The AdTech M&A market continues to heat up. After several 9-figure acquisitions announced earlier this year, in the first few days of August we already have two more significant deals:
- Outbrain acquiring Teads for $1 billion
- Reddit acquiring Memorable AI
Here’s what these acquisitions are all about and what we can expect going forward.
Outbrain acquires Teads for $1 billion
Outbrain is a public advertising technology company. Specifically, they are a native advertising platform. On one side, they work with publishers and brands. Think CNN, Fortune, MSN and Hearst. These are media publishers that produce content, and one way they monetize that content is with ads. These media partners are what Outbrain calls the “open web”, meaning they are places where users spend time but don’t include social media (where Meta and others have built their own advertising technology). There are a bunch of different ad formats brands may consider, but the one that Outbrain helps with is native advertising.
Native advertising is advertising that fits in with the rest of the content. It’s an advertisement that looks and feels like regular content so, in theory, it’s more likely that the viewer of the content will click on the advertisement. A classic example of native advertising is Google search ads, where the sponsored links at the top look similar to the regular links, just with a small “Sponsored” label on them. Here’s another example from Forbes. As you can see, the link on the left is a Forbes article while the link on the right is a native advertisement from Dell.
Outbrain provides the software that enables publishers and media companies to host these native advertisements effectively, and for buyers of advertisements (large brands or agencies representing these brands) to easily place ads for consumers. As you can imagine, this isn’t as easy as you might expect. Outbrain has developed technology to solve some of the problems you might think would come up. A few examples:
- They collect and analyze lots of data to figure out what kinds of specific ad formats and types of content within ads perform better in certain situations. They can use this data to help their customers run more effective ads (and predict the performance of those ads).
- They provide software tools for advertisers to measure and report on the return on ad spend (ROAS) of the ads that they run, enabling them to manage the effectiveness of channels and ad formats and driving future ad spending decisions.
Outbrain went public in 2021 and still is publicly traded. Their gross revenue has been flat, between $900m and $1b for the past few years, with their gross revenue just below $200m and net income treading around breakeven. As of writing this post in early August, their market cap is around $240m. Outbrain is one of the larger native advertising platforms, though they do have large competitors like Taboola (which it previously tried and failed to merge with) and Revcontent. Outbrain has ad inventory on both web and mobile, though mobile is their largest segment (73% of revenue in 2023 came from mobile ads).
Just yesterday, Outbrain announced that they were acquiring Teads. Teads can be thought of in a similar way to Outbrain in that they connect media publishers who want to monetize their audience with brands who want to advertise to that audience. It’s different, however, in that Teads focuses on video. Ads powered by Teads will show up as you scroll through a mobile site or also if you see advertisements native on your smart TV (called connected TV, CTV). They similarly have interesting tools to help both sides of the marketplace like optimization and reporting.
Teads was owned by Altice, a publicly-traded telecommunications provider. In 2021, they were aiming to spin Teads out via an IPO at a targeted $5b valuation, but it fell through. Part of the reason for selling is to pay off an increasingly burdensome debt load.
Acquisition Rationale
The rationale for this deal is pretty straightforward: Outbrain and Teads each have strong advertising platforms, but with different kinds of ad formats and with different customer bases. By connecting the platforms, they can serve their advertisers better. Think about it from the perspective of a brand like Audi trying to get more people to buy their cars. Instead of working with a point solution that just does native advertising and another point solution that just does brand advertising on television, you can optimize your ad campaigns across a number of touch points and formats. More importantly, you can optimize that ad spend within the same platform instead of trying to do it separately or with another analytics and optimization tool.
Beyond the corporate-coded reasons, Outbrain likely did this for both scale and quality reasons. They go hand-in-hand. Outbrain is known for “chumboxes” which is another way to describe native ads that are low-quality and often served on similarly low-quality websites built just for advertising. Outbrain has several of these customers and serves these kinds of ads. It can be a profitable business, but it’s not viewed as a high-quality channel.
Teads is primarily known as a brand advertiser, which favors brands that tend to feel better (even if you often can’t attribute the ROAS quite as tightly as performance advertising). Combining the companies not only provides an option for advertisers to optimize ads on several different platforms and ad types, but also opens up cross-selling between both customer bases.
According to Sincera, the incremental publisher install base between the two companies is quite significant. It shows how much more value they can provide to advertisers. (RTB here stands for real-time bidding, a process where each ad is bid for by buyers each time it’s served to a viewer.)
2024 AdTech M&A
While the Outbrain / Teads deal was the largest adtech deal of the year so far, it’s been a very hot market. Here are a few others that have been announced just this year.
