CDPs and Martech M&A in 2021
The frenetic energy of 2020 upended nearly every industry, propelling consumers to embrace “new normals” across the board. Most notably, e-commerce boomed, positioning ad and martech companies to capitalize on evolving consumer behaviors in the New Year. How? By leveraging their ability to provide brands and advertisers with new strategies to win in a post-Covid environment. Here’s how I see that progressing in 2021.
CDPs are the new CRMs and DMPs
From retail businesses to quick-serve restaurants, CPG to travel, several industries have been steadily increasing and modernizing over the years; however, the pandemic brought about a dramatic acceleration. Rightfully so, consumers’ behaviors have changed amid COVID-19, and these changes — online shopping, curbside pick-up, virtual services, etc. — are not going away anytime soon. As a result, companies are scrambling to evolve their digital transformations, unify their data, and build out or acquire the new capabilities needed to keep consumers engaged in the coming years.
The way I see it, CDPs are the next-generation CRM systems and DMPs, capturing first-, second-, and third-party data (including online and offline) and setting the stage for companies to better understand and target consumers. With more consumers taking more of their activities online and generating more data, CDPs will continue to thrive in 2021. What’s more, with third-party cookies going away in the very near future, brands are looking for ways to maximize their data in order to bring the brand (and their activities) to the forefront. The best and most holistic way to do that, of course, is through a CDP where data for both anonymous and known consumer profiles can be stored.
With this emphasis on business agility, it’s likely we’ll also see an uptick in CDP partnerships across areas of focus like location intelligence, for example. Void of third-party cookie data, there’s an opportunity for companies like Gravy Analytics to provide contextual targeting capabilities through identity-based solutions that do not involve a cookie.
Ultimately, partnerships like these will help provide the new level of flexibility needed to enrich the consumer profiles that brands can engage with — with permission, of course. With that trusted permission, brands and advertisers can enhance targetability through location as the country begins to reopen and also gain a better understanding of how consumers are moving throughout the world.
M&A activity
While 2020 was a banner year for market consolidation, in truth, the market has been weeding out the weak for some time now. Two-plus years ago, we saw a plethora of ad and martech companies going out of business; now, we’ve entered into a phase where the last remaining private companies — viewed as having some of the most valuable assets — are some of the strongest.
With more than $125 billion in SPAC (Special Purpose Acquisition Company) activity this year (more than quadrupling from 2019), we can only expect M&A activity to accelerate in the New Year. A number of these acquisitions will target media and technology companies, and a handful of these, I’d imagine, will be made by investors seeking opportunities to exit via publicly traded vehicles. As we’ve seen, there’s more than one way to go public, and in 2021, I expect more companies to take advantage of reverse mergers or SPACs, versus the more traditional IPO.
As digital spend continues to accelerate, taking on an ever-larger share of total ad spend, we’ll see large TV networks shore up their connected TV offerings to compete with Netflix and Roku. We’ll also see the usual tech suspects such as Amazon go after more acquisitions. While Amazon is actively building a major advertising business, it does not yet have all the functionality it needs. Specifically, it could benefit from demand-side platforms and customer data platforms.
Dan MacKeigan is a partner at Spring Lake Equity Partners.
