The local technology space saw plenty of M&A activity in 2015 and remains poised for another busy year in 2016 as established firms look to stay on top. Rampant expansion of certain areas such as on-demand services and delivery apps vaults consolidation out of the realm of possibility and into the area of probability.
The startup scene saw its share of healthy — if not billion-dollar — exits as well. Public companies like Apple, Google, Groupon, GrubHub, Square, and Yelp, as well as venture-backed firms like Wahanda and Zomato all bought companies in the local space.
Here’s a recap of the five of the biggest exits in the local tech industry in 2015.
1) Nokia HERE
Maps emerged as the must-have digital asset in 2015. Among the deals that went down, ride-sharing giant Uber acquired deCarta in March and then a portion of Bing’s mapping resources in July. Apple bought mapping visualization startup Mapsense in September.
But no mapping deal was bigger than Nokia HERE, which sold to a consortium of the big three German luxury carmakers — Audi, BMW, and Mercedes — in August for $2.8 billion. Although other companies, including Uber, were said to be in the hunt, the automakers were a logical suitor, as the auto industry accounted for more than half Nokia HERE’s 2014 sales, according to the Wall Street Journal. As high as it was, the sale price still was less than half the $8.1 billion Nokia paid for the Navteq business back in 2008.
The connected car business is expanding rapidly. Having mapping and location-based assets outside the purview of Apple and Google, which are vying for control of connected dashboards, will provide the carmakers with flexibility in an increasingly contested market.
2) Constant Contact
Email is an essential marketing capability and one that’s highly prized by small businesses. In Street Fight’s Local Merchant 2015 report, 51 percent of respondents said they use email marketing, a tactic that ranked second only to online advertising.
With an eye to tapping into that market, Endurance International Group Holdings, operator of end-to-end small business services spanning domain registration, web hosting, blogging, webpage design, cloud hosting, and ecommerce, acquired email marketing specialist Constant Contact for $1.1 billion in November. Veteran analyst Peter Krasilovsky described the deal as “an SMB version of Salesforce’s $2.5 billion acquisition of ExactTarget in 2012.”
3) Millennial Media
One of the original high-flying mobile IPOs of the decade (it went public in 2012), Millennial Media struggled in subsequent years in the increasingly concentrated mobile ad market dominated by Google and Facebook. Following its blockbuster acquisition by Verizon for $4.4 billion in May, AOL turned around and bought Millennial in September, in a deal valued at approximately $250 million.
Integrating Millennial and its array of assets, including Jumptap, Nexage and Condaptive, gives AOL, and, by extension Verizon, a legitimate mobile advertising offering — one with a solid programmatic presence, a must in today’s tech-driven ad market. Condaptive, a mobile data startup Millennial acquired in 2011, adds to Verizon-AOL’s location targeted capabilities.
On-demand food delivery services represented big money in 2015. Yelp’s acquisition of Eat24 in February for $134 million helped inject froth into an already overheating market. The move signaled a future direction for the company where content and commerce are more explicitly linked — and monetized — through the Yelp platform.
Expanding into ordering might seem like a natural extension of the platform, given the preponderance of restaurant reviews on Yelp, but it’s not as simple as that. As Street Fight noted at the time, “The move positions Yelp in direct competition with its other food ordering partners and puts the company on a collision course with GrubHub, the online ordering firm that went public last year after merging with New York-based Seamless.”
Still, by Q3, the acquisition appeared to be bearing fruit. When Yelp reported earnings on October 28, it highlighted steep year-over-year growth in transaction revenue, attributable primarily to Eat24.
2015 was a fairly grim year for Groupon, punctuated by executive musical chairs, restructuring, and strategic repositioning. But all the sour news didn’t stop the daily deals giant from making a number of acquisitions. One high-profile purchase, part of the company’s pivot into new markets, was for OrderUp. Groupon paid $69 million for the food delivery app (and may pay more if performance targets are met).
Adding food delivery puts Groupon in another highly competitive, potentially low-margin business, but at least it is one that encourages repeat customers, something the company had difficulty in attracting. Think of it as something akin to a loyalty program. Plus, it enables Groupon to combine offers in the 40 markets where OrderUp is active.
Noah Elkin is Street Fight’s managing editor.