In August, Reddit acquired Memorable AI. Most people know what Reddit does; what is Memorable and why did they acquire them? MemorableAI leverages artificial intelligence to predict ad performance based on brand KPIs and then utilizes generative AI to create higher-performing creative. A big reason Reddit did the deal was to keep pace with Meta, X, Google and other large ad networks who have (or are planning to) build these capabilities into their ad networks. The deal was rumored to be at about 10x the price of the Seed round. Notably, the company was started by two AI researchers (not AdTech industry professionals) and sold less than three years after it was founded.
In July, Publicis Groupe acquired Influential for $500m. Publicis Groupe is one of the largest advertising agency holding companies and Influential is a technology platform for influencer marketing. They match influencers with brands trying to capture attention and demand (and include some interesting AI tools to help do so). This one of the first tech acquisitions by any of the holding companies.
In June, Summit Partners and Klaviyo invested in PostPilot. PostPilot is a tech-enabled direct mail marketing company across prospecting, retargeting and retention. The biggest pain point here for a while isn’t that the channel isn’t effective, but rather that it’s slow and hard to measure. This is what PostPilot tries to solve. PostPilot has a strong self-serve offering and focuses a lot of their effort on SMBs, in contrast to competitor PebblePost which focuses more on enterprises (and customer success use cases given their focus).
In June, Mozilla acquired Anonym. Most people know the Mozilla name from the Firefox web browser, but they make a series of privacy tools including a VPN, a tool to detect fake product reviews, and many others. They acquired Anonym, which is a platform that allows advertisers and platforms to optimize ad performance without exposing personal data. They process data sets in a highly secure environment where sensitive data is encrypted, allowing these parties to target ads and track results without compromising user privacy. Mozilla has historically been a fairly frequent acquirer of privacy-first internet businesses.
In April, Cadent acquired AdTheorent for $324m. Cadent is a television advertising services company that helps advertisers across building audiences, deploying campaigns and measuring results. Cadent was acquired by the private equity fund Novacap in 2023 and purchased AdTheorent a few months ago. AdTheorent helps Cadent along two vectors. First, it helps them expand into omnichannel: they can now help agencies with brand marketing on TV and connect that to data-driven digital marketing. Second, the acquisition helps them expand into smaller markets where AdTheorent already has customers. They will continue to serve agencies but will now start to serve brands directly too.
In January, LiveRamp acquired Habu for $200m. Similar to the AdTheorent acquisition, the desire to measure performance across all channels is becoming increasingly important. LiveRamp is principally a data onboarder – taking offline data like files, names, addresses and matching them with a digital identifier like a cookie. They are also an identity company that takes information across devices and locations and matches it to a person, so that brands can target them with ads. Habu, meanwhile, is used by brands and media companies to securely share first-party data; they can combine that data for better ad targeting. This acquisition will make data sharing even easier for large brands.
What’s next for AdTech M&A?
The future of AdTech M&A is likely to be shaped by several key trends.
First, the push for omnichannel and full-service offerings will continue to drive consolidation in the industry. As advertisers look for more integrated solutions that can manage campaigns across multiple platforms and ad formats, larger companies will look to acquire smaller, specialized firms to fill gaps in their service offerings. This trend, exemplified by the Outbrain / Teads deal, will allow companies to offer brands a more comprehensive suite of ad formats, from native advertising to video and CTV to social media, all under one platform. There are many companies of scale that just offer one or two of these capabilities and we should see more acquisitions that mesh both complementary technologies and audience reach.
AI will undoubtedly play a significant role in AdTech M&A as well. Companies will be on the lookout for startups developing AI tools for ad creation, performance prediction, and optimization. For instance, we might see acquisitions of firms specializing in AI-driven dynamic creative optimization, automated A/B testing, or advanced audience segmentation. The Reddit / Memorable AI deal is just the beginning, especially in a sector that historically adopts technology quite quickly.
Data will remain a critical asset in the AdTech landscape, driving acquisitions in data sources, structuring, infrastructure and analytics. As third-party cookies phase out, companies will be eager to acquire first-party data sources or technologies that can help create robust identity solutions. We may see acquisitions of companies specializing in data clean rooms, privacy technologies, or innovative approaches to gathering and leveraging first-party data. Additionally, acquisitions might target firms with expertise in data integration and management, helping AdTech companies to better organize and utilize the vast amounts of data they collect.
Finally, it’s likely that other AdTech categories will see more M&A activity. A few examples could be content monetization tools, influencer marketing technology, tools that help enable and integrate retail media, and additional privacy and compliance tools. Expect to see a lot more M&A activity in AdTech in coming months.
