 3,478.1 558.2 2,694.7 846.8 3.2x
Alphabet 729,458.2 100,143.0 634,696.3 110,855.0 5.7x
Baidu 81,323.6 19,477.7 72,858.6 13,034.1 5.6x
Median $42,400.8 $10,017.9 $37,776.7 $6,940.5 4.4x
Video Software
RhythmOne $195.3 $39.3 $153.6 $196.8 0.8x
Telaria 206.4 77.2 106.3 43.8 2.4x
YuMe 167.0 41.3 - 159.9 NA
Mirriad Advertising 81.9 12.8 54.6 1.2 45.7x
Median $181.2 $40.3 $80.4 $101.8 1.6x
Recent AdTech Software Transactions
1.3x 13.3x
3.8x
Median Revenue Multiple
Median Min Max
Legend
Source: PitchBook, Capital IQ
($M)
Date Announced Target Name Aquiror Name Target Enterprise
Value Target LTM Revenue
Target LTM Revenue
Multiple
9/1/2017 140 Proof AcuityAds (TSXV: AT) $23.0 $11.3 2.0x
8/1/2017 DoubleVerify Providence Equity Partners 300.0 70.0 4.3x
6/23/2017 Teads Altice (AMS: ATC) 319.8 200.0 1.6x
3/2/2017 Viant Time (NYSE: TIME) 155.0 100.0 1.6x
12/19/2016 TubeMogul Adobe Systems (NASDAQ: ADBE) 611.3 212.0 2.9x
5/10/2016 Livefyre Adobe Systems (Nasdaq:ADBE) 45.0 11.8 3.8x
4/26/2016 Tapad Telenor Group (OTCMKTS: TELNY) 378.9 100.0 3.8x
1/6/2016 AddThis Oracle (NYS: ORCL) 175.0 19.9 8.8x
12/24/2015 HeyZap RNTS Media (FRA: RNM) 45.0 20.0 2.3x
10/27/2015 PureCars Raycom Media 125.0 26.5 4.7x
10/8/2015 Kixer Nexstar Broadcasting Group (NASDAQ: NXST) 15.5 6.8 2.3x
9/16/2015 Unruly News Corp (NASDAQ: NWSA) 174.9 22.2 7.9x
9/10/2015 Supersonic IronSource 150.0 75.0 2.0x
7/22/2015 Midroll Media The E.W. Scripps (NYSE: SSP) 60.0 7.9 7.6x
6/30/2015 Dailymotion Vivendi (PAR: VIV) 304.2 69.5 4.4x
3/23/2015 Viralheat Cision Group 40.0 3.0 13.3x
2/25/2015 Smart AdServer Cathay Capital Private Equity 42.3 27.8 1.5x
2/2/2015 Yashi Nexstar Broadcasting Group (NASDAQ: NXST) 33.0 25.3 1.3x
1/23/2015 Datalogix Oracle (NYS: ORCL) 1200.0 125.0 9.6x
22
ASSUMPTIONS
Preliminary analysis based on SaaS industry multiples
Public company comparables provide a range of
enterprise value (EV) multiples
– Range indicates 25th to 75th percentile value
How Growth Affects Valuation
Mean Growth Interval Valuation Interval (EV / Revenue) Median
> 3
5%
OUR THOUGHTS
Any analysis is only as accurate as the forecasts it relies on. Errors in accounting for key ingredients of corporate
value – such as the company’s growth rate - can lead to mistakes in valuation. We strongly believe that any
strategic advantage that translates into superior growth rates will make a company trade at higher multiples.
However, in the technology middle market, where valuations are highly subjective and acquirers use a set of
different valuation tools, we identify having and advisor with the right negotiation experience that fights for the
right exit multiple as a key component of the outcome.
25
% -
35
%
10
% -
25
%
>1
0%
3.0x
4.1x
5.4x
7.6x
3.4x
6.9x
9.7x
10.0x
1.0x 3.0x 5.0x 7.0x 9.0x 11.0x
0
50
100
150
200
250
300
0
1
2
3
4
5
6
7
8
9
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ma
rke
t Cap
italiz
atio
n ($
B) C
as
h o
n B
ala
nc
e S
he
et
($B
)
Growth in Public Software Company Cash on Balance Sheet and Market Capitalization Indicates Purchasing Power
Cash on Balance Sheet
Market Capitalization
Major SaaS companies undergoing take-
private transactions leave PE giants poised to
make add-on acquisitions Despite a ~35% percent pull back in year-over-year startup acquisitions due to
uncertainty surrounding tax reform and repatriation, analysts are expecting a highly
acquisitive market environment in 2018. Public companies are showing a particularly
strong position as cash on balance sheets has grown 20x over the past ten years to
approximately $8.5 billion, and the market capitalization of those companies has
grown 28x over the same time period. This combined with the current availability of
debt financing leaves companies with an unprecedented level of purchasing power.
Furthermore, there are record amounts of dry powder in private equity. It is therefore
probable that the coming period will see both increased deal activity and higher
valuations.
Indicators Signaling Continuation of Highly Acquisitive Period for SaaS
Market Timing
23
Source: Tomasz Tunguz
SUCCESS
Refers to a good or service being offered
by a company ideally a product
IMPROVE
Refers to a good or service being offered
by a company ideally a product
REBRAND
Refers to a good or service being offered
by a company ideally a product
3 EASY STEPS Your Subtitle Here
The opinions, ideas, statements, and interpretations in this report do not offer warranties, make representations, assurances, or undertakings of any kind, express or implied. User discretion regarding the accuracy, completeness and reliability is recommended. Data provided is based on several external sources Arbor Advisors, LLC deems to be reliable. However, any person or entity reviewing this report should conduct its own diligence and reach its own conclusions to inform business decisions. © 2018 Arbor Advisors, LLC — Member FINRA
Arbor Advisors provides M&A and capital raising
advisory services to high-growth technology companies
Find us at
www.arboradvisors.com
The Arbor Advisors Difference
Aligned Interests Focus exclusively on advising
entrepreneurs, never investors or buyers
Operational Experience Experience building companies as
entrepreneurs
Negotiation Framework Optimize results using the Harvard
Negotiation Project framework