Why Local Marketing Tech Is Strongly Influencing 2016’s Furious M&A Activity
In case you missed it, there’s been a flurry of merger and acquisition (M&A) activity occurring in the ad and marketing technology space this year. When we entered 2016, those of us in the industry knew this wave of activity was imminent; and now the wait is very much over. In just the first half of the year, more than 70 deals were closed. This included the acquisitions of Marketo, Yahoo and LinkedIn, and plenty of smaller local marketing tech providers as well.
So, what’s the reason for all of this activity? It directly correlates to a growing demand by brand marketers for broader solutions. Today’s brand marketer is increasingly strapped for time, resources and tools. Their perceived needs have been oversaturated with a myriad of point solutions, while the bigger need is for an end-to-end solution that can enable them to measure performance, predict outcomes, drive campaign success and more. What we’re seeing now is a race between enterprise technologies as they work to build comprehensive tech stacks that address all of brand marketers’ needs.
The challenge today for both acquirers and those looking to be acquired is finding suitable business partners. Those participating in the front end of all this M&A activity will score higher valuations and flourish in the long-term as the available seats get taken and the remaining smaller providers struggle to gain size and momentum. As a result of all the M&A activity and brand marketers’ need for complex, holistic tools, valuations for the more proven or scaled marketing tech companies have held up, making them ideal targets for investors and enterprise technology brands.
What Makes “MarTech” – and Local Marketing – So Lucrative?
Traditional ad tech has been just a mere tool in a brand marketer’s toolkit, mainly running on a model of arbitraging media and helping to shepherd the process of media buying. Meanwhile, marketing tech solutions have become a more complete and attractive package for marketers, providing them with the capability to build and execute campaigns while offering deeper insights on their return on investment (ROI).
This year, investment in marketing tech is on pace to more than double the investment in ad tech, suggesting just how promising this market is. Because these solutions are in high demand and are built on a recurring and relatively predictable software-as-a-service (SaaS) revenue model, profits have surged. For investors, this type of technology is more attractive because it is less influenced by unexpected changes in ad spending. One area to watch, in particular, is the local marketing space, valued at roughly $70 billion. The current succession of M&A deals in this particular market suggests that enterprise technology providers have begun setting their sights on the burgeoning local marketing opportunity, and more specifically, marketing’s elusive “last mile.”
Today’s brand marketers are seeking more efficient, and effective, ways to deliver marketing messages across devices and media channels to reach local buyers. While many have relied on selling products through a co-op model — where digital marketing campaigns are facilitated from brand to retail partners through subsidies — this approach presents a litany of challenges. In fact, we’ve found through extensive research that the core challenges (communication, reimbursement, brand control and more) cause brands and their local business partners to waste $14 billion on co-op programs each year. That is the amount of allocated co-op subsidies that goes unredeemed each year based on these challenges.
To overcome these hurdles, brands are recognizing the power that marketing technology has to simplify and streamline the co-op process. Both this, and the fact that more than 90 percent of retail spending still happens locally, in-store, have caught brand marketers’ attention and served as a catalyst for some of this increase in M&A activity.
As we look ahead to 2017, expect to see more activity and noise coming from the brand-to-local marketing space.
While billions are being spent acquiring and funding various marketing technologies, the industry is still too crowded for everyone to have a piece of the pie. Today, over 4,000 marketing tech companies make up the massive industry landscape and the competition is even fiercer when competing for brands’ attention and dollars. To differentiate, companies will need to illustrate their expertise and value clearly – with a keen understanding of how their solution and expertise helps brand marketers execute the last mile of marketing.
As it relates to the local marketing landscape, there are six key capabilities brand marketers need to be successful. These include critical functions like end-to-end attribution and analytics, distributed campaign execution at scale and distributed marketing workflows that help address a brand’s digital presence across large numbers of localized business locations.
To-date, it’s been considered “good enough” for brands to master national marketing campaigns, but to truly reach and engage a high-intent local buyer, brands now need to bridge the chasm between their functions and the business partners who have the local knowledge to make marketing messages stick. This is something few marketing technologies can do well, but must address as brand marketers need it more than ever.
Beyond just the technology, both solution providers and marketers need to remember that all tech must be used with an eye for smart strategy and execution. Only those marketing and technology professionals who understand the rapidly evolving landscape will be able to utilize marketing tech to its full potential. In the months to come, the marketing tech landscape will evolve as M&A activity continues, and marketers should be excited to see what new, broader toolsets will be made available to help them address today’s challenges.
Brendan Morrissey co-founded Netsertive in 2009 after serving as the VP of Business Development for Motricity, an interactive mobile marketing technology company. Immediately prior to this role, he played a major role in the growth, subsequent sale and integration of venture-backed mobile marketing platform GoldPocket Wireless before being acquired by Motricity.