Local M&A Activity Hits $7.2 Billion In First Half of 2013

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BIA/KelseyWhether it’s through acquisition or investment, money keeps flowing into the local space. The first half of 2013 saw total investment activity, which includes both M&A and private financing, grow from a year earlier, as the number of deals stayed flat but total reported deal value jumped from $5.2 billion to $7.2 billion over the same period, according to a new report from BIA/Kelsey.

The report draws from a dataset which monitors activity among mobile, social, online and audio/video business that target a local audience or geography. The database tracks a wide swath of firms, from straightforward local plays like Foursquare and Yodle to more tangential businesses like Pinterest and Tumblr, many of which are still in the early stages of developing a local strategy.

Led by Google’s acquisition of navigation service Waze in June, the mobile category saw the most robust growth in the first half of 2013. But it’s growth that’s slowing thanks to a slower shift in marketing spend than earlier expected.

“In the mobile advertising, there continues to be a declining trend of money moving to the mobile advertising space largely because companies continue to struggle in terms of monetization for advertisers. That’s been happening in a while, and the marketplace has still been unable to come up with a solution,” Jeanne Dattilio, senior analyst and BIA/Kelsey told Street Fight in an interview. “The flip side of that is that mobile app and web development, we’re seeing a lot of investment in that area because it’s so critical for larger companies to have mobile facing-product for consumer.”

The growth in mobile development investment,and subsequent decline in capital toward advertising models points to an ongoing debate in the mobile space. Given the intimacy of the device, and the success of branded applications from firms like Starbucks, brands might may begin to approach mobile as a re-engagement medium of sorts, a place where they can interact with their most loyal customers rather than luring new consumers. For hyperlocal firms, in particular, location targeting technologies have already begun to exceed the privacy limitations in a third-party (media) environment, making an owned property like a mobile app far more attractive for marketers.

The study also reported signs of consolidation among loyalty companies in the first half of 2013, following a similar roll up in the daily deals space a year prior. And it’s a shift that’s very much part of the same process, says Dattilo

“Investors shifted money from the deals to loyalty space to try to create a better customer retention scenario. We did see more movement into loyalty last year but our prediction is that it will likely plateau very soon,” she added.

Steven Jacobs is Street Fight’s deputy editor